Dissenting Views

Energy Policy Act of 2005

Electricity and Hydroelectric Relicensing

The bill reported by the Committee on Energy and Commerce is substantially similar to the flawed and ultimately failed energy bill conference report from the 108th Congress, with several notable new additions that regrettably did not add to the bill’s attractiveness.

In both process and substance this bill and the product from the 108th Congress stand in marked contrast to the bipartisan energy bill reported by the Committee in the 107th Congress when only five Democrats voted against it; this year 16 Democrats voted “no.”

While this bill retained some portions of the widely-supported product from the 107th Congress, there are new provisions that were not contained in last year’s conference report and have not had the benefit of extensive legislative hearings. Democrats repeatedly made requests to the Republicans that extensive hearings be held preceding any markup. The Republicans responded with two days of wide-ranging hearings that by design could not allow members to fully explore the myriad of complex issues contained in the bill.

While many of our Democratic colleagues take issue with a variety of provisions in this bill, these Dissenting Views will address two of the worst problems in the bill relating to electricity and hydroelectric relicensing.

Electricity

The electricity provisions of Title XII exhibit both sins of commission and omission. They ignore the lessons of 2000-2001, when Enron and other unscrupulous power marketers manipulated electricity prices in west coast power markets and undermined the financial credibility of the utility industry. The title represents a victory for various special interests at the expense of citizens whom our federal energy laws are supposed to safeguard, and combines the worst of deregulation with favors to a select few.

Despite the fact that millions of consumers were forced to pay inflated costs, the bill does nothing to ensure that they will receive refunds of overcharges resulting from purposeful withholding of electricity and related gaming of natural gas transportation markets. Nor does the bill reform current law to provide the Federal Energy Regulatory Commission (FERC) and the Securities and Exchange Commission (SEC) the tools and direction they need to prevent a repetition of this debacle.

The title includes an incomprehensible “native load” provision altering FERC’s authority over interstate transmission lines, the full impact of which is unclear. Indeed, because this language was available only hours before being voted on in the Committee, members did not have the benefit of hearings, the Commission’s views, or any other means of understanding whether it would benefit or harm consumers.

The electricity title continues to hold hostage a crucial reform needed to help improve the reliability of our transmission system and prevent future blackouts. This section is one of the few consensus items in the title, and is supported by the Administration, FERC, consumer groups, and private industry. Sadly, though common sense suggests this provision should have been enacted immediately after the massive 2003 summer blackout, it remains enmeshed in this controversial comprehensive energy bill. Moreover, this bill adds a spending cap on reliability councils that threatens to make blackouts more likely.

Among other objectionable features of Title XII is the outright repeal of the Public Utility Holding Company Act of 1935 (PUHCA), which is administered by the SEC. This law has operated for years to protect consumers and investors. Title XII fails to include appropriate compensatory protections to ensure that investors and consumers are not at the mercy of unconstrained market power. Its few “reforms” barely scratch the surface of what is needed to prevent the recurrence of market abuses that cost consumers billions of dollars in electricity overcharges and compromised the reliability of a system that once was without peer.

The title displaces the traditional “just and reasonable” standard for modifying unfair contracts with a far less protective standard which will tie FERC’s hands and make it more difficult to modify agreements that harm consumers.

Finally, the title includes transmission siting provisions which preempt not only state decisions about whether new or expanded lines should be built, but also decisions by federal land agencies as to whether lines should be built in our national forests and other public lands.

A far better alternative for electricity reform was proposed by the amendment offered by Ranking Member Dingell, similar to H.R. 1272 that he sponsored along with Representatives Waxman, Markey, Boucher, and 13 other cosponsors from the Committee on Energy and Commerce during the 108th Congress. The amendment would protect consumers by setting aside deregulatory efforts such as PUHCA repeal, and instead instituting reforms to prevent the type of market manipulation practiced by Enron. A recent FERC report observed that the Commission has limited tools to deter fraud. This amendment would authorize the Commission to take preventative measures to ensure markets operate for the benefit of consumers rather than unscrupulous industry participants.

The Dingell amendment also set aside divisive questions about industry “restructuring” in favor of targeted, sensible reforms. It banned fraudulent, manipulative, or deceptive practices in the sale and transmission of electricity, and in the sale and transportation of natural gas. It established audit trail requirements to improve FERC’s ability to conduct investigations and take enforcement actions, and provided for greater transparency by requiring the reporting of information about transactions or quotations involving the purchase and sale, and the transmission and transportation, of electric power and natural gas.

The amendment increased the Federal Power Act’s civil and criminal penalties to help deter future misconduct. It directed the SEC to review existing PUHCA exemptions, to prevent a future Enron from wrongly claiming “exempt” status permitting it to exploit investors and consumers. The amendment required FERC to issue rules against affiliate abuse and authorized the Commission to issue refunds for “unjust and unreasonable rates” from the date they were first charged. It reformed the market-based rate policy of FERC to ensure it lives up to the Federal Power Act’s requirement that electricity rates are “just and reasonable.” Finally, the amendment incorporated several of the provisions of the electricity title that helped consumers, most notably the reliability provisions. The amendment was defeated on a straight party-line vote.

Title XII does not provide the reforms needed to prevent a future Enron disaster, and offers only thin and patently inadequate protections for consumers. In so doing, it both misses an opportunity to respond to recent abuses in electric markets and obviates the responsibility of Congress to stabilize this critical industry.

Other Democratic amendments included an amendment by Representative Ed Markey (D-MA) to protect consumers and investors of utilities within holding companies deregulated by PUHCA repeal, and an amendment by Rep. Ted Strickland (D-OH) to strike caps on private spending needed to improve transmission reliability. Others would strike preemptive transmission siting provisions and a section making it harder for FERC to modify unjust contracts. An amendment by Rep. Anna Eshoo (D-CA) would have ensured that California consumers harmed during electricity market turmoil of 2000-2001 can receive refunds. An amendment by Representative Frank Pallone (D-NJ) would have established a renewable portfolio standard to help diversify our energy supplies. These amendments were all rejected, as well.

Hydroelectric Relicensing

The provisions relating to hydroelectric relicensing found in Title II, Section 231, are identical to those included in the conference report that died in the 108th Congress. In the name of “reform” these provisions give preferential treatment to electric utilities at the expense of other legitimate parties to licensing proceedings including states, Indian tribes, conservationists, irrigators, ranchers, and sportsmen.

The bill entitles utilities alone to request trial-type hearings before the resource agencies charged with protecting rivers, lands, and fish and wildlife. Other parties are not given this right. The bill entitles utilities alone the special right to offer alternatives to the resource protections required by the resource agencies, which the agencies must accept under certain conditions. These rights are not afforded to others with a legitimate interest in relicensing. The bill also requires the resource agencies to justify their mandatory conditions based on a laundry list of non-resource related issues that are beyond their expertise and are redundant, given the fact that the Federal Energy Regulatory Commission is charged with considering power development factors.

 These provisions place the concerns of power companies well above the needs of the general public and fly in the face of basic, fundamental fairness. They also undermine an agreement between electric utilities and the Committee prior to passage of the Electric Consumers Protection Act of 1986.

In the hearings conducted last month on this bill, and in a subsequent submission to Subcommittee on Energy and Air Quality Chairman Ralph Hall, the industry offered precious little evidence for the need for the changes contemplated by the bill beyond the vague concern that the process for relicensing is somehow broken. No evidence of widespread or excessive delays; no evidence of conditions being imposed without a basis in fact; no evidence of even a marginal loss of generation due to resource conditions. One is left with the distinct impression that the industry simply finds it bothersome that they have to protect the resources from which they derive their profit.

The hearings did reveal that both the industry and conservationists support FERC’s administrative actions to make the licensing process less onerous. We learned that the agency has twice issued rulemakings, supported by all, that have led to less delay, less cost, and less litigation with regard to licensing. We have not given FERC’s most recent administrative reform – the Integrated Licensing Process (ILP) – adequate time to work, so that we may know if legislative changes are necessary. Yet in contravention of the facts, we have this language.

Now of course, the industry thinks this language is just wonderful – and how could they not? They get all sorts of special considerations that are not given to other parties with legitimate standing.

Democrats introduced letters last week in opposition to this language, including one with over 78 state and local conservation organizations, a letter from six prominent sportfishing organizations, as well as letters from the Yakima Indian Nation, the Nez Perce Tribe, and the Northwest Indian Fish Commission, and numerous other conservation and environmental groups opposed to this language. The Democrats are also in possession of past letters signed by no less than 25 state Attorneys General opposed to language that gives preferential treatment to license applicants, as well as a past letter from the Conference of Western Attorneys General opposed to trial-type hearing provisions similar to those in the bill and signed by Attorneys General from Arizona, Colorado, Montana, New Mexico, Oregon, and Washington.

Despite the egregious nature of this title, Republicans rejected repeated attempts to give some voice to the concerns of states, Indian tribes, conservationists, and sportsmen. Republicans rejected a bipartisan compromise that had been included in the Committee’s energy bill in the 107th Congress. This compromise had been supported in writing by conservationists and the industry.

Republicans also rejected two additional proffers designed to provide a more tolerable level of equality for all parties to a licensing proceeding, while avoiding unnecessary delay in the relicensing process. These offers were rejected without the benefit of thoughtful discussion.

There are few things more precious than the natural resources endowed upon this country. By siding so completely with the industry, Republicans have endorsed the foolish and misguided view that rivers are the special dominion of electric utilities and that the public at-large should be relegated to second-class status.

JOHN D. DINGELL
EDWARD J. MARKEY
SHERROD BROWN
FRANK PALLONE, JR.
HILDA L. SOLIS
ELIOT L. ENGEL
DIANA DeGETTE
LOIS CAPPS
BART STUPAK
ANNA G. ESHOO
TAMMY BALDWIN
TOM ALLEN
JIM DAVIS
JAY INSLEE
JAN SCHAKOWSKY
HENRY A. WAXMAN
RICK BOUCHER