Schaefer measure wins praise from UtiliCorp, Enron, and others, but EEI wants relief on stranded costs."The Electricity Consumers Power to Choose Act," introduced by Rep. Dan Schaefer (R-CO), while designed to bring competition to the electric industry, has definitely attracted controversy. The bill has evoked strong reactions from industry players as well as intense lobbying efforts on the part of promoters and detractors. Everyone, it seems, wants to put in their two cents as the bill makes its way across Capitol Hill. (Lack of time and election-year politics are expected to delay the bill's passage until next year.)
And in case industry debate over the merits of customer choice should prove dull, Schaefer added a twist (em a scheme to promote the use of renewable energy in electric generation. Borrowing from the Environmental Protection Agency's Acid Rain Control Program, the Schaefer bill would require power producers (regulated or not) to obtain "renewable energy credits" that could be traded much as emissions allowances. Power producers would submit these credits to the Federal Energy Regulatory Commission (FERC), based on the quantity of power they generate.
Introducing the bill at a press conference, Schaefer referred to a recent study by Citizens for a Sound Economy, which found that retail choice would cut monthly residential electric bills by at least 43 percent, adding $191 billion to the nation's gross domestic product. Schaefer, chairman of the House Commerce Subcommittee on Energy and Power, held a series of hearings on electricity deregulation over the last year. He has concluded that giving all retail consumers the right to choose among competitive providers of electricity can provide significant savings for even the smallest consumers.
Dissatisfaction
Although the bill in its original form finds favor with a number of utilities (em including UtiliCorp United, Wisconsin Power & Light, Enron, Cinergy (em the Edison Electric Institute (EEI) has reservations. EEI president Tom Kuhn points out that 47 states and the District of Columbia already are examining and experimenting with varying approaches to retail competition, and that the bill would overrun current activities. Kuhn also says the bill would enable large customers to bypass the costs of low-income assistance programs, environmental programs, universal service, and stranded investment. To prevent such an uneven effect, Kuhn wants Congress to create a level playing field by eliminating tax and financing differences and preferences among utilities. Kuhn also finds the bill's stranded-cost provisions inadequate. Merely suggesting that states consider the issue, he argues, fails to assure stranded-cost recovery.
The PURPA Reform Group, a coalition dedicated to changing PURPA, also finds fault: "Chairman Schaefer ignores the federal government's responsibility for high-priced PURPA power and its corresponding obligation to ensure that utilities are not forced to bear these federally mandated costs," said Arthur Adelberg, PURPA Reform Group chairman and vice president of law and power supply at Central Maine Power. Adelberg called on Schaefer to halt mandatory PURPA power purchases this year, and to ensure recovery of costs incurred under PURPA.
Organized labor chimed in with a laundry list of problems. John J. Barry, president of the International Brotherhood of Electrical Workers (IBEW), predicts a long fight. "We believe that, despite the good intentions of some of its backers, the bill as it stands would cause chaos and disruption in an industry already undergoing massive changes." Barry urged Schaefer to complete deregulation of the wholesale electric market first. He also asked for a guarantee that access to and reliability of electric supply would not suffer for the benefit of new entrants.
Barry took particular issue with the projected consumer savings reported by Citizens for a Sound Economy, which he labeled as faulty assumptions resulting in factually incorrect conclusions. "CSE presented only the alleged positive aspects of accelerated deregulation and restructuring, avoiding any quantification of the downside to such actions," he claimed.
Contentment
Peggy Welsh, executive director of the Electric Generation Association (EGA), applauded the Schaefer bill for putting a date to the introduction of competition in the electric industry. She noted that the bill comports with EGA's Vision of a Fully Competitive Electric Industry, which urges Congress to implement competition by a date certain and to clarify federal and state jurisdiction. She said EGA agrees with the idea of uniform national standards to guide competition, and complimented the bill for acknowledging the interstate nature of today's electric market while respecting state needs for flexibility when implementing broad federal guidelines.
Ohio state Rep. Dale N. Van Vyven, 1996 national chairman of the American Legislative Exchange Council (ALEC), which represents 3,000 state legislators, applauded Schaefer (em a former state legislator and ALEC alumnus (em for assigning states major responsibility to implement the transition. "We will measure Congressman Schaefer's proposal, and the others that may follow, against the fundamental principles ALEC stands for (em opening free markets, limiting government, promoting federalism, and protecting individual rights." Van Vyven noted that on June 1 ALEC became the first organization of elected officials to adopt model state legislation on a competitive electricity market, and that the organization is now working on a regulatory framework to promote consumer choice.
Natural Gas Supply Association (NGSA) president Nicholas Bush called the bill a "major step" toward ensuring an "orderly rather than chaotic" restructuring. Pointing to the successful restructuring of the natural gas industry, Bush said that efforts to bring competition to the electric industry "will, if carefully drafted, have long-range, positive consequences for the nation."
The bill also received a vote of confidence from the Partnership for Customer Choice (PCC), a coalition of seven geographically diverse utilities (em Allegheny Power, Cinergy, PacifiCorp, Pennsylvania Power & Light, UtiliCorp United, Wisconsin Energy Corp., and Wisconsin Power & Light. The coalition said it was "unfortunate that certain opponents of customer choice are masquerading behind the banner of states' rights while at the same time opposing efforts of state legislators and regulators to institute customer choice programs." Noting that many electric utilities will argue against federal legislation, PCC said the bill fills a critical need by addressing issues such as barriers to entry, jurisdiction/reciprocity, and the proper role of states. t
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