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Flashpoint Congress

This year, or next, legislators will close in on a national energy bill.

Fortnightly Magazine - October 15 2002

recent Congressional hearing that featured federal and state utility regulators as witnesses. It illustrates how far apart the two sides are on the question of SMD for electric transmission and wholesale power transactions, and how federal hegemony over the grid might affect time-cherished state prerogatives, such as control over those grid functions that serve retail load. Here, you see the "two Washingtons" going at it: Washington state commission Chairwoman Marilyn Showalter debating with Chairman Pat Wood from the Federal Energy Regulatory Commission, in Washington, D.C.:

Chairman Wood: "Some objections to our rule have come from some state energy regulators. This is understandable, given our proposal to treat all transmission uses the same.

"We don't take this step lightly, but it is not possible to create a fair and equitable marketplace without use of a single set of rules for uses of the transmission grid. In our proposed rule, we explain in detail why we find that undue discrimination continues to this day, and its negative effects upon the competitors and customers of the wholesale electric market."

Chairwoman Showalter: "FERC's proposed rule rests on the premise that a vertically integrated utility, by its very nature, engages in undue discrimination. That is, when a utility, in order to fulfill its own obligations under state law, reserves its own transmission and load-balancing generation facilities to serve its own customers, it is practicing, according to FERC, undue discrimination. From this premise-that utilities preferring their own customers are engaging in undue discrimination-the rest of the rule flows. If this premise is misdirected and overbroad (as I believe it is), then the rule loses its justification."

Both regulators are as geometrically opposed as their respective time zones. It is difficult to believe that if state and federal regulators cannot find agreement that Congress will. Nevertheless, most congressional watchers believe there is major support for an electricity title that would have policies that favor competitive energy markets.

PUHCA: Down for the Count

For many years, utilities have called for the repeal of the Public Utility Holding Company Act, or "the '35 Act," as it is also known, referring to its Depression-era enactment. But one cannot help observing that PUHCA repeal may be needed now more than ever.

Some experts believe the credit and financial problems that have plagued the energy industry in the last year might have been cushioned had utilities had sizable enough balance sheets to withstand economic downturns, credit issues and diversify their risks. Very soon, industry may get its wish.

Congressional sources say that the great majority of those in Congress now favor repeal of PUHCA-a feature included in both Senate and House bills. They disagree mainly on how much added authority they should give to FERC to regulate mergers, as a quid pro quo. Of course, some senators continue to cling to the notion that PUHCA may have prevented the Enron collapse. Most experts refute that notion, including the Securities and Exchange Commission (SEC). The SEC says PUHCA would not have prevented the Enron collapse.

In fact, the SEC wholeheartedly supports PUHCA repeal:

"Repeal of