Electric's Players Tell Senate Panel Where to Jump In, Butt Out

With three hearings behind it, what has the Senate panel on electric restructuring learned from regulators, utility execs and other industry types who have testified?

Granted, some candor has emerged from all the maneuvering and positioning typical of electric industry and sector leaders, but is that enough for the Senate Committee on Energy and Natural Resources to develop a position on federal legislation, without input from energy consumers and the voting public?

Sen. Frank H. Murkowski, committee chair, said he expected to hold more workshops to explore the fuel, financial and consumer implications of restructuring. On the House side, Rep. Dan. Schaefer (R-Colo.), chair of the Energy and Power Subcommittee, planned four "field hearings" from April 14 to May 9.

Elizabeth A. Moler, chair of the Federal Energy Regulatory Commission, shared some of the more frank testimony on March 20 when she voiced "personal opinions" on the subject before the committee. She said she did not doubt federal legislation establishing national policy would make the power supply industry more efficient, competitive and reliable.

She acknowledged that Order 888 is limited in scope: Much of the electric power grid (em the transmission facilities of federal power marketing administrations, the Tennessee Valley Authority, municipal and cooperative utilities, and ERCOT utilities (em lies beyond the FERC's reach, leaving a 30-percent gap in jurisdiction.

"Nationwide open access has some holes," she said. "Federal legislation is necessary to fill these holes."

At the previous week's hearing, others drove home the same point. Richard Munson, executive director of the Northeast-Midwest Institute asked: "How can you ignore a key sector and exempt them from competition?" Munson said the similarities in the lobbying points of private and public power struck him. "True competition can't be realized if you don't include public power," he said.

Moler said Congress should promote choice at the retail level. "Direct the states to establish consumer choice programs, but with the opportunity to opt out if a state determines that retail competition is contrary to its own needs and interests."

Moler envisions Congress, not the FERC, setting principles. States should have the opportunity to challenge these points, and challenges should not come to the FERC, she noted.

Moler also called on Congress to eliminate the Public Utility Holding Company Act's impediments to competition and to repeal the Public Utility Regulatory Policies Act, establishing in its place a federal policy for renewable technologies "compatible with a competitive industry."

The FERC chair supports efforts by the North American Electric Reliability Council to take the lead on reliability. "But the reliability rules of the road are not well defined. There are no effective programs of enforcement for making sure everyone plays by the same rules (em and for ensuring all industry segments are involved in setting these rules. Reliability in a competitive environment is too important to be left to a voluntary regime."

Mississippi Commissioner Curt Hebert, also testifying before the panel, disagreed with Moler: "I submit to you that competition must bring lower prices and more reliability. Or what have you done? You've accomplished nothing."

Moler pointed out the Internal Revenue Service needs to clarify its rules to ensure public and nonpublic utilities do not jeopardize their tax-exempt financing in providing open access.

Before the same Senate panel a week earlier, Missy Mandell of the Large Public Power Council had offered a strident argument for her constituents on the matter of tax laws and private power entities. "We do believe we can compete and exist with private power," she said. She urged Congress, however, to resolve the conflicting elements of the 1992 Energy Policy Act and the 1986 Tax Reform Act. "The tax laws stipulate that a state or local public power system cannot sell more than 10 percent of its transmission capacity to a private entity," she said. "And yet the Energy Policy Act, as interpreted by the Federal Energy Regulatory Commission, states that we must make our transmission lines available to everyone."

Impending competition has made problems created by IRS "private use" restrictions more acute, Mandell said.

Most, if not all, state regulators at the March 20 hearing agreed with Commissioner Richard H. Cowart that they did not need "congressional dynamite" to undo any logjam at the state level when it came to starting the flow of competition.

Cowart, chair of the Vermont Public Service Board, suggested Congress help states by promoting regional solutions, clearing jurisdictional boundaries, and boosting environmental quality and public purpose measures.

P. Gregory Conlon, president of the California Public Utilities Commission, said federal legislation was not necessary in its case (em the California market becomes competitive next year. "We need Congress to ratify an interstate compact that we're working on with 14 states in the West," he said. The compact would include Mexico and Canada. Reciprocity also requires federal attention as a regional issue, he said.

Linda K. Brethitt, chair of the Kentucky Public Service Commission, suggested her state does not need mandated federal restructuring legislation, but for different reasons. "We enjoy some of the lowest rates in the nation in that our average ... [with] all the customer classes combined is about 4.5 cents a kilowatt-hour, with the national average being about 7.2 for all customer classes."

Later, Brethitt said she didn't advocate a "not-in-my-state" position. But "because we are so low cost, we have a different set of circumstances than many of my colleagues here at the table." She said because of Kentucky's large rural population, it will always carry a significant obligation to serve.

Like Conlon, John M. Quain, chair of the Pennsylvania Public Utility Commission, noted his state also has a deregulation plan. He asked that such states be "grandfathered" into federal legislation.

Quain did admit it was appropriate for Congress to mandate retail competition.

"Simply even the threat last year of federal legislation was enough to move some of the most slow-moving IOUs in Pennsylvania to the table to sit down and negotiate," he said. "So I would suggest if just the threat has that kind of impact, a mandate, set sufficiently forward, would have an even greater impact."

Sen. Murkowski (R-Alaska), committee chair, asked Moler if she thought a federal mandate on states would "pass constitutional muster."

"I do not believe it would be in violation of the 10th Amendment and I will be happy to provide a detailed explanation as to why I think that is true," she said. "We have studied the issue." t

Joseph F. Schuler Jr. is an associate editor of PUBLIC UTILITIES FORTNIGHTLY. Associate editor Lori M. Rodgers contributed to this report.

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