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Aggressive Gramm-Schumer Electric Bill Unveiled

Aggressive Gramm-Schumer Electric Bill Unveiled

Capitol Hill observers who had expected the electric deregulation legislation of Sens. Phil Gramm (R-TX) and Charles Schumer (D-NY) to be more aggressive and comprehensive than other bills languishing in the Senate weren't disappointed last week.

The bipartisan measure, which was a long time in the making, would require states to open up their retail electric markets to competition in less than two years, establishing Jan. 1, 2002 as the deadline. States that have passed laws to deregulate their electric markets by that date will be grandfathered under the bill. No state or utility will be permitted to opt out of the legislation.

At a press briefing following the bill's introduction last Tuesday, both Gramm and Schumer indicated they hoped to move their measure this year. This could be done by attaching it to an existing bill, such as repeal of the Public Utility Holding Company Act (PUHCA), which cleared the Senate Banking Committee last year but hasn't been voted on by the full Senate yet, said a spokeswoman for Schumer. Gramm is chairman of the banking committee.

But few realistically expect the measure to go anywhere this year. "I think this was just to sort of put out another marker. It's largely a discussion piece to kind of keep the fires burning on a few issues" until the Senate can resume its debate on a comprehensive bill next year, an energy industry source said. The Senate managed to pass a watered-down electric reliability bill last month as a sort of consolation prize despite an attempt by Gramm, an advocate of comprehensive restructuring, to block it.

On the House side, Commerce Committee Chairman Thomas Bliley failed to carry through with his pledge to markup comprehensive legislation last week. Some industry die-hards are clinging to the hope that the House will approve a broad-based bill during this session, and that the Senate reliability measure will be inserted into it during conference. But even they admit the chances of this happening are growing faint.

The Gramm-Schumer legislation would give New York, which was ordered to restructure its electric market by executive decree, "another bite at the apple." The state restructuring experiment "has failed the test. Prices are still at the very top of the pyramid and consumers have received almost no benefit," said Schumer. "...[W]e deserve a plan that is not of the utilities, by the utilities and for the utilities." He noted New York retail consumers have realized savings in the last year of only one-tenth of one cent per kilowatt hour.

The bill, entitled the "Consumer Empowerment and Electricity Deregulation Act of 2000," takes a number of bold steps to replace the "patchwork" of state regulation with a "one-size-fits-all plan" for utility deregulation. It would compel states to ban the utility practice of favoring their own generation when serving customers; require utilities to open their transmission lines to all competitors; would give FERC authority to "establish and enforce" reliability standards for regional transmission organizations (RTOs); and would award FERC jurisdiction over all interstate transmission (whether bundled, unbundled, retail or wholesale).

Under the bill, electric consumers also could petition FERC if they suspect their energy provider is violating the terms of competition in the act. In addition, utilities would have to return to their customers half of the recovered stranded costs from underperforming utility assets. "For years consumers have been forced to pay for the bad business decisions of utilities. This bill finally gives consumers the upper hand," Schumer said.

Furthermore, the legislation seeks repeal of the mandatory-purchase clause of the Public Utility Regulatory Policies Act (PURPA) that requires utilities to buy high-cost electricity from independent power producers (IPPs) under long-term contracts. Existing PURPA power supply contracts with IPPs would be honored, but "contracts with prices greater than 150% of the wholesale market price shall be [voided] by either party to the contract after five years." Schumer said New York State utilities have been saddled with PURPA contracts that add as much as 20% to the price of electricity bills.

It also calls for repeal of the PUHCA effective 18 months after the bill's enactment. Under the measure, the tax-exempt financing of transmission and distribution facilities owned by municipal utilities will be preserved as well.

Susan Parker

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