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CONGRESS SHOULD FOCUS ON DEREGULATING NOT 'REREGULATING' AS IT DEBATES ELECTRIC RESTRUCTURING, AN EEI EXECUTIVE SAYS

WASHINGTON (July 22) As Congress considers legislation to restructure the electric power industry, it should strive to deregulate not reregulate if the goal of full and fair competition is to be achieved, a senior Edison Electric Institute official said today.

"As states move forward with their retail choice plans, it is obvious that there are significant restructuring issues they cannot address," EEI Executive Vice President David K. Owens said. "We believe Congress should resolve these issues to help facilitate state activities and remove federal barriers to competition."

"While government cannot, and should not, control market forces in a competitive environment," Owens added, "it is responsible for addressing the transition issues and establishing the ground rules for fair and effective competition."

The association executive delivered his comments to members of the House Commerce Subcommittee on Energy & Power during a hearing on various restructuring proposals. Owens identified a range of issues that he said lawmakers should address, as well as some areas in which federal legislation is not appropriate.

Federal restructuring legislation, he emphasized, should not give the Federal Energy Regulatory Commission (FERC) new authority to order divestiture, to regulate retail rates, or to mandate participation in regional transmission entities.

"The utility industry is currently subject to intense scrutiny by federal and state governments acting under a number of different statutes to address potential market power concerns," he said. "Congress should let market trends continue to evolve and refrain from enacting draconian market power provisions."

Any federal legislation, the EEI executive continued, also should formally endorse utilities' right to recover legitimately incurred stranded costs. Additionally, Congress should confirm FERC's jurisdiction over stranded cost recovery at wholesale, and support recovery of other federally created transition costs.

"Because policymakers create transition costs when they promote competition, they have a responsibility to ensure that utilities can recover them," Owens underscored. Virtually all of the states that have adopted retail competition have provided for stranded cost recovery, and they are moving swiftly forward toward implementing their restructuring plans, he said. In contrast, New Hampshire the only exception until recently has been mired in litigation over its failure to provide recovery of commitments made under the prior regulatory regime.

Owens discussed several other issues that he urged lawmakers to consider.

Congress should remove federal barriers to competition, he said, by repealing the Public Utility Holding Company Act (PUHCA) and the mandatory purchase requirement under the Public Utility Regulatory Policies Act (PURPA), and providing for recovery of PURPA costs.

With respect to the states, Owens urged the panel to respect their decisions regarding retail competition and to grandfather state restructuring plans. "Federal legislation should clarify that states have the authority to restructure retail electric services under their own timetable, taking into consideration the interests of their consumers," he said.

Owens also advised lawmakers to address critical transmission issues by requiring that all transmission providers be subject to FERC jurisdiction over transmission service. In addition, Congress should provide incentives for the construction of new transmission facilities and establish a self-regulating reliability organization.

Furthermore, Owens said, any federal bill should ensure that the same rules apply to all suppliers. Among other things, this means making federal utilities subject to the same accounting principles that FERC applies to public utilities, and providing the same assurances to all competitors with respect to the recovery of transition costs. Congress also must address the tax subsidies enjoyed by government utilities, he said.

"The details of how we get from a regulated electricity regime to a competitive market are critical," Owens said. "This is a $200 billion-a-year industry that powers our economy and improves every American's quality of life. That's why we emphasize that it's important to get it right."

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EEI is the association of shareholder-owned electric companies and international affiliates whose domestic members produce and distribute more than three-quarters of the nation's electricity.

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