CONGRESS - Will Electricity Deregulation Fizzle Again?

By Margaret Kriz, National Journal
© National Journal Group Inc.
Saturday, Feb. 20, 1999

	      In early February, House Commerce Committee Republicans 
were asked to sign a letter urging committee Chairman Thomas J. 
Bliley Jr., R-Va., and Energy and Power Subcommittee Chairman Joe 
L. Barton, R-Texas, to swiftly pass legislation deregulating the 
electricity industry. Curiously, the request to endorse the 
letter came from staffers to Bliley and Barton themselves. The 
aides had written the correspondence as part of a GOP campaign to 
engender support for electricity deregulation. 
	     At first glance, attempts to create a phony groundswell 
seem unnecessary. After all, Republican leaders in Congress, as 
well as White House policy makers, for four years have wanted to 
open the electricity generation business to new competition. 
	     Serious legislative packages are already in the works. 
The Clinton Administration's deregulation bill, currently under 
review by a variety of agencies, is expected to be unveiled in 
March. Senate Energy and Natural Resources Committee Chairman 
Frank H. Murkowski, R-Alaska, promises to introduce his energy 
package this spring. Barton boasted in a Feb. 4 speech to the 
U.S. Chamber of Commerce: ''I think the House can move more 
rapidly than the Senate.'' And House Majority Leader Richard K. 
Armey, R-Texas, has declared that electricity legislation will be 
a top priority this Congress. 
	     The effort also got a boost when two heavy-hitters-- 
former Rep. Bill Paxon, R-N.Y., and former Deputy Energy 
Secretary Elizabeth A. Moler--signed up with a pro-deregulation 
coalition called Americans for Affordable Electricity. Paxon 
announced on Wednesday that he will be the national chairman and 
Moler will serve as counsel for the group, whose members include 
utilities and large industrial companies. 
	     So, with that much muscle backing an electricity bill, 
why are so many Washington insiders saying that it doesn't have 
legs in the 106th Congress? 
	     One reason is that Congress has been slow to begin the 
real work on the arcane and complex legislation. Barton just 
assumed the leadership of his subcommittee, which has primary 
jurisdiction over electricity in the House, in January. During 
the past two congresses, Rep. Daniel Schaefer, R-Colo., headed 
the panel, but he retired at the end of last year, and never was 
successful in getting electricity deregulation legislation 
through his committee. 
	     Deregulation also faces an uphill battle this year 
because there's no consensus inside or outside of Congress on 
what role the federal government should take in overhauling the 
electricity industry. And unlike last year's popular highway 
bill--which included political pork proj-ects for nearly every 
lawmaker's district--electricity legislation is not guaranteed to 
benefit every part of the nation. 
	     ''We have the lowest electricity rates in the world and 
the most reliable electric system in the world,'' noted David K. 
Owens, a senior vice president at the Edison Electric Institute, 
which represents the traditional electric utility companies and 
advocates a go-slow approach to deregulation. ''We have the most 
competitive economy. Why would we want to disrupt that?'' 
	     During the past four years, nearly 20 states, primarily 
those with high electrici-ty rates, have adopted their own form 
of electricity deregulation in hopes of lowering their local 
energy costs and attracting new industry. Many of those states 
now want Congress to rewrite federal laws that are slowing local 
competition. But state support is hardly universal. In December, 
utility commissioners from 23 states whose electricity rates have 
traditionally been lower than those in other states asked 
Congress not to order all states to deregulate their utilities. 
Officials from those low-cost states fear that deregulation will 
raise their energy costs. 
	     In January, a new coalition of 11 state and local 
government organizations called on Congress to let the states 
handle most of the electricity restructuring issues. The 
coalition includes such Washington powerhouses as the National 
Conference of State Legislatures, the National Governors' 
Association, and the National League of Cities. ''We're saying, 
'Let's see how it plays out in the states before we move on the 
federal level,' '' said Dawn Levy, director of the energy and 
transportation committee of the National Conference of State 
Legislators. ''I think it's premature to have a bill.'' 
	     Although consensus is elusive, most of those active in 
the deregulation debate agree that a few basic issues should be 
included in a federal electricity bill. For example, they say 
that Congress should protect the reliable operation of the 
national electric grid and provide access to the grid for all 
companies that sell energy. There's also broad agreement that the 
federal government should scrap the 1935 Public Utility Holding 
Company Act, which limits business transactions by utilities 
operating in more than one state. Also destined for the trash 
heap: the 1978 Public Utility Regulatory Policies Act, which 
required utilities to buy alternative energy sources. 
	     But the areas of agreement are far outnumbered by the 
roadblocks facing electricity legislation. Moreover, deregulation 
proponents fear that if substantial progress is not made on a 
federal bill this year, it's not likely to be completed in 2000, 
when policy issues will be entangled in the presidential 
campaign. 
	     Bliley, for his part, wants legislation that would 
require all states to deregulate their electricity industry by a 
firm deadline. Those states that didn't take action would be 
deregulated by the Federal Energy Regulatory Commission under 
Bliley's proposal. But Murkowski insists that such federal 
mandates are nonstarters in the Senate, where western lawmakers 
who emphasize states-rights have more influence. ''I don't think 
federal mandates will happen,'' Murkowski recently told the U.S. 
Chamber of Commerce. ''There is too much opposition.'' 
	     The Administration is proposing a deadline by which the 
states would be required to deregulate their electricity 
businesses. But the White House would give local governments the 
opportunity to opt out of competition. 
	     Lately, even some pro-competition lobbyists have been 
moderating their demand that all states deregulate their 
electricity industries by a firm deadline. ''I think we're going 
to come up with something other than a mandate--possibly federal 
guidelines that create competitive, interstate markets,'' said 
John A. Anderson, executive director of the Electricity Consumers 
Resource Council, a coalition of large industrial companies. 
	     Meanwhile, the states that have already deregulated their 
electricity businesses are insisting that Washington respect the 
local laws. ''We feel that state actions should be grandfathered 
in,'' said Levy. ''You've got states that have sweated blood over 
this. It would certainly be a shame for Congress to make a one- 
size-fits-all approach to restructuring.'' Barton, however, 
argues that all state deregulation laws aren't worth saving. 
''The mantra in the states is, grandfather every state,'' he 
said. ''I'm going to try hard not to do a blanket grandfather 
(approach), because I think there are some states that have done 
things that are stupid.'' 
	     Another contentious issue facing Congress is whether to 
use the energy bill to mitigate the pollution caused when coal 
and other fossil fuels are burned to generate electricity. During 
the 105th Congress, the White House suggested that electricity 
deregulation legislation should include provisions requiring all 
electric firms to sell 5.5 percent of their power from solar, 
wind power, or other ''cleaner'' technologies. Such provisions 
are intended to give a boost to these renewable energy practices. 
	     This year's Administration draft proposal is ''a little 
greener around the edges,'' according to one Administration 
official. It continues to call for such a renewable energy 
standard, but so far does not include direct controls on 
pollution, which the Environmental Protection Agency has pushed. 
	     None of the top Republican congressional leaders are 
embracing environmental provisions as part of electricity 
deregulation, much to the relief of the utility industry, which 
opposes such requirements. If, however, an electricity bill makes 
it to the Senate or House floor, environmental-minded lawmakers 
surely will try to add on ''green'' amendments. 
	     Members of Congress are also widely split on whether 
quasi-governmental power market administrations and municipal 
power companies should be allowed to compete in a deregulated 
electricity market. At issue is whether those hybrid energy firms 
can use tax-exempt bonds to build new power plants, which could 
then be used to compete against privately owned electricity 
providers. Barton has suggested privatizing the federally owned 
power agencies, such as the Tennessee Valley Authority and the 
Bonneville Power Administration. But lawmakers from those regions 
want their constituents to continue to enjoy cheap power provided 
by the federal entities. 
	     Despite the potential pitfalls for electricity 
deregulation legislation, its supporters are quick to point out 
that Murkowski--who was less than enthusiastic about such 
legislation in the past--now promises to push an energy bill this 
year. 
	     And as more states introduce competition into their 
electricity businesses, members of Congress from those regions 
are likely to seek a federal energy bill that streamlines the 
deregulation process. Right now, all eyes are on Texas and 
Michigan, whose legislatures are debating deregulation bills. 
Action in Texas could influence the votes of Armey, Barton, and 
fellow Texas Rep. Ralph M. Hall, who is the ranking Democrat on 
Barton's subcommittee. Deregulation in Michigan is likely to 
affect the role that House Commerce Committee ranking member John 
D. Dingell, D-Mich., plays in the electricity debate. So far, 
Dingell has been highly suspicious of deregulation proposals. 
	     Administration officials are giving deregulation a 50-50 
chance of success. But many Democrats on Capitol Hill argue that 
there is no pressing reason for Congress to throw out years of 
reliable energy law, simply for the promise of a competitive 
electricity market. 
	     Those hurdles have left some deregulation proponents 
pessimistic. ''Under the current circumstances, the basic status 
quo rules,'' said L. Andrew Zausner, a Washington energy lawyer 
who favors competition. ''There doesn't seem to be any way for 
the debate to move.''