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 theother bills pending in the Senate weren’t disappointed yesterday.

The bipartisan measure, which was a long time in the making,would require every state to open up its 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 to unveil the bill yesterday, both Gramm andSchumer indicated they hope to move their measure this year. Thiscould be done by attaching it to an existing bill, such as repealof the Public Utility Holding Company Act (PUHCA), which was passedby the Senate Banking Committee, said a spokeswoman for Schumer.

But few expect the measure to go anywhere this year. “I thinkthis was just to sort of put out another marker. It’s largely adiscussion piece to kind of keep the fires burning on a few issues”until the Senate can resume its debate on a comprehensive bill nextyear. The Senate managed to pass a piecemeal electric reliabilitybill last month as a sort of consolation prize despite an attemptby Gramm, a proponent of comprehensive restructuring, to block it.

The Gramm-Schumer measure would give New York, which was orderedto restructure its market by executive decree, “another bite at theapple.” The state’s restructuring plan “has failed the test. Pricesare still at the very top of the pyramid and consumers havereceived almost not benefit,” said Schumer. “…[W]e deserve a planthat is not of the utilities, by the utilities and for theutilities.”

The bill, dubbed the “Consumer Empowerment and ElectricityDeregulation Act of 2000,” takes a number of other bold steps. Itwould compel states to ban the utility practice of favoring theirown generation when serving customers; require utilities to opentheir transmission lines to all competitors; would give FERCauthority to “establish and enforce” reliability standards forregional transmission organizations (RTOs); and would award FERCjurisdiction over all interstate transmission (whether bundled,unbundled, retail or wholesale).

It also would empower consumers to petition FERC in the eventthey believe their energy provider is violating any of the terms ofcompetition in the act if enacted into law. In addition, the billwould require utilities to return to their customers half of theirrecovered stranded costs from underperforming utility assets.ay forthe bad business decisions of utilities. This bill finally givesconsumers the upper hand,” Schumer said.

Furthermore, the legislation seeks repeal of the mandatorypurchase requirement of the Public Utility Regulatory Policies Act(PURPA) that forces utilities to enter into high-cost, long-termcontracts with generators of “alternative” power. Existing PURPApower supply contracts would be honored, but “contracts with pricesgreater than 150% of the wholesale market price shall be [voided]by either party to the contract after five years.” Schumer notedthat New York State utilities have been saddled with PURPAcontracts that add as much as 20% to the price of electricitybills.

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.

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