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Senate Passes Reliability Bill; House Wants More

Senate Passes Reliability Bill; House Wants More

The full Senate passed by unanimous consent a stand-alone electric reliability bill late last week, while House Commerce Committee Chairman Thomas Bliley (R-VA) moved ahead full throttle with plans to mark up a comprehensive power bill and bring it to the House floor before the end of July.

Accompanying news of the Senate's action, Sen. Slade Gorton (R-WA), sponsor of the reliability proposal, called on FERC to investigate the spikes in spot power prices in the Pacific Northwest and report back in 30 days. He also asked Senate Energy Committee Chairman Frank Murkowski (R-AK) to conduct hearings into the "devastating situation" in the California and the Pacific Northwest wholesale electric markets.

The opinion is split over whether Gorton's bill, which would create enforceable reliability rules for the bulk power system for the first time, will provide any real relief this summer. The bill gives FERC new authority to immediately adopt mandatory reliability standards, and begin the process of creating one national reliability organization."

Even Murkowski, who voted in favor of Gorton's measure, questioned how much good it would do the market. The bill, S. 2071, "does not stimulate the construction of new generation and transmission that are essential if we are going to avoid electricity shortages this summer and in the future." Murkowski has and continues to be a major proponent of comprehensive restructuring legislation.

In a recent speech in Montreal, FERC Chairman James Hoecker also knocked Gorton's reliability bill. "No piece of stand-alone reliability legislative, however meritorious, entirely gets us where we need to go. We need open, competitive, transparent markets too and I, for one, do not think that will happen without RTOs." (see related story)

In a letter to Hoecker on Friday, Gorton wrote the "unprecedented and devastating series of price spikes" in the wholesale electric markets in California and the Pacific Northwest reveal that there's something "seriously wrong." Record-setting temperatures and planned and unplanned maintenance outages at generation facilities were partly to blame, he said, but they alone don't explain the extreme level of the price spikes.

"Many of my constituents have speculated that the command-and-control approach of the California Power Exchange (PX) has created a situation that encourages suppliers (and in some cases large users) to 'game' the power market. I have heard that certain generating plants were held back from the market --- even during the San Francisco-area rolling blackouts --- in order to sell it at astronomical levels on the short-term spot market. This situation stymies the function of the marketplace and encourages certain entities to gain tremendous financial windfalls from creating potentially artificial shortages. Consumers throughout the West will eventually see rate increases from this situation, workers are jobless due to these actions, and the reliability of the entire West Coast bulk-power grid is thereby endangered."

Also, Gorton wrote, "some of my constituents...contend that the lack of investment in new generation, partly due to a lack of regulatory certainty, has contributed to these prices spikes" in the region.

Before Gorton's reliability bill could be voted on Friday, it first had to clear two holds --- one placed by Sen. Phil Gramm (R-TX) and another by Sen. Dianne Feinstein (D-CA). Gramm put a hold on the bill "in hopes that he could buy a few hours to see if there was an opportunity to broaden the legislation. He wanted to take the steam out of the [reliability] effort," said Gramm press aide Larry Neal. He noted Gramm, who has a "strong preference" for comprehensive legislation, lifted the hold when he realized there was no hope "in the immediate future" of passing a broad electricity measure in the Senate. He said, however, Gramm's "got [his] fingers crossed" for a comprehensive bill in the House.

Feinstein removed her short-lived hold on the reliability bill after her concerns about the bill's impact on the California market were addressed, he office said.

Susan Parker

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