[BETA] Fortnightly

Douglas W. Smith, deputy general counsel for energy policy at the Department of Energy, addressed several timely legislative issues in a recent speech, including that of a federal restructuring mandate, which he said, is unlikely to be passed by Congress this year.

"There never was a chance for federal restructuring legislation this year," Smith said, on May 22 at a conference in Arlington, Va., sponsored by PUBLIC UTILITIES FORTNIGHTLY, "Restructuring & Convergence: Successful Strategies in the Energy Services Marketplace." He predicted that there was "almost zero chance for such legislation before the end of this Congress," which ends September 1998.

Smith said that of the six states that had passed legislation and the 12 that had begun retail wheeling pilots as of late May, the most interesting development was a restructuring bill passed in Montana. (See Headlines, this issue, p. 14.) The Montana bill "defies conventional wisdom," Smith said, because the presumption has been that states with low-cost electric would not move toward competition. Also, Montana Power Co. had urged passage of that legislation.

On the federal front, he noted, the White House had asked the DOE to put restructuring legislation together. Smith said such legislation appeared to be set for interagency review. The goal would be to obtain a recommendation from the president by late June.

Although he felt that many states would move forward with retail competition within the next 15 to 18 months, Smith said that defining the impact of state actions on federal legislation could prove difficult to assess. On the one hand, if many states have legislation in place, then Congress could find it easier politically to mandate a federal standard for retail competition. On the other, however, widespread state action would make it less important to enact a federal law.

Among the several issues the Administration is considering as it crafts a restructuring proposal, a key concern is whether the federal government should mandate retail access at all, Smith said. The Administration and prior DOE leadership have said that there should not be a federal mandate. Smith observed that FERC Chair Elizabeth Moler, who now apparently will take over the No. 2 spot at DOE, has advocated a federal mandate with states having the choice of opting out. The discussions will continue.

"[The] bottom line is that there probably shouldn't be a federal mandate, and if there is one, states should be allowed to opt out," Smith said. Also, without a federal restructuring mandate, stranded cost recovery issues should be left to the states. If there is a choice mandate, then recovery also would be required, he added. The other six issues that need further consideration include regulatory jurisdiction, PUHCA reform, public benefits, reliability, tax code changes and air emissions. Smith emphasized that the DOE already has held several stakeholder meetings and will hold more. Smith invited the industry and interested parties (em "Feel free to come talk to us."

Several approaching air-emissions events could affect the Administration's restructuring bill, Smith said. In fact, the outcome of these various milestones could force a rewrite of any