The Clinton administration finally unveiled its long-awaitedrestructuring program for the electric industry yesterday in aseries of meetings with congressional leaders, stakeholders and themedia. The plan, which did not include specific legislativelanguage, represents a pragmatic position that its proponentsbelieve has the best chance of forging a compromise betweencompeting interests to arrive at comprehensive restructuringlegislation, if not in this session of Congress, then “very soon,”according to Energy Secretary Federico Pena.

Pena told reporters the plan would result in national energysavings of $20 billion annually, once fully implemented, whichrepresents about $232 a year for a family of four. DOE says thatrepresents about two weeks’ worth of groceries. “Choosing an energysupplier should be no more difficult than buying a box of cereal ina grocery store,” he added.

Carol Browner of the EPA said the plan was a march in lock stepwith the Administration’s previous stands on environmentalprotection. The environmentalists did not win caps on carbondioxide and other emissions, but Browner said the administration’s”right-to-know” provisions would allow the public to make informeddecisions and would result in substantial reductions in CO2. Sheadded that previous programs had shown a 50% reduction in pollutionfrom companies that were forced to publicly report their emissions.

Deputy Energy Secretary Elizabeth Moler said the package made itclear that the Federal Energy Regulatory Commission would be thetraffic cop authorized to monitor the brave new market world forelectricity. The proposal would:

— require utilities to provide retail choice in electricservice by Jan. 1, 2003, with an “opt out” provision that wouldapply to states or non-regulated utilities that can demonstrate,based on a public proceeding, that consumers would be better servedby preserving the status quo, or by adopting an alternative plan;

— allow utilities to recover stranded costs;

— force electric suppliersto disclose information on price,terms and conditions, type of generation and levels of pollution toconsumers in a uniform, easy-to-read label, in much the same waythat the Food and Drug Administration requires nutritional labelingon food;

— repeal the Public Utility Holding Company Act, but protectconsumers, particularly against cross-subsidization and abusivemarket power, by providing FERC and state commissions additionalaccess to the books and records of holding companies and affiliatesof public utilities;

–give FERC jurisdiction over mergers or consolidations ofelectric utility holding companies, under a streamlined procedure.In addition, FERC would be authorized to remedy wholesale marketpower by requiring large generating companies to submit mitigationplans. FERC would also be authorized to order divestiture, ifnecessary;

— amend the Federal Power Act (FPA) to require FERC to approvethe formation of “private, self-regulatory organizations,” (i.e.,independent system operators, or ISOs), with the ability to overseetheir operations. FERC would also have the authority, under arevised FPA, to turn over operational control of transmissionfacilities to an ISO. Regional transmission groups would also beencouraged;

— set up a federal Renewable Portfolio Standard (RPS) toguarantee a minimum level of additional renewable generation,consisting of non-hydro technologies like wind, solar, biomass orgeothermal generation, would be required for sellers ofelectricity. The RPS would increase over time to a total of 5.5% in2010;

— repeal the “must buy” provision of Section 210 of the PublicUtility Regulatory Policies Act, thus ending the special provisionfor “qualifying facilities” and the avoided cost contracts thatsupported them;

— make all consumers eligible for net metering for small (up to20 kW) renewable energy projects. Net metering would allow on-sitefacilities to produce electricity and sell the excess back to thegrid, with the meter running backward. This provision wouldespecially help the photovoltaic market;

— create NOx (nitrogen oxide) trading;

— clarify state/federal jurisdiction over retail transmission,with FERC having clear authority to order wheeling of authorizedsales, reinforce FERC’s jurisdiction over rates, terms andconditions of unbundled retail transmission, and make clear thatFERC’s open access rules apply to municipals, cooperatives, theTennessee Valley Authority and Federal power marketingadministrations; and

— grandfather existing tax-exempt bonds for municipals butlimit their use for new generation or transmission facilities.Transmitting electrons in the open market will not jeopardizecurrent funding, said Pena, but in future, munis would be subjectto the open market.

The plan doesn’t include every detail. The future of publicpower agencies, for example, is still up in the air. But theadministration believes that comprehensive electric deregulationwill result in substantial savings, including 25-40 million metrictons of CO2 reductions. It also estimated savings that ranged ashigh as 22% in some areas of the country.

“We have deregulated trucking, the airlines,telecommunications,” said Pena. “The electric industry is the lastmajor industry to be deregulated, and we will build from what wehave learned from our experience with these other industries.”

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