by Steven Angle, Donna Bobbish and Frank Verrastro
On February 28, Rep. Joe Barton (R-TX) released a draft of his proposed energy legislation for the new Congress. Barton's proposal is similar to H.R. 4, which was passed by the House last session, but also incorporates new titles on electricity, energy efficiency and Strategic Petroleum Reserve fill. It does not, however, include language either to provide for exploration in the Arctic National Wildlife Refuge or mandate a federal renewable portfolio requirement - two of the more contentious issues visited by the conferees during negotiations on last year's energy bill. House staff also indicates that Title IX of the legislation will contain an as-yet-to-be-drafted renewable fuels section. Because of the decided lack of agreement on components of the section at this juncture, Barton has left the title as a placeholder for a substantive language insert to be provided as the debate moves forward.With respect to electricity, a title absent in last year's House bill, Title VII of the Barton proposal promotes investment in transmission by requiring FERC to produce a rulemaking on just and reasonable rates of return and participant funding. The measure also calls for expediting the construction of critical transmission infrastructure, harmonizes the regulation of interstate transmission by granting FERC "partial" jurisdiction over the transmission of currently non-regulated utilities - such as rural electric co-ops and municipally-owned utilities, authorizes Bonneville Power, TVA and other federal power marketing administrations to participate in Regional Transmission Organizations (RTOs) and expresses a "Sense of the Congress" that all utilities should voluntarily participate in RTOs and that FERC should provide incentives for them to do so. The draft electricity title does not address FERC's Standard Market Design (SMD) proposal, and its provisions concerning open-access transmission rights section mirrors earlier limited regulatory approaches, characterized as "FERC-lite."
The draft repeals the Public Utility Holding Company Act of 1935 (PUHCA) twelve months after enactment, but authorizes federal and state government officials to have access to utilities' books and records. It also contains many of the anti-manipulation proposals developed in the wake of the Enron bankruptcy and reports on the electricity crisis in California - calling for greater transparency in energy markets, banning "round-trip" trades, and increasing civil and criminal penalties for violations of the Federal Power Act. It also changes the rule for FERC-ordered refunds of power sales found to be above just and reasonable rates to permit refund liability to begin on the date that a complaint is filed. (The current rule delays refund liability until 60 days after a complaint is filed).
Title VIII of the draft energy bill authorizes the Department of Energy (DOE) to develop accelerated programs for the production and supply of electrical power from advanced clean coal methods. Title X authorizes the National Highway Transportation and Safety Administration to implement and enforce fuel economy standards for FY 2004-2006 and directs the National Academy of Sciences to study the feasibility of significantly improving fuel efficiency for automobiles by model year 2012 and to recommend alternatives to the Corporate Average Fuel Efficiency (CAFÉ) system. Finally, the proposal also reauthorizes (for 15 years) the Price-Anderson Act indemnification in the event of nuclear accidents.
Rep. Barton acknowledges that this draft is just an opening salvo and a first step in achieving a comprehensive bill. He intends to begin a series of energy hearings in the next few weeks to use as a platform for building support for the legislation. He has indicated that he hopes the House Energy and Commerce committee can produce a comprehensive measure by the Easter recess. For its part, the Senate Energy and Natural Resources committee, under the leadership of its new chairman, Pete Domenici (R-NM), already has begun hearings to examine critical energy issues, both domestic and international. Congressional staff in both chambers indicate that impending military action in Iraq will focus the Congress' attention on energy matters. Issues of access to resource-rich acreage, the need for streamlined permitting and regulations, the development of new technologies, environmental, safety and renewable energy proposals, tax incentives and credits and means of improving energy security through both domestic production and more efficient consumption measures are all under consideration.
Senate Energy Committee Revisits Electricity Restructuring
While the Senate Energy Committee's March 4 hearing was intended to address transmission incentives, panel members quickly broadened their discussion to include FERC's SMD proposal, as well as the proposed repeal of PUHCA and the most effective means for increasing the construction of new electricity transmission facilities.
One of the more outspoken critics of SMD, Sen. Craig Thomas (R-WY) stated that he felt it would be "inappropriate" for FERC to produce a final SMD rule in the face of widespread state concern and opposition. He also said that he would prefer to see Congress adopt broad policy guidelines with respect to market design features and RTOs - guidance that would then allow FERC to propose specific market prescriptions, where appropriate. Sen. Gordon Smith (R-OR) also has been critical of the SMD approach, characterizing it as "unworkable" in the Pacific Northwest. Committee chairman Domenici also is opposed to FERC's plans to move ahead with SMD, and has called on FERC chairman, Pat Wood, to issue a "white paper" addressing the specifics of the SMD proposal, rather than a final rule. The omnibus spending bill recently adopted by Congress instructed DOE to produce a study of the SMD proposal. Both the FERC white paper and the DOE report are due in April.
Witnesses at the hearing, however, urged lawmakers to let SMD go forward, arguing that it would benefit the market by increasing investment in transmission projects and provide some degree of regulatory certainty to a complex market and environment.
On the issue of PUHCA repeal, both Sen. Thomas and former committee chairman Bingaman (D-NM) asked witnesses to predict what impact the repeal would have on consumers and businesses. Thomas reiterated his belief that PUHCA could be repealed so long as additional access to energy company records is provided to FERC and state public utility commissions. Witnesses urged the committee to enact comprehensive energy legislation this year in order to help stabilize the market with one panelist characterizing a passage of energy bill as a "critical component of any economic recovery program
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