Bipartisan Energy Politics? 105th Congress Takes on Electric Restructuring in Earnest

Fortnightly Magazine - March 15 1997

"It's going to take a lost of time to understand all the pies."

It's almost spring. There's a new energy secretary(emisn't there? And at least for new electric restructuring bills in Congress. Sen. Frank H. Murkowski (R-Alaska) is chairing "workshops" on deregulation at the Energy and Natural Resources committee.

Everyone's wondering: Which bill take hold? Where will it be and how will it look by the end of the legislative session: dead, alive, or limp?

Only time and lobbying will tell, as the Senate and the House are approaching restructuring in different ways, both in substance and in pace. But here's what industry reps, legislative aides and a onetime energy Committee chairman told PUBLIC UTILITIES FORTNIGHTLY as Congress Convened:

• A bipartisan issue. "Consumer choice" isn't political. Everyone appears to want an end to the utility monopoly so that consumers can buy cheap, reliable power. At the start of the session, legislation flew from all sides. A draft bill surfaced from the Department of Energy, expected to be followed by an Administration bill. House and Senate Republicans and Democrats authored more defined bills. An aide to one Democratic congressman says his boss has long wanted to work with Rep. Dan Schaefer (R-Colo.) on a bipartisan measure. Rifts may turn out to be regional(emlow-cost vs. high-cost states(emor philosophical: Is the best route to competition wholesale or retail?

• Congress needs schooling. Few legislators know the issues well. This is where Murkowski will shape the debate. His first workshop was set for March 6. He hopes to discover how states already promote competition, what the impediments are, the role of public power and what Congress can do. Murkowski's philosophy, in sum: "Go slow until we know." He'll tackle state preemption and jurisdiction, stranded costs, taxes, renewables and market power, among other issues.

• Lobbies stand firm. Their influence is written between the lines of all the early legislation. The differences between consumer groups and utilities are well known. But utilities are siding with consumers against industrial users they claim only want to shoulder half the stranded-cost load. That is the stance of the Alliance for Competitive Electricity, or "ACE," a new group of utilities with medium to heavy stranded costs. Some of these companies have already won hard-fought restructuring battles at the state level. ACE has contracted J. Bennett Johnston, the former Democratic senator from Louisiana and Murkowski's one-time colleague on the Energy and Natural Resources Committee, to be its advisor and strategist in the fight on Capitol Hill. (Johnston retired last year and is precluded from lobbying or contacting his former colleagues for 12 months.)

Before leaving office, Johnston sponsored S. 1526, which would provide for recovery of stranded costs. It also would require states to either set up a competitive wholesale market, a retail market, or some other "fair program." The year 2010 would serve as a startup date. The Federal Energy Regulatory Commission would define "stranded costs." Parts of this initiative have crept into ACE's agenda.

Exploring all the restructuring issues and addressing them in a cogent piece of legislation is a task whose immensity isn't lost on lobbyists like Tom Dennis of Southern California Edison. SCE contributed to the formulation of Assembly Bill 1890, the restructuring law enacted late last summer in California.

"To be truthful, I don't see legislation passing in the United States Congress in 1997 and signed by the president of the United States," Dennis says, "I think this issue is enormously complex. It's going to take a lot of time to understand all the pieces."

But, "There are two things everyone agrees on right now," says an aide to Rep. Schaefer. "And that's electricity deregulation is one of the biggest issues of the 105th Congress, and ... that the industry will be deregulated."

Looking at the early legislation and listening to comments made by "power players" in the House, Senate and Administration, there's consensus on some issues, conflict on others.

On states' rights, for example, Murkowski and the DOE's Charles B. Curtis agree the states ought not be subjected to a federal mandate for customer choice at the retail level. A state ... "may elect" to open up retail markets, reads the draft of Dale Bumpers' (D-Ark.) restructuring bill.

But Schaefer's bill, re-introduced last month with technical changes, essentially calls on states to mandate retail access, because if they don't act, the FERC will step in. And the legislation expected to be re-introduced by Edward J. Markey (D-Mass.) would require states to go through retail-wheeling proceedings. If states choose the retail route or divest generation, they're released from the mandatory power-purchase requirement in the Public Utility Regulatory Policies Act of 1978, and from certain other mandates in the Public Utility Holding Company Act of 1935.

Markey has urged Schaefer for more than a year to work on a bipartisan bill. "Schaefer has generally indicated interest in doing that too, but he's never gone beyond that aid actually say, 'OK, we'd like to work together, and get out staff together and work in the bill,'" says a Capitol Hill source. The observe adds that there is concern from within the Schaefer camp about their retail wheeling "mandate."

The drafts from Bumpers and the DOE and Schaefer's 1996 bill, among other measures, emphasize renewables and the environment. Murkowski, however, veers, here.

Signs point to agreement on eliminating PURPA and PUHCA, at least in the early draft legislation. And on stranded costs, Bumpers and Schaefer appear aligned. At the DOE, however, the jury was still out earlier this year.

Not much is expected from the draft bill the DOE circulated through various government agencies. "By the time it gets through interagency review, I think it'll will come out pretty wimpy," says one Hill Republican aide.

But to allow states to address stranded costs is "where everybody seems to be headed," says Dennis of SCE.

So, while the players have staked out positions on the obvious issues, they have paid less attention to items such as transmission to items such as transmission and distribution, asset divestiture, market power, alleged subsidies for public power and the fate of workers displaced by the corporate restructuring that competition could bring.

Johnston, whose Senate sting and Energy Policy Act experience have given him a 24-year perspective of energy, says the issues haven't even been thought out yet. ACE, which calls for a transition to a wholesale market with open-access transmission, is positioning itself as a friend of the residential consumer. To extend competition to the retail market, the group calls on federal legislators to clarify jurisdiction, provide for reciprocity and ensure that stranded costs and recovered, among other guarantees.

"That's the job we have, to educate the Congress on what the real interests are and what the real economics of this thing are," Johnston says. "It's a vast educational job.

"We think we know more about the answers that anybody since we're the big utilities."

One issue still has ACE stumped, the former senator admits: "We haven't solved the question of how to grant that residential consumer his fair share of the pie. We're dedicated to doing that ... because we're going to end up being his provider of last resort."

He says ACE will try to get cooperatives on its side, as they also are weighed down with stranded costs. Johnston has told industrial users that he doesn't think they'll get competition without taking care of stranded costs.

People in the industry ought to realize "competition is a good thing properly arrived at, and they simply cannot break the utilities in the process," the ACE strategist says. "I mean the country won't allow for that. It's nice to say, 'Well, they made some bad investments, so let them go down the drain.' But when you really examine it, first of all the investments were prudent at the time they made them. If you let them go down the drain, it has terrible economic effects, especially on residential consumers."

"Bankruptcy" is what he's implying. It's a word being used frequently by utilities these days, especially those faced with restructuring mandates in New Hampshire.

Murkowski, too, is concerned about bankruptcy utilities.

But Irwin A. "Sonny" Popowsky, president of the National Association of State Utility Consumer Advocates, insists that NASUCA members don't want stranded costs recovered 100 percent. He met with a Bumpers aide and DOE officials early in the year.

"Any federal legislation that mandates stranded-cost recovery is a bad deal for consumers, because I think that we don't need a federal mandate to have retail choice in the first place," says Popowsky. "I think we can convince Congress that's a bad idea. If the utilities are able to claim a constitutional or a federal statutory right to recover 100 percent of stranded costs, then there may not be much point in going forward. But I also believe that regional differences could derail it."

Some issues are a natural for a federal solution, such as those on the environmental front. "In Pennsylvania you can't pass a law that says you can't burn dirty coal in Ohio," Popowsky says.

"I think what Congress and the Administration are going to do is to outline key policy areas that need to be addressed to restructure an entire industry and to address those issues that only the federal government has a responsibility for," says Dennis. He says those areas include interstate commerce, taxes, reciprocity, the fate of the Power Marketing Administrations and tax-exempt financing.

Murkowski told the Edison Electric Institute Government Affairs Conference in January that he doesn't advocate change for change's sake. "Nor do I believe that the federal government is the only agent of change," he said. He noted that, according to the Edison Electric Institute, 47 states have begun formal or informal proceedings to address restructuring issues. And 30 percent of the U.S. population lives in states with final restructuring orders.

"Preemption of states is a tool of last resort," he said. "Neither the federal government nor the FERC is the solution to all problems."

Joseph F. Schuler, Jr. is associate editor of PUBLIC UTILITIES FORTNIGHTLY.

Leadership,

105th Congress

House

Newt Gingrich (R-Ga.), Speaker

Richard K. Armey (R-Texas),

Majority Leader

Thomas D. DeLay (R-Texas),

Majority Whip

Richard A. Gephardt (D-Mo.),

Minority Leader

David E. Bonoir (D-Mich.),

Minority Whip

Senate

Strom Thurmond (R-S.C.),

President Pro Tempore

Trent Lott (R-Miss.), Majority Leader

Don Nickles (R-Okla.), Majority Whip

Thomas A. Daschle (D-S.D.),

Minority Leader

Wendell H. Ford (D-Ky.),

Minority Whip

Power Brokers in the House

Thomas J. Bliley, Jr. (R-Va.)

As chair of the House Committee on Commerce, Bliley has said electricity deregulation will be his panel's "most ambitious task." He wants to give consumers the power to choose their electric supplier, and he'll be leading the push to dismantle the utility monopoly this year (em ahead of the Senate's efforts. Bliley brings a small businessman's perspective to the debate, having had his own business prior to being elected to Congress in 1980. He is known for his competence and fairness.

Richard M. Burr (R-N.C.)

A member of the House Commerce Committee, Burr's subcommittee appointments include Energy and Power. He was first elected to Congress in 1994; he has yet to author energy legislation. Seen as "intellectually engaged" in the restructuring issue, he typically has attended hearings from start to finish. His staff says he's earning the reputation as a consensus builder, and is aware of the large number of players and their interests.

Ralph M. Hall (D-Texas)

Elected to the House in 1980, Hall is the new ranking Democrat on the Energy and Power Subcommittee. According to his staff, he believes in the goal of deregulation and that if done correctly, it will benefit consumers with better quality, lower-cost electricity. He expects to work with both parties on a "common sense" approach. He thinks Schaefer's bill is a good starting point.

Edward J. Markey (D-Mass.)

A member of the House Commerce Committee and its Energy and Power Subcommittee, Markey has been active in the national energy policy debate. He authored the wholesale wheeling provisions of the Energy Policy Act of 1992 and was a principal author of EPAct's PUHCA amendments. According to one source, Markey has urged Republicans to work with Democrats on a bipartisan restructuring bill.

Dan Schaefer (R-Colo.)

Chairman of the House Commerce Committee's Energy and Power Subcommittee, Schaefer has long shown an interest in energy issues. He also played a role in the Telecommunications Act of 1996. That deregulation effort helped him learn how he could set the parameters of the electric restructuring debate. Having come off nine electric restructuring hearings last year, it's uncertain where he'll head this year. But it could be on visits to a cabinet office to brief the new energy secretary on what "choice" is about. Federico Peña, secretary, Department of Transportation and Schaefer served in the Colorado Legislature together in the late 1980s.

Power Brokers in the Senate

Dale Bumpers (D-Ark.)

Replacing the retired J. Bennett Johnston as the ranking Democrat on the Senate Energy and Natural Resources Committee, Bumpers was among the first to introduce a comprehensive restructuring bill this year. He's not expecting Republican Frank H. Murkowski to co-sponsor the bill, although the two are friends. Murkowski's desire to take time on the issue won't stop Bumpers from forging ahead. Bumpers expects to take part in Murkowski's hearings. He was first elected to the Senate in 1974 and has become known for deficit-control measures on defense and science projects, including the $12-billion "supercollider." His interests lie in rural America, which could figure in the restructuring debate when it comes to electric cooperatives. He also serves on the Senate Appropriations Committee.

Frank H. Murkowski (R-Alaska)

Chairman of the Senate Energy and Natural Resources Committee, Murkowski also serves on the Finance Committee. He says his goal is to assure consumers low-priced, reliable electricity through deregulation, regulatory streamlining and state promotion of retail competition. Two years ago, Charles B. Curtis, then the DOE's deputy secretary, was one of the first people to brief Murkowski on the issue. Not surprisingly, the two share some restructuring philosophy. The senator has said he won't legislate until he has seen what the states are up to: "We will not proceed like the Queen of Hearts in Alice in Wonderland: 'Verdict first, trial afterwards.'" Murkowski's energy state roots may push his leanings toward energy suppliers.

Don Nickles (R-Okla.)

Nickles, like Bliley, brings a small businessman's perspective to Congress. Among his assignments are seats on the Senate Budget Committee and Energy and Natural Resources Committee. He comes from an energy state, and has always been interested in natural gas and oil, along with utility deregulation. His perspective on deregulation, however, has been "one piece at a time." On stranded costs, Nickles leans toward letting the states step in. This year, he plans to listen to those testifying at Murkowski's hearings to come up with a bill that increases competition and lowers cost. If he introduces new legislation, it's uncertain whether his bill would borrow from last year's measure, S. 708.

Key House Committees

Appropriations (33-25)*

Bob Livingston, Chairman

James W. Dyer (La.), majority staff director

David Obey (Wis.), ranking Democrat

Scott Lilly, minority staff director

Key Subcommittee chairmen

Joseph M. McDade (Pa.), Energy and Water Development

Ralph Regula (Ohio), Department of Interior

Budget (24-18)

John R. Kasich (Ohio), chairman

Richard E. May, majority staff director

Martin Olay Sabo (Minn.), ranking Democrat

Eileen Baumgartner, minority staff director

Commerce (27-22)

Thomas J. Billey, Jr. (Va.), chairman

James E. Derderian, majority staff director

John D. Dingell (Mich.), ranking Democrat

Alan J. Roth, minority staff director

Key Subcommittee chairmen

Dan Schaefer (Colo.),Energy and Power

Joe Barton (Texas), Oversight and Investigations

W.J. "Billy" Tauzin, Telecommunications and Finance

Michael G. Oxley (Ohio), Commerce, Trade, Hazardous Materials

Judiciary (20-15)

Henry J. Hyde, III (Ill.), Chairman

Alan F. Coffey, majority staff director

John Conyers, Jr. (Mich.), ranking Democrat

Julian Epstein, minority staff director

Resources (27-22)

Don Young (Alaska), chairman

Daniel Val Kish, majority staff director

George Miller (Calif.), ranking Democrat

John Lawrence, minority staff director

Ways and Means (23-16)

Bill Archer (Texas), chairman

Pete Singleton, majority staff director

Sam M. Gibbons (Fla.), ranking Democrat

Janice Mays, minority staff director

*(Ratio of Republicans to Democrats.)

Key Senate Committees

Appropriations (15-13)*

Ted Stevens (Alaska), chairman

J. Keith Kennedy, majority staff director

Robert C. Byrd (W.Va.), ranking Democrat

James H. English, minority staff director

Key Subcommittee Chairmen

Pete V. Domenici (N.M.), Energy and Water Development

Slade Gorton (R-Wash.), Interior and Related Agencies

Budget (13-11)

Pete V. Domenici (N.M.), chairman

G. William Hoagland, majority staff director

Frank R. Lautenberg (N.J.), ranking Democrat

William G. Dauster, minority staff director

Commerce, Science and Transportation (11-10)

John McCain (Ariz.), chairman

Patric G. Link, majority staff director

Ernest F. Hollings (S.C.), ranking Democrat

Kevin G. Curtin, minority staff director

Energy and Natural Resources (11-9)

Frank H. Murkowski (Alaska), chairman

Gregg Renkes, majority staff director

Dale Bumpers (Ark.), ranking Democrat

Ben Cooper, minority staff director

Key Subcommittee Chairmen

Don Nickles (Okla.), Subcommittee on Energy Research,

Development, Production and Regulation

John Kyl (Ariz.), Water and Power

Environment and Public Works (10-8)

John H. Chafee (R.I.), chairman

Steven Shimberg, majority staff director

Max Baucus (Mont.), ranking Democrat

J. Thomas Sliter, minority staff director

Finance (11-9)

William V. Roth, Jr. (Del.), chairman

Lindy L. Paull, majority staff director

Daniel P. Moynihan (N.Y.), ranking Democrat

Mark Patterson, minority staff director

* (Ratio of Republicans to Democrats.)


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