SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 1618 words

COMMITTEE: HOUSE ENERGY AND COMMERCE

SUBCOMMITTEE: ENERGY AND AIR QUALITY

HEADLINE: ELECTRICITY TRANSMISSION

TESTIMONY-BY: FRANCIS BLAKE, DEPUTY SECRETARY

AFFILIATION: U.S. DEPARTMENT OF ENERGY

BODY:
The Honorable Francis Blake Deputy Secretary U.S. Department of Energy

Mr. Chairman and Members of the Subcommittee, I welcome the opportunity to testify before you today on Chairman Barton's bill, HR 3406, the Electric Supply and Transmission Act.

The Administration believes that electricity legislation - done right - will make wholesale power markets more competitive, strengthen the transmission grid, increase electricity supply, lower prices, protect consumers, and improve reliability. The President's National Energy Policy calls for comprehensive electricity legislation that respects the role of the States and focuses on the regulation of wholesale power markets and transmission in interstate commerce.

When the Federal Power Act was written in 1935 there was virtually no interstate commerce in electricity, there was no interstate transmission grid, electricity markets were local, power plants were built near consumers, and electricity generation was perceived to be a natural monopoly. The evolution of the electricity industry today presents a different picture. The transmission grid is both interstate and international, electricity markets encompass entire regions, almost all wholesale electricity sales are in interstate commerce, and the natural monopoly in generation has long since been disproved. The electricity industry has been swept by dramatic changes for years, investment in new transmission and generation has lagged as a result, and legislation can significantly reduce this uncertainty and strengthen the U.S. electricity industry. The time has come to modernize federal electricity laws to recognize these changes.

In order to address these changes in the electricity market, the President's National Energy Policy recommends several proposals to encourage modernization of electricity law and foster investment in both generation and transmission. First, the Department of Energy has been tasked with conducting an analysis of the nation's transmission grids in order to determine where we need more transmission and better interconnectivity and instructs DOE to consider the benefits of a national grid. A Department of Energy report on these issues is shortly forthcoming. Second, the Policy encourages FERC to develop a rate structure that would encourage the construction of additional transmission. Finally, the Policy instructs DOE to develop legislation that would provide the federal government with transmission siting authority to address situations that might arise where failure to act by a state or local government causes major constraint in an area's transmission needs. The Department of Energy has been working with both Congress and States to develop siting authority language that respects the role of the States as well as regional needs.

The recent electricity crisis in California and the West was a dramatic demonstration of the problems that exist under the status quo - problems that Congress can and should address. The time has come for Congress to reduce the tremendous regulatory uncertainty facing the electricity industry, and modernize federal electricity laws in order to make wholesale power markets more competitive, strengthen the transmission grid, increase electricity supply, lower prices, protect consumers, and improve reliability. We believe that Chairman Barton's proposed legislation goes a long way toward accomplishing these goals, and look forward to working with the Committee on this important bill.

As to the specifics of H.R. 3406:

-Title I

-The Administration agrees with the policy goals of sections 101, 102 and 103. -The Administration supports the repeal of PUHCA, as has every Administration since 1984. -The Administration supports prospective repeal of the mandatory purchase obligation under PURPA and believes the legislative language should be amended to eliminate the ownership limits on PURPA qualifying facilities. -The Administration supports section 142 because the Administration believes that NRC antitrust review is redundant and unnecessary and should be prospectively repealed.

-Title II

-The Administration supports the policy goal of section 201 and looks forward to working with the Committee to agree on final specific language. -With regard to section 202, the Administration believes RTOs have great potential to improve competition, secure reliability and ensure sensible regional coordination. To the degree RTOs serve those purposes, we support them.

-Title III

-With regard to section 301, the Administration believes this section is an improvement over the reliability provisions of legislation approved by the Subcommittee two years ago and approved by the Senate last year.

-Title IV

-The Administration agrees that FERC transmission-pricing policies should encourage increased investment in new transmission. The Administration therefore supports the legislative proposal in section 401 to direct FERC to develop a performance-based regulatory framework for transmission pricing.

-Section 402 grants FERC limited authority to issue permits to construct or modify transmission facilities under certain circumstances. The Administration supports this proposal.

-Title V

-The Administration generally supports the language in Title V and looks forward to working with the Committee to agree on final specific language.

-Title VI

-The Administration generally agrees with the consumer protection provisions in Title VI and looks forward to working with the Committee to agree on final specific language.

-Title VII

-The Administration opposes section 702, which expands FERC's refund authority.

The President has asked for comprehensive electricity legislation which will reduce regulatory uncertainty, make wholesale power markets more competitive, strengthen America's transmission grid, increase electricity supply, lower prices, and improve reliability. We believe that this legislation is a good start on these principles and look forward to working with Congress to enact them.

At this time I would be happy to answer any questions that the Committee may have for me.



LOAD-DATE: December 13, 2001