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

“I hope Congress will move quickly on this legislation to bringcompetition and choice to the electricity industry and deliversavings to consumers,” said Pena in submitting the ComprehensiveElectricity Competition Plan to Capitol Hill. Pena, who is expectedto leave the Department of Energy (DOE) later this week, estimatedthe proposed measure would save power consumers about $20 billion ayear.

The legislation incorporates many of the same principles thatwere included in the administration’s customer-choice guidelinesthat came out last March. The administration came under fire fromall sides then – Capitol Hill and the energy industry – because theguidelines weren’t presented in legislative form.

Not surprisingly, natural gas producers weren’t too happy withthe bill because it would provide for a Renewable PortfolioStandard that would ensure that by 2010 at least 5.5% of allelectricity sales would be generated by renewable energy sources.The gas industry, particularly producers, is staunchly opposed tothis provision because it would guarantee renewable energy sourcesa specific share of the all-important power generation market inthe years ahead.

First, the the Clinton administration extends the drilling banfor 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 GasSupply Association. “It is difficult to avoid the thought, ‘withfriends like these…'”

The administration’s proposal mandates customer choice in theelectricity industry by Jan. 1, 2003, but it gives states theopportunity to opt out of retail competition if they believe theircustomers would be better off under the status quo or under analternative state-crafted plan.

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

Under the administration’s measure, the states would continuetheir role as the final arbiter of the recovery of retail strandedcosts under state law, but it added that utilities should beallowed to recoup “prudently incurred, legitimate and verifiable”stranded costs that cannot be mitigated reasonably. It reinforcedFERC’s authority to act as a back-up for recovery of stranded costsin certain cases.

The legislation also gives broad authority to FERC in severalareas. It would extend the Commission’s jurisdiction overtransmission services to municipal and other publicly-ownedutilities, cooperatives, the Tennessee Valley Authority (TVA), andthe Federal Power Marketing Administrations. The proposal wouldpermit the Commission to suspend or modify application of itsopen-access transmission rules to these entities in the eventadequate stranded-cost recovery mechanisms aren’t in place for themyet.

Moreover, the administration’s legislation would amend theFederal Power Act (FPA) such that it would give FERC explicitauthority to require transmission-owning utilities to turn overoperational control of their transmission facilities to independentsystem operators (ISOs). In addition, it would grant the Commissionthe authority to “register and oversee” an electric reliabilityorganization that would prescribe and enforce mandatory reliabilitystandards for the power industry. Until then, existing standardsestablished by the North American Electric Reliability Council andregional reliability councils would be mandatory and enforced byFERC, it noted.

The bill further would amend the FPA to streamline FERC’s reviewof utility mergers. And it would repeal the Public Utility HoldingCompany Act of 1935 and replace it with the Public Utility HoldingAct of 1998, which would give FERC and the state regulatorycommissioners greater access to the books and records of holdingcompanies and the affiliates of public utilities within the holdingcompanies.

Another key section of the legislation calls for prospectiverepeal of the “must buy” provision (Section 210) of the PublicUtility Regulatory Policies Act of 1978. Existing power contractswould remain intact, according to the proposal, and the otherprovisions of Section 210 would continue to apply.

Susan Parker

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