Senate Energy Committee Chairman Frank Murkowski (R-AK) willunveil draft electricity restructuring legislation today thatcouldn’t be more friendly to natural gas had the industry itselfwritten the measure.

Foremost, the draft — unlike the Clinton administration’sproposal — will not include a mandate requiring the use ofrenewable fuels in power generation. A renewable mandate also isabsent from the House restructuring bill, which is before theEnergy and Power Subcommittee.

The mandate was omitted because the federal government”shouldn’t pick [the] winners and losers” in the energy markets,Murkowski told lawmakers and energy executives Thursday at the 1999National Summit on Electricity and Natural Gas in Washington, D.C.

Like the traditional fuel sources for generation, renewables”should compete on the basis of consumer demand, not on governmentdicta,” he said. A renewable mandate “just favors today’spolitically correct energy,” Murkowski noted, but he questioned howlong renewables would maintain that status.

He didn’t totally rule out some type of federal assistance forrenewables, but he stressed it shouldn’t be done through a mandate.The natural gas industry has lobbied vigorously to oppose a mandatefor renewables, fearing that it would rob the industry of its shareof the expected surge in new generation capacity.

The objective of his draft proposal is to “free it [the market]up as much as possible from government interferences,” Murkowskisaid. That means that regulation should be pared to the “absoluteminimum.”

Murkowski used the National Summit to outline for the first timethe key principles of his restructuring bill. He said he will holdhearings on the draft when Congress convenes next year. And he willgo to markup only if there’s a “reasonable chance of forming [a]consensus” among the Senate Energy Committee members.

In addition to the gas industry, Murkowski was particularly kindto the states in the draft legislation. It precludes federalpreemption of state restructuring programs, as well as adate-certain for states to comply with federal restructuringlegislation. Further, the draft draws a clear division between thejurisdiction of the federal government and the states, givingstates responsibility over all retail sales within their bordersand FERC sole jurisdiction over the interstate market, includingwholesale power competition.

Moreover, the draft clarifies that states have the authority: 1)to protect electric consumers in their states; 2) impose a “wires”charge to fund state public purpose programs; 3) to establishreciprocity requirements; and 4) over retail sales of electricityto federal facilities.

Probably the most “controversial” provision would give utilitiesthe right to assert eminent domain when building new transmissionfacilities, Murkowski said. But this can only be done when the newfacilities are “proposed in accordance to a regional planningprocess, and the line cannot be built through the state process.”

If the industry is going to get power to consumers, it’s goingto have to build new transmission facilities, he said. Also, hebelieves eminent domain will help to address market-power concerns,which he said arise when demand outstrips available transmissioncapacity. Hydroelectric facilities and gas pipelines already havethe right to federal eminent domain, Murkowski noted, and he thinksit time power transmission had it.

Furthermore, the draft would give FERC jurisdiction over allinterstate transmission lines, not just those owned byinvestor-owned utilities. And it supports voluntary participationby utilities in regional transmission organization (RTOs), andwould set standards for the Commission to follow in creating suchgroups. FERC is opposed to imposing standards for RTOs, and insteadwould prefer some flexibility in this area so that RTOs can evolvealong with the market.

Murkowski also calls for prospective repeal of themandatory-purchase obligation of the Public Utility RegulatoryPolicies Act, and repeal of the Public Utilities Holding CompanyAct (PUHCA).

He noted the Senate Banking Committee is addressing the issue ofwhether municipally owned utilities should be allowed to continueto issue tax-exempt bonds to build new facilities, wheninvestor-owned utilities can’t. “The question is [is] that faircompetition,” Murkowski asked, and added that he didn’t think so.

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