CHAIRMAN BARTON AND MEMBERS OF THE SUBCOMMITTEE ON ENERGY AND POWER
My name is Sonny Popowsky. I am the Consumer Advocate of Pennsylvania and the Immediate Past President of the National Association of State Utility Consumer Advocates (NASUCA). NASUCA is an organization of state utility consumer advocate offices from 39 states and the District of Columbia, charged by their respective state laws with representing utility consumers before state and federal regulatory agencies, courts, and legislative bodies. I have been asked by you to testify on behalf of NASUCA regarding 1) the need for federal electricity legislation; 2) the specific elements that should be included in any federal legislation; and 3) the provisions of H.R. 2944, the Electricity Competition and Reliability Act of 1999, that are or particular interest to NASUCA.
Before addressing these questions, I would like to thank Chairman Barton and the members and staff of this Subcommittee for consistently seeking the input of NASUCA members, as representatives of retail electric consumers in our respective states, in each step of your deliberations. While we do not necessarily agree with all of the provisions of H.R. 2944 or, for that matter, any of the legislative proposals that have been introduced in this Congress, we heartily endorse your efforts to ensure that the voices of the consumers who ultimately will pay the bill for electric restructuring are heard in this debate. We believe that the success of your efforts in this monumental task will be judged not by the size of the financial gain to any particular segment of the electric industry, but rather by the impact on the reliability and price of electric service to America's electricity consumers.
With respect to your first two questions -- the need for federal legislation and the necessary components of such legislation -- NASUCA agrees that federal legislation is required in at least two areas: reliability and market power.
As I and other members of NASUCA have testified before the House and the Senate on several prior occasions, we do not believe that a federal mandate for retail electric competition in all states by a date certain is either necessary or appropriate. We believe that the individual states are in the best position to determine whether and when to open up their electric industries to one of the various forms of retail electric competition that are being implemented today in numerous states. On the other hand, NASUCA members recognize the limitations of state authority and therefore the need for federal legislation in such areas as reliability and market power.
With respect to reliability, I have had the honor to serve for the last two years as one of two consumer representatives on the Board of Trustees of the North American Electric Reliability Council (NERC). I believe that NERC is an outstanding organization that has done a magnificent job of maintaining the reliability of our Nation's electric system. But as the members of NERC and virtually all industry participants agree, the basic voluntary structure of NERC cannot be sustained in an increasingly competitive electric industry. There is a need for federal legislation to establish an independent electric reliability organization that can develop and enforce mandatory reliability rules, subject to the oversight of the Federal Energy Regulatory Commission (FERC). NASUCA has endorsed legislative language that would accomplish this goal, with the caveat that such legislation must preserve the role of states in maintaining the reliability, safety and adequacy of electric service within their state's borders.
NASUCA also supports federal legislation that would strengthen the ability of the FERC to ensure open, fair and non-discriminatory access to transmission facilities, including authority to establish independent and competitively neutral regional transmission organizations. Federal legislation should give FERC the authority to monitor the development of competitive markets and to remedy anti-competitive abuses.
In addition to the need to address reliability and market power, NASUCA would also support federal legislation that establishes basic standards for consumer protection and universal service, as long as such standards to not preempt efforts of individual states to provide stronger protections and universal service benefits to consumers.
Finally, in this regard, NASUCA would note that consumers' efforts in achieving competitive benefits at the federal level would be enhanced by the establishment of a FERC Office of Consumer Counsel. The establishment of such an Office was included in the August 4, 1999, Discussion Draft that was submitted to this Subcommittee, but was not included in H.R. 2944 as introduced. NASUCA would urge that the creation of such an office be included in any final legislation that addresses electric restructuring at the federal level.
Turning to the specific provisions of H.R. 2944 that are of greatest interest to NASUCA, I would like to compare those provisions to the "Consumer Checklist" for federal legislation that was presented to this Subcommittee in testimony presented by NASUCA President Fred Schmidt of Nevada on July 22, 1999. As stated by Mr. Schmidt, the NASUCA Consumer Checklist represents a roster of principles that we believe should be reflected in any federal legislation to ensure that electric restructuring benefits, rather than harms, consumers. Those principles and the extent to which we believe they are consistent with the provisions of H.R. 2944, are set forth as follows:
1. Federal Preemption: Federal legislation should permit states to adopt retail competition statutes or rules. There should not be a federal mandate for states to require retail competition by a date certain.
H.R. 2944 does not mandate retail competition by a date certain. NASUCA fully supports the decision to leave this fundamental decision to the states.
2. Stranded Costs: Retail stranded cost issues should be left to states.
H.R 2944 generally leaves stranded cost issues to the states. NASUCA supports this reservation of critical state authority.
3. Market Power: Legislation should provide FERC with specific authority to monitor the development of competitive markets, to eliminate undue concentrations of market power in any relevant market, and to remedy anticompetitive conduct or the abuse of market power by any player, incumbents, affiliates, or new market entrants. These powers should include the authority to order divestiture or other structural remedies when necessary.
NASUCA respectfully submits that H.R. 2944 does not adequately address market power issues. NASUCA strongly urges that market power provisions such as those included in the Administration Bill, H.R. 1828, and the Largent/Markey Bill, H.R. 2050, be included in any final legislation.
4. Transmission and ISOs: Legislation should authorize FERC to require ISOs or other independent and competitively-neutral regional transmission operation organizations. Legislation should authorize FERC to rectify transmission policies, practices or prices which create a competitive advantage for services offered by the transmission provider or affiliates.
H.R. 2944 requires the establishment of regional transmission organizations (RTO's) by transmitting utilities by January 1, 2003, but does not give FERC the authority to establish such organizations. In addition, while the legislation, in Section 103 properly requires that the RTO must be independent of market participants, this section goes on to state that the independence requirement can be met, for example, even if a market participant maintains passive ownership or owns as much as 10 percent of the voting interest in the RTO. NASUCA would strongly urge the elimination of such exceptions to the independence requirement from market participants as they could easily lead to the the domination of RTO governance by a particular industry segment. The hallmark of a successful RTO in NASUCA's view is total independence from the financial interests of any particular market participant or market segment. NASUCA also submits that additional transmission pricing "incentives" are not necessary or appropriate in order to encourage the development of competitively neutral independent RTO's.
5. Reliability: Legislation should authorize FERC to review the reliability requirements imposed by an independent North American Reliability Organization to promote reliability of electric supply.
H.R. 2944 contains a reliability section similar to that endorsed by NERC and a number of utility organizations. NASUCA supports the language with the addition of a savings clause clarifying that states have a vital role in maintaining the reliability, safety and adequacy of electric systems within each state's borders. The savings clause in Section 201 of H.R. 2944 is inadequate because it only refers to state jurisdiction over local distribution facilities.
6. Consumer Protection: Legislation by Congress should adopt provisions which would set minimum standards for basic consumer protections. States should retain authority to set additional or more stringent or more specific standards.
The draft includes many of the protections suggested by NASUCA, including protection from cramming and slamming, consumer privacy, and supplier information disclosure. NASUCA would support additional provisions that would establish minimum federal standards in such areas as credit collection activities and service quality standards. In all such cases, these federal standards should be viewed as floors that can be strengthened by state actions to protect consumers.
7. Universal Service: Legislation should adopt universal service standards and principles as part of any restructuring.
The legislation appropriately includes a sense of the Congress that every retail customer should have access to electric energy at reasonable and affordable rates. The legislation does not contain specific standards or principles in this regard, however. NASUCA would seek to work with members of this Subcommittee to develop provisions that would insure that all Americans can have access to safe, affordable electric service.
8. Aggregation: Aggregation of small customers should be encouraged. Federal legislation should not preclude states from facilitating the aggregation of small customers by any entity.
H.R. 2944 contains language clarifying the authority of municipalities and other entities to aggregate retail customers. NASUCA submits that all barriers to such aggregation efforts should be eliminated.
9. Mergers: Legislation should specifically revise merger standards to require a net benefit to consumers. Legislation should expand FERC merger authority to include combinations that are currently outside FERC jurisdiction, such as electric-communications and electric-gas mergers.
NASUCA would respectfully urge stronger FERC review authority over mergers, including language that would require mergers to provide a net benefit to consumers.
10. PUHCA: PUHCA should be addressed only as part of comprehensive restructuring legislation. Waiver of certain PUHCA provisions should be conditioned on holding companies (i) being subject to effective competition in every state in which they operate, or (ii) divesting all of their generation assets. In addition, legislation should provide FERC with current PUHCA authority to review affiliate transactions, provide state and federal access to books and records, and limit diversification.
The legislation does include repeal of PUHCA as part of comprehensive restructuring legislation and provides state and federal access to books and records. It does not, however condition repeal on the existence of competition or divestiture of generation assets or provide FERC with current PUHCA authority to limit diversification.
11. PURPA: Legislation should not waive Section 210, the PURPA mandatory purchase obligation, unless protections are in place to insure that utility generation is subject to effective competition.
PURPA is repealed, but there are no provisions insuring that utility generation is subject to effective competition.
Again, NASUCA appreciates this opportunity to comment not only on H.R. 2944, but on the overall principles that we believe should be contained in any federal restructuring legislation. We look forward to continuing to work with you in developing policies and legislation that will truly benefit all consumers.