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DOE Restructuring Bill Sent to Capitol Hill

DOE Restructuring Bill Sent to Capitol Hill

Departing Energy Secretary Federico Pena made certain that he would go out with a bang this week when he forwarded to Congress on Friday the Clinton administration's much-awaited legislation to enact customer choice for electricity users on a nationwide basis.

"I hope Congress will move quickly on this legislation to bring competition and choice to the electricity industry and deliver savings to consumers," said Pena in submitting the Comprehensive Electricity Competition Plan to Capitol Hill. Pena, who is expected to leave the Department of Energy (DOE) later this week, estimated the proposed measure would save power consumers about $20 billion a year.

The legislation incorporates many of the same principles that were included in the administration's customer-choice guidelines that came out last March. The administration came under fire from all sides then - Capitol Hill and the energy industry - because the guidelines weren't presented in legislative form.

Not surprisingly, natural gas producers weren't too happy with the bill because it would provide for a Renewable Portfolio Standard that would ensure that by 2010 at least 5.5% of all electricity sales would be generated by renewable energy sources. The gas industry, particularly producers, is staunchly opposed to this provision because it would guarantee renewable energy sources a specific share of the all-important power generation market in the years ahead.

First, the the Clinton administration extends the drilling ban for most of the Outer Continental Shelf, and now it proposes "harming the demand side as well by requiring mandated set-asides" for renewables, said Nicholas Bush, president of the Natural Gas Supply Association. "It is difficult to avoid the thought, 'with friends like these...'"

The administration's proposal mandates customer choice in the electricity industry by Jan. 1, 2003, but it gives states the opportunity to opt out of retail competition if they believe their customers would be better off under the status quo or under an alternative state-crafted plan.

It also would give customer-choice states the authority to bar utilities from non-choice states from selling power to customers in their states. Moreover, it would mandate the labeling of electricity, requiring suppliers to disclose information on price, terms and conditions of sale; the type of energy resource used to generate the electric energy; and the environmental attributes of the generation, including air emissions characteristics.

Under the administration's measure, the states would continue their role as the final arbiter of the recovery of retail stranded costs under state law, but it added that utilities should be allowed to recoup "prudently incurred, legitimate and verifiable" stranded costs that cannot be mitigated reasonably. It reinforced FERC's authority to act as a back-up for recovery of stranded costs in certain cases.

The legislation also gives broad authority to FERC in several areas. It would extend the Commission's jurisdiction over transmission services to municipal and other publicly-owned utilities, cooperatives, the Tennessee Valley Authority (TVA), and the Federal Power Marketing Administrations. The proposal would permit the Commission to suspend or modify application of its open-access transmission rules to these entities in the event adequate stranded-cost recovery mechanisms aren't in place for them yet.

Moreover, the administration's legislation would amend the Federal Power Act (FPA) such that it would give FERC explicit authority to require transmission-owning utilities to turn over operational control of their transmission facilities to independent system operators (ISOs). In addition, it would grant the Commission the authority to "register and oversee" an electric reliability organization that would prescribe and enforce mandatory reliability standards for the power industry. Until then, existing standards established by the North American Electric Reliability Council and regional reliability councils would be mandatory and enforced by FERC, it noted.

The bill further would amend the FPA to streamline FERC's review of utility mergers. And it would repeal the Public Utility Holding Company Act of 1935 and replace it with the Public Utility Holding Act of 1998, which would give FERC and the state regulatory commissioners greater access to the books and records of holding companies and the affiliates of public utilities within the holding companies.

Another key section of the legislation calls for prospective repeal of the "must buy" provision (Section 210) of the Public Utility Regulatory Policies Act of 1978. Existing power contracts would remain intact, according to the proposal, and the other provisions of Section 210 would continue to apply.

Susan Parker

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