March 29, 2001

 
Good morning and thank you for that energetic welcome. Had it been any more energetic I’d suggest hooking the lot of you up to a generator to help California through its current crisis.

Headlines throughout the country echo the ominous warnings issued by the Administration on the prospects of a national energy shortage and skyrocketing prices. Indeed, you can’t pick up a paper without being assailed by dire warnings. A recent headline in the Energy Daily sums it up perfectly "Energy Crisis Again Rears its Ugly Head." Believe me, it is one Ugly Head, and the body it’s attached to is not a pretty sight either.

Those of us who work in this field are familiar with this beast and know how perilous it can be – particularly when enthusiastic members of a new Administration and Congress embark on well-intended attempts to be helpful in the taming.

Make no mistake, your industry and this country face serious energy challenges. Last summer, motorists paid through the nose for gasoline. During the winter, natural gas prices climbed by 100 percent or more and heating oil prices set records for recent years. As I stand here today, two of your members are struggling to stave off bankruptcy while many residential consumers throughout the nation are beginning to wonder, perhaps for the first time ever, if the lights will actually come on when they flip the switch.

The nation needs a strong, reliable energy supply. This is a simple truth. Yet, it is perhaps too simple because I suspect it leads many people to believe there is a simple formula for ensuring long term access to inexpensive and reliable energy. As you well know, that is not the case. The quest for this grail involves competing interests, divergent philosophies, and many disagreements – most of them honest – about which road to travel. And, as we recently witnessed on the issue of CO2 emissions, many of those differences may flourish in the least likely places.

That said, I wish I could tell you more about the direction energy policy may take in the next two years, but I am not privy to the Administration’s or the majority’s plans. I commend the President for taking energy policy seriously, and understand that Vice President Cheney’s energy task force plans to release its findings in May. While this early focus on energy policy is welcome, I suspect it will be quite difficult for even such experienced hands to craft something that can be readily deployed to help consumers during the summer months. I hope, too, that this task force will produce something more concrete and specific than broad principles. I have found over the years that most principles sound good in the abstract, but their real merits and deficiencies tend not to be detectable until actual legislative language is proposed.

Similarly, it is difficult to talk about the budget for FY 2002 at this point, since the Administration has not yet provided much detail. It is expected the Department of Energy will see substantial cuts in the neighborhood of $700 million from last year’s numbers. I would be disappointed if in the effort to promote energy production, which I generally support, we shortchange efforts to promote efficiency and conservation. I am particularly concerned that a tight DOE budget might adversely affect the high level nuclear waste program which, so long as the Nuclear Waste Fund remains "on budget," continues to be vulnerable to the spending whims of the moment.

At the outset of my remarks, I mentioned the possibility of the federal government lending a helping hand to address the current volatility in certain energy markets. I am rather more optimistic about Congress and the Administration’s ability to be helpful in the long-range than in the short- range. As a general matter, quick-fix responses have substantial political components that can lead, knowingly or unknowingly, to policies that at are at best ineffective or, perhaps, even harmful. This is why I cannot stand here and assure you with certainty that some recent proposals such as forgiving BPA’s debt or using U.S. Naval submarines to provide Californians a hotel’s worth of power will not be enacted into law. Even when we come close to getting it right, our efforts may still not bear fruit, as is the case with the Alaska Natural Gas Transportation Act. Be wary of fostering the notion that Congressional action is necessary. You may get some things you like in an emergency energy bill, with a great number of things you dislike.

I would note, too, that there are many divergent views on the nature of this energy crisis, even among friends. For instance, on the one hand I hear much about the need to promote domestic fossil fuel development, yet then I read that oil and gas exploration is booming to such an extent that rigs are either becoming unavailable or unaffordable to independents. Meanwhile, some of the fiercest opponents to the Administration’s stated interest in offshore drilling include the Governor of Florida and, based upon her record, perhaps even the EPA Administrator. And while many on my Committee blame the Clean Air Act for our energy problems, the President is proposing to further regulate NOx, SOx, and mercury. My point is this: in order to do something helpful, we must decide at minimum what problems are really out there, which problems really need legislative solutions, whether or not a proposal solves a given problem, and if the solution is better or worse than the original problem.

Should legislation be warranted, it goes without saying that major energy bills must be bipartisan in nature. Bipartisanship is not developing policies and drafting legislation on one side of the aisle and presenting it to the other as a fait accompli. With both the executive and legislative branches in Republicans control, it will be tempting for some to ignore the Democrats to see how far they can go on their own. I caution against that, for it will take a strong centrist core of support for any energy bill to avoid being mired down by special interest provisions, be they on the industry side or the environmental side. The extremes of such a debate can prove deadly to any bill.

Let me take a moment to reflect on specific energy problems, particularly those facing the electric industry. I am very concerned about the turmoil in Western electricity markets, spurred of course by California’s decision to embrace retail competition. As you know, I have taken a cautious approach to the question of deregulation, and prefer to leave the decision whether to abandon the traditional utility system to the states. California perhaps is suffering more than others may because it went first, and by all accounts in something of a rush. I hope that Michigan, and other states which adopted competition plans, will not suffer a similar fate. I am pleased that Congress did not attempt to push states into retail competition, either by prescribing a federal plan or a date certain by which states must take the plunge.

In the same vein, I am cautious about suggestions that Congress must step in and fix California’s problems through new legislation. First, it is not at all clear that anyone knows how to fix the problem. Major uncertainties remain. Will the state’s utilities avoid bankruptcy? Will the State succeed in its effort to acquire the utilities’ transmission lines? What conditions might the Federal Energy Regulatory Commission impose upon such a change in ownership? Will the courts grant the utilities’ request to recover from their customers the costs of purchasing wholesale power? Perhaps the one certainty in all this is that the California situation presents a moving target, and many of these unresolved questions are beyond Congress’ ability to influence.

It is not clear at this point whether new statutory authority will be necessary to respond to pricing problems in the West. The Federal Power Act provides very specific direction to the Commission to maintain just and reasonable wholesale prices for electricity. Last year, FERC concluded that prices in California were not just and reasonable and that the Commission’s 1996 approval of the wholesale aspects of the California plan had to be modified. I tend to agree with Commissioner Massey that under these circumstances the Power Act does not give FERC much discretion as to whether or not to address pricing. It is a pity the Commission did not initiate an investigation under section 206 to consider how to restore just and reasonable prices before things deteriorate further. I do not relish the thought of Congress trying to fix appropriate prices through prescriptive legislation, as some have proposed, but Congress may be forced to act if the FERC refuses to live up to its obligation under the Power Act.

In the near term, I note that there are two Republican vacancies on the Commission as well as an unusual dynamic between the Senate Majority Leader, the FERC Chair, and the President that appointed him. As you well know, the makeup of FERC can dramatically affect the direction of energy policy. The President’s recent decision on FERC appointments may do more to alter the current situation than any other action taken by anyone else in Washington.

My friends, I again thank you for this opportunity to discuss the interesting topics of our time. As we work through this "crisis," I know you have much wisdom to impart to me and, as always, I look forward to receiving it, for it is always valuable. My counsel for you now is to be careful, stick together, hold your friends close and your enemies closer.