Capitol Hill observers who had expected the electricderegulation legislation of Sens. Phil Gramm (R-TX) and CharlesSchumer (D-NY) to be more aggressive and comprehensive than otherbills languishing in the Senate weren’t disappointed last week.

The bipartisan measure, which was a long time in the making,would require states to open up their retail electric markets tocompetition in less than two years, establishing Jan. 1, 2002 asthe deadline. States that have passed laws to deregulate theirelectric markets by that date will be grandfathered under the bill.No state or utility will be permitted to opt out of thelegislation.

At a press briefing following the bill’s introduction lastTuesday, both Gramm and Schumer indicated they hoped to move theirmeasure this year. This could be done by attaching it to anexisting bill, such as repeal of the Public Utility Holding CompanyAct (PUHCA), which cleared the Senate Banking Committee last yearbut hasn’t been voted on by the full Senate yet, said a spokeswomanfor Schumer. Gramm is chairman of the banking committee.

But few realistically expect the measure to go anywhere thisyear. “I think this was just to sort of put out another marker.It’s largely a discussion piece to kind of keep the fires burningon a few issues” until the Senate can resume its debate on acomprehensive bill next year, an energy industry source said. TheSenate managed to pass a watered-down electric reliability billlast month as a sort of consolation prize despite an attempt byGramm, an advocate of comprehensive restructuring, to block it.

On the House side, Commerce Committee Chairman Thomas Blileyfailed to carry through with his pledge to markup comprehensivelegislation last week. Some industry die-hards are clinging to thehope that the House will approve a broad-based bill during thissession, and that the Senate reliability measure will be insertedinto it during conference. But even they admit the chances of thishappening are growing faint.

The Gramm-Schumer legislation would give New York, which wasordered to restructure its electric market by executive decree,”another bite at the apple.” The state restructuring experiment”has failed the test. Prices are still at the very top of thepyramid and consumers have received almost no benefit,” saidSchumer. “…[W]e deserve a plan that is not of the utilities, bythe utilities and for the utilities.” He noted New York retailconsumers have realized savings in the last year of only one-tenthof one cent per kilowatt hour.

The bill, entitled the “Consumer Empowerment and ElectricityDeregulation Act of 2000,” takes a number of bold steps to replacethe “patchwork” of state regulation with a “one-size-fits-all plan”for utility deregulation. It would compel states to ban the utilitypractice of favoring their own generation when serving customers;require utilities to open their transmission lines to allcompetitors; would give FERC authority to “establish and enforce”reliability standards for regional transmission organizations(RTOs); and would award FERC jurisdiction over all interstatetransmission (whether bundled, unbundled, retail or wholesale).

Under the bill, electric consumers also could petition FERC ifthey suspect their energy provider is violating the terms ofcompetition in the act. In addition, utilities would have to returnto their customers half of the recovered stranded costs fromunderperforming utility assets. “For years consumers have beenforced to pay for the bad business decisions of utilities. Thisbill finally gives consumers the upper hand,” Schumer said.

Furthermore, the legislation seeks repeal of themandatory-purchase clause of the Public Utility Regulatory PoliciesAct (PURPA) that requires utilities to buy high-cost electricityfrom independent power producers (IPPs) under long-term contracts.Existing PURPA power supply contracts with IPPs would be honored,but “contracts with prices greater than 150% of the wholesalemarket price shall be [voided] by either party to the contractafter five years.” Schumer said New York State utilities have beensaddled with PURPA contracts that add as much as 20% to the priceof electricity bills.

It also calls for repeal of the PUHCA effective 18 months afterthe bill’s enactment. Under the measure, the tax-exempt financingof transmission and distribution facilities owned by municipalutilities will be preserved as well.

Susan Parker

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.