A House Commerce subcommittee hearing last week revealed thatlawmakers aren’t much closer to agreement on the tough,controversial issues associated with restructuring of the powerindustry than they were a year ago.

The rifts were apparent last Thursday as members of the energyand power subcommittee, which seeks to piece together and vote oncomprehensive restructuring legislation by the end of the year,addressed reform of the Public Utility Regulatory Policies Act of1978 (PURPA), stranded-cost recovery, the possibility of anenvironmental title and the hot-bed issue of a renewable portfoliostandard (RPS).

The natural gas industry firmly opposes a renewable standardbecause it would mandate that renewable sources – wind, biomass andsolar – be used more widely to generate electricity each year,which could rob gas of a potentially greater share of the powermarket. Producers told the subcommittee their objections were witha mandate that would guarantee renewables a specific market share,not with the renewables themselves. Whether a renewable standardshould be included in restructuring legislation is an issue thathas split policymakers and the industry almost down the middle.

Even among the proponents, which include the Clintonadministration, there’s a “fair amount of disagreement” over thedetails of an RPS, said Rep. John Dingell (D-MI), the rankingDemocrat on the Commerce Committee. The administration has proposedphasing in increases in the annual level of renewable-generatedpower over a 10- to 15-year period, ultimately climbing to 7.5%,while others have come up with completely different figures. “Wecould have a grand battle” over this issue alone, Dingell noted,asking whether the percentage share for renewables should be “2, 7,10 [or] 20%.”

And that’s only the beginning. As shown in the administration’sbill, “should the required percentage [of renewables’ market share]increase over time? And if so, what is the appropriate rate for theincrease?” he asked lawmakers. “Should [an] RPS be a permanentfixture in law or should it sunset? Should an RPS count wasteenergy or hydroelectric projects as renewables? Should TVA, thePMAs, municipal utilities and rural cooperatives [be bound] by RPS?What would be the relationship between the investor-owned utilitiesand the munis and the co-ops and the public if we go thisdirection?” It’s questions and issues like these that will be”helpful in sinking” federal restructuring legislation, he said.

But Rep. Edward Markey (D-MA) believes the nation should have a”renewable strategy” as it moves into the 21st century to avoid an”environmental catastrophe.” He said such a strategy was criticalgiven that electric generation plants presently account forone-third of the greenhouse gases in the country.

Don Niemiec of Union Pacific Resources Group, who testified onbehalf of the Natural Gas Supply Association (NGSA), also urgedlawmakers to tackle fuel-neutral standards for emissions inelectricity restructuring legislation. This would remove the”preferential treatment that dirty fuels have enjoyed for the lasttwo decades,” he said.

On a more general note, there was considerable debate overwhether a restructuring bill should even have an environmentalcomponent. “…[O]ne thing that I’m quite certain about is that thelegislation should not include any environmental title that imposesadditional controls on electric power plants or attempts topenalize the coal industry anymore,” noted Rep. Edward Whitfield(R-KY). “I take this position because I believe the existing CleanAir Act (CAA) is working quite well.”

This drew an immediate reaction from Rep. Frank Pallone (D-NJ),who contends the CAA’s exemption of “older, dirty” coal plants inthe Midwest has “negatively” affected the air quality in theNortheast. Since New Jersey’s recent legislation enacting retailcompetition fell far short of ensuring environmental safeguards, hebelieves it’s up to Congress to address the issue in itscomprehensive legislation.

Pallone said he plans to come out soon with an “expanded”version of a bill, which he first introduced in the 105th Congress,that would propose the implementation of uniform environmentalstandards for all electric generators.

Before jumping on the environmental bandwagon, Dingell believeslawmakers must consider some “fundamental” issues – one of whichincludes identifying the environmental consequences, whetherintended or not, of specific deregulation proposals. Rep. John M.Shimkus (R-IL) believes the sheer introduction of competition tothe power industry will produce environmental benefits throughgreater efficiencies, and thus would minimize the need for aseparate environmental title.

Most of the House lawmakers agreed stranded-cost recovery was anissue that should be handled with the utmost care, but whichjurisdiction should be doing the handling, the states or federalgovernment, remains a major bone of contention. “I have great faith[in] the states to do the right thing, and we ought to be…theleast intrusive that we can be in this issue,” said Rep. Ralph Hall(D-TX), who added stranded costs were the “largest financial”matter that he’s come up against since joining Congress. Gasproducers agreed with Hall on this score, saying that Congressshouldn’t “dictate a single nationwide approach” for the states.

“I think…we can largely remove ourselves from this obligationif we bury once and for all time this notion of imposing mandateson the states and the date-certain by which they’d have to becarried out,” Hall told the subcommittee.

Commerce Committee Chairman Thomas J. Bliley (R-VA) noted that21 states, in opening their power markets to competition, haveprovided a “fair opportunity” for utilities to recover theirstranded costs. “They have already done all the heavy lifting onthis issue, and that is proper.”

The states have “serious questions about federally mandatedtreatment of stranded costs,” Dingell said. They “are to beproperly commended for their worry over this matter. We shouldlisten. There are further significant legal and policy questionsabout how the Congress might provide for recovery of stranded coststhat are currently recoverable in state-regulated retail sales.”

Rep. Charles Norwood (R-GA) urged lawmakers to proceedcautiously on the issue. “…[I]f we don’t handle this correctly wecan force dozens of towns and several companies in Georgia [andelsewhere] into bankruptcy…If we pull the rug out from underneaththem, 39 of 42 electric memberships in Georgia will mostlikely…go out of business. That is no way to increase competitionin the marketplace.” He called for the subcommittee to hold aseparate hearing to solely address stranded-cost recovery.

“…[I]t’s probable that states can handle this issue as theyhave been doing over the past several years,” said Rep. SherrodBrown (D-OH), “but we should consider whether a federal rule isnecessary.” Oklahoma Corporation Commissioner Denise Bode agreedthat “over-arching” federal electricity legislation was needed toaddress stranded-cost recovery and other issues, saying that itwould be “extraordinarily difficult” to move forward withcompetition without it.

With respect to PURPA, the NGSA’s Niemiec said gas producerssupported prospective repeal of the act, which would guarantee thesanctity of existing contracts. But any repeal should apply to allfuels across-the-board, it stressed. Legislation “should not, inessence, repeal PURPA with regard to gas-fired generation whileputting in place a new PURPA that mandates use of renewables.”

Susan Parker

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