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Clinton Electric Bill Is Bad News for Gas

Clinton Electric Bill Is Bad News for Gas

Energy Secretary Bill Richardson last week said long-awaited Clinton administration legislation to restructure the retail power industry would be on congressional lawmakers' desks after they return from Easter recess in mid-April.

The administration is in the midst of fine-tuning the measure so it "makes[s] more sense" from a policy standpoint, he said during an electricity restructuring forum co-sponsored by The Atlantic Monthly and the Edison Electric Institute in Washington D.C. last Tuesday. But "it'll be ready" when Congress comes back on April 12th, he assured Rep. John Dingell, ranking Democrat on the Commerce Committee, and other top energy lawmakers and regulators who were panelists.

The bill is expected to have some bad news for the natural gas industry: it will propose mandating the use of renewable fuels in electricity generation at an annual level that will be a "little higher" than the 5.5% previously sought by the administration, Richardson noted. Some expect it to be 7% or more. The gas industry is fervently opposed to the mandate because it contends it would give renewables - i.e. solar, wind and biomass - an unfair competitive advantage over gas as a source to generate power. "We're willing to go to battle" over this issue, said one gas source, adding that nearly the entire industry was united against the mandate.

The higher level for renewables also is not expected to sit well with Senate Energy Committee Chairman Frank Murkowski (R-AK), who was "critical" of 5.5%, a committee press aide told NGI. He just can't see how renewable fuels, which currently generate only about one-tenth of 1% of the electricity nationwide, can reach 7% or more of generation capacity without including nuclear or hydro power in the fuel category. "What are you going to do fill an entire state with windmills?" the aide asked. Also, the senator doesn't like mandates. "Any time you mandate something, it's a big deal with the chairman."

Even with the administration's proposal expected soon, lawmakers said the outlook for getting comprehensive restructuring legislation out of Congress this year would be iffy at best. "I don't think we can [get a comprehensive bill through] unless we're prepared to address the tough issues," including stranded-cost recovery, the fate of power marketing administrations, the grandfathering of states' retail access plans and the controversial renewable mandate, said Murkowski. He indicated the prospect for such a bill this year was a "mixed bag."

Sen. Jeff Bingaman (D-NM) agreed that a comprehensive restructuring measure was out of the question this year, but he thinks legislation addressing a "very short list" of issues might be doable. "...[I]f we can get to a point very early in this Congress to agree that we're only going to be able to pass a very short list of provisions at the federal level, I think we can move ahead," he told energy executives and lobbyists.

Rep. Joe Barton (R-TX), chairman of the energy and power subcommittee, was a bit more optimistic and had a clear-cut timetable for passage of restructuring legislation. He hopes to do markup by either "this spring or early summer," and forward a bill to the floor by "late summer or early fall." Barton said his goal was to be at a "Rose Garden [signing] ceremony" for electricity restructuring legislation "before the first presidential primary in the year 2000." But he conceded that reaching that goal hinged on the contents of the administration's bill and whether the House and Senate could reach consensus on key issues.

Industry analysts generally agree the chances for a power restructuring bill grow increasingly dim as the beginning of the presidential primary draws near next year.

Richardson said that not only was there a need for federal legislation, but that the states were clamoring for it. The "states want us to do this...What we would be doing would be helping the states achieve some very good results for their customers." The administration estimates its bill would save retail power consumers $20 billion annually. Dingell countered that he hadn't heard any state regulators asking "the feds" to step into their retail markets.

Murkowski said he was concerned a federal restructuring bill would increase power costs for rural consumers, who are prevalent in his home state. "If the rates are going to go up for Rural America, look out. The bill isn't going to go anywhere," he warned. But Richardson noted there were "a lot of provisions" in the administration's bill to protect rural customers and others. He cited the section that would permit states to opt out of federal restructuring as an example.

Richardson pointed to last summer's price spikes in the Midwest power market as a good reason "why we need a federal bill" to complement states' efforts. "We're not going to have utilities build new [generation] capacity unless they know what the new rules are going to be."

FERC Chairman James Hoecker said he was "guardedly optimistic" that there wouldn't be a recurrence of power price spikes in the Midwest. "I don't think you're going to find that this summer. I think there is more generation on line in the Midwest" than last year.

Susan Parker

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