A discussion draft of Rep. Joe Barton’s (R-TX) much-anticipatedretail electric legislation that was unveiled last week appears tobe most notable for the two things that were missing from it – arenewable-fuel mandate and a date-certain.

Absent was a gas producer-opposed mandate that would require acertain percentage of electric power each year to be generated byrenewable fuels. Instead the draft called for the reauthorizationof the Renewable Production Incentive (REPI) program, which woulddirect the Department of Energy (DOE) to provide incentive paymentsof 1.5 cents/kilowatt-hour to facilities that generate power”solely by use of solar energy, wind, biomass or geothermal.” Thelegislation, which would authorize the payments over a 10-yearperiod, called for Congress to appropriate $50 million for the REPIprogram during fiscal years 2000-2004.

Gas producers lobbied vigorously against any kind of legislativemandate that would give a competitive advantage to renewable fuelsor other fuels in the generation market. The gas industry iscounting on power generation to provide it with much of its demandgrowth over the next decade, and it believes a mandate guaranteeingrenewables a specific share of generation would deprive it of afair shot at the market. Although Barton’s proposed incentivepayments still would give renewables some edge, they’re likely tobe more palatable to gas producers than a mandate.

The mandate wasn’t included in the draft measure mainly becauseof Barton’s dislike for it, and it would never have survived theEnergy and Power Subcommittee, of which Barton is chairman, aCapitol Hill observer said. “That’s not going to pass.” Butlawmakers “would like to do something along the lines [ofincentives] to say that they helped” green electricity, he noted.

Even more than the absence of a mandate, the observer thinks thebiggest boon for natural gas in the draft is the requirement thatutilities disclose to retail customers information about, amongother things, their electricity’s generation source and emissionscharacteristics.

Barton’s draft also didn’t specify a date-certain by which thestates would be required to open their electric markets to retailcompetition. Instead, it defers to states on this issue. It doestake a backdoor approach to encourage retail competition by barringutilities in states closed to competition from selling to customersin open states. The reciprocity provision also would extend toutilities in Canada and Mexico. Lastly, the draft proposes some taxadjustments to further encourage state and municipal utilities andelectric cooperatives to embrace retail competition.

Barton’s silence on the date-certain issue wasn’t surprising,the Hill observer said. “I think that’s becoming less and less ofan important issue because 24 states have already passed bills”opening their retail markets to competition. These states representabout 65-70% of the electricity consumers in the nation, heestimated.

The draft has been circulated to lawmakers on the House energyand power panel for their comment. Actual legislation from Bartonis not expected to emerge until September, said a spokeswoman forthe Texas Republican. Commerce Committee Chairman Thomas J. Bliley(R-VA) has sent Barton a letter requesting legislation by Sept.21st, according to a subcommittee aide. Mark-up on a Houserestructuring bill is “still up in the air at this time.”

Extends FERC Rule

The Barton draft would enhance FERC’s jurisdiction over thepower transmission grid, extending to it authority over the 34% ofthe system that is currently non-jurisdictional (state andmunicipal utilities, cooperatives and federal electric utilities).It further clarifies that the open-access provisions under Order888 would apply to all transmission systems.

A gas lobbyist anticipates there may be a “big debate” over howmuch new authority to award the Federal Energy RegulatoryCommission. “Personally, I don’t think the Barton measure does”give the Commission an inordinate amount of authority, he said.

To further reduce barriers to transmission access, the draftproposal urges transmitting utilities to form and/or join regionaltransmission organizations (RTOs) within three years after theenactment of the bill. If utilities fail to act by then, it wouldgive FERC the power to order their participation in RTO groups,which would oversee the operation and control of regional utilitytransmission facilities. The draft measure also directs theCommission to establish incentive rates for the removal ofsignificant transmission constraints by RTOs.

It proposes the establishment of an electric reliabilityorganization (ERO) to develop “enforceable” reliability standardsfor the transmission grid. In the United States, FERC would havejurisdiction over the group and would have approval authority overthe standards. The draft proposal further directs the ERO to take”all appropriate steps to gain recognition” in Canada and Mexico,and directs the administration to use its “best efforts” to enterinto agreements with the two countries to ensure effectivecompliance with reliability standards.

Barton also attempts to remove some of the barriers totransmission facility siting by authorizing interstate compacts tocoordinate with states on the planning and siting of facilities ona regional basis. This has been a key concern for utilities, manyof which say the siting problems are responsible for transmissionconstraints that have resulted in the spikes in power prices duringthe summer months. Additionally, the draft gives FERC the authorityto order a utility to expand its transmission system, afterconvening a joint federal-state board to discuss the need for theexpansion.

To further enhance competition, the Barton draft proposesprospective repeal of the mandatory purchase provision of thePublic Utility Regulatory Policies Act of 1978 (PURPA). Contractsbetween utilities and qualifying facilities that were in effect asof Jan. 6, 1999 would remain whole, however. It also proposesrepeal of the Public Utility Holding Company Act of 1935 (PUHCA)one year after the bill’s enactment.

And in an attempt to further reduce market-power abuse, thedraft proposes that review of electric utility mergers betransferred from FERC to the Department of Justice and the FederalTrade Commission, which have authority under antitrust laws. FERC,however, would have oversight over all sales of utility generationand transmission facilities.

Susan Parker

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