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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:
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Title
I
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The
Administration agrees with the policy goals of sections 101, 102 and 103.
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The
Administration supports the repeal of PUHCA, as has every Administration
since 1984.
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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.
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The
Administration supports section 142 because the Administration believes that
NRC antitrust review is redundant and unnecessary and should be
prospectively repealed.
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Title
II
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The
Administration supports the policy goal of section 201 and looks forward to
working with the Committee to agree on final specific language.
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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.
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Title
III
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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.
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Title
IV
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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.
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Section
402 grants FERC limited authority to issue permits to construct or modify
transmission facilities under certain circumstances. The Administration
supports this proposal.
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Title
V
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The
Administration generally supports the language in Title V and looks forward
to working with the Committee to agree on final specific language.
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Title
VI
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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.
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Title
VII
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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.
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