LDC Minimus, LDC Insipidus,
LDC Robustus? Which Would You Rather Be?
Post-Order 636 evolution depends on aggressive regulatory and legislative reform.
"Get out of...
Two congressmen and a Clinton Administration official recently weighed in on the future of electric industry deregulation, giving observers an inkling of what they might expect in legislation or policy this year.
Sen. J. Bennett Johnston (D-LA), the ranking minority member of the Energy and Natural Resources Committee, spoke before the Electric Generation Association (EGA) January 22. Just three days later he introduced S. 1526. The bill (see outline below) calls for full stranded-cost recovery, including decommissioning costs for nuclear plants. He hopes to protect retail wheeling, respect historic jurisdiction between federal and state governments, give states control over local markets, reform the Public Utility Regulatory Policies Act (PURPA), and repeal the Public Utility Holding Company Act (PUHCA).
Rep. Dan Schaefer (R-CO), chairman of the Energy and Power Subcommittee of the House Commerce Committee, was less specific about his plans, but asked for ideas so that he could meet his "aggressive timetable for pushing legislation this year."
Meanwhile, Charles B. Curtis, deputy secretary, Department of Energy, told members of the American Public Power Association (APPA) that restructuring should be delayed until after the Federal Energy Regulatory Commission (FERC) makes its final rule on the open-access Mega-NOPR, due sometime in April. Initiatives in California, Wisconsin, New York, and Massachusetts also should be given consideration.
"While I have counseled waiting, I do not counsel benign neglect," Curtis said. "The electricity utility industry is our nation's most vital, exercising enormous influence on our standard of living and on the competitiveness of U.S. business and its capacity for jobs creation. . . . We cannot afford a failed experiment on a national scale."
Curtis's most welcome announcement concerned privatization of the federal Power Marketing Administrations (PMAs): "Our fiscal year 1997 budget planning documents do not presently contain any PMA sale proposal." But as with any announcement in the industry lately, the PMA "rally" revealed a flip side.
Joe Nipper of the APPA noted that Congress may have plans for the PMAs, which are being studied by the General Accounting Office at the request of Rep. John Doolittle (R-CA). Doolittle, chair of the House Resources Subcommittee on Water and Power Resources, is expected to lay groundwork in 1996 for privatizing the PMAs in 1997.
The largest portion of Johnston's speech was dedicated to stranded-cost recovery: "It is simply
unfair to leave utilities holding the bag for the energy policies of the past. . . . Eighty-seven of the largest [investor-owned utilities] could lose $135 billion in stranded investment in the next 10 years. This is more than 80 percent of the total equity of these companies. Make no mistake about it. If we force the utilities to eat the stranded costs, we have a bankrupt industry."
Rep. Schaefer made it clear that his plans for deregulation will follow the action of the telecommunications bill: "We cannot deregulate until we eliminate the fundamental reason for those strict regulations in the first place (em the government-protected monopoly.
"To simply remove the government (em to deregulate (em without restoring the free market is the wrong kind of deregulation. Such deregulation,