CONGRESS - Will Electricity Deregulation Fizzle Again?
By Margaret Kriz, National Journal
© National Journal
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
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
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
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.''