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Dissenting Views on Energy Policy Act of 2003 Electricity and Hydroelectric Relicensing Provisions The bill reported by the Committee on Energy and Commerce in this Congress differs dramatically from the one reported in the previous Congress. In that Congress, we worked in a bipartisan manner to report a bill that most of our Committee could support. In order to do so, we worked on bipartisan compromises in some areas, such as hydroelectric relicensing, and agreed to defer consideration of other matters, such as electricity issues, until a consensus arose. Unfortunately, our Republican colleagues chose to pursue a different path in this Congress and drafted a partisan bill. This can be seen in the fact that last Congress, 5 Democrats out of 26 voted against the bill. In this Congress, 17 Democrats voted against the bill. While some of the bill reflects some bipartisan agreements reached during last year’s energy bill conference, which was never completed, other portions of the bill reflect partisan decisions that will do little in solving our energy needs, but instead will hurt our environment, and reduce protections for consumers and investors in energy. While many of our Democratic colleagues take issue with a variety of provisions in this bill, these Dissenting Views will deal with two of the worst problems with bill –– provisions relating to electricity and hydroelectric relicensing. In each case, Democrats offered substitutes that were defeated along party lines. In the case of electricity, the Republican bill would, among other things, repeal the Public Utility Holding Company Act, and preempt state and Federal decisions on power line siting. In contrast, the Democratic substitute, identical to H.R. 1272, would provide improved regulation to prevent fraudulent practices by energy traders, and provide other common sense reforms to protect consumers and investors from the manipulative practices of traders like Enron in the Western electricity markets. In the case of hydroelectric relicensing, the Republican bill abandoned a bipartisan compromise reached in the committee in the last Congress, and supported by all stakeholders, that would have allowed all parties to propose alternatives to mandatory conditions, while achieving the same level of resource protections. Instead the Republican bill includes provisions that would tip the scales in favor of the utility and reduce important resource, fish and wildlife protections. Our detailed comments on these two subjects follow.
Electricity The electricity provisions contained in Title VII suffer from both sins of both commission and omission. They ignore the lessons of the past several years of volatility in electricity markets, which harmed consumers in California and other western states and eroded investor confidence in this critical industry. The title represents a victory for various special interests at the expense of the citizens whom our federal energy laws are supposed to safeguard. Indeed, it combines the worst of deregulatory principles with favors to a select few. Among the most objectionable features of Title VII is the outright repeal of the Public Utility Holding Company Act of 1935 (PUHCA), without appropriate compensating protections to ensure that investors and consumers are not subjected to unconstrained market power. It contains so-called "reforms," which hardly 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 an electricity system that once was without peer. The title includes "native load protections" that exempt so many regions that the net effect is impossible to determine. It displaces the traditional "just and reasonable" standard for modifying unfair contracts with a far less protective standard in an effort to tie the hands of federal regulators who recently have had to modify agreements that were harmful to consumers. Finally, the title includes transmission siting provisions which preempt not only state decisions about which new or expanded lines should be built in our neighborhoods, but also federal land agencies’ decisions 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 Democratic substitute amendment, identical to H.R. 1272, which was introduced by Congressmen Dingell, Waxman, Markey, and Boucher and cosponsored by 13 other Committee on Energy and Commerce Democrats. The premise of this substitute was to protect consumers by setting aside further deregulatory efforts and instead instituting reforms to prevent the sort of manipulation that occurred in west coast electricity markets from 2000 through 2001. As the Federal Energy Regulatory Commission (FERC) reported late last month, the massive fraud which took place during that period appears to have involved dozens of parties. It is particularly disappointing that the committee would report a bill at this time that repeals PUHCA and includes only superficial consumer protections. The Democratic substitute amendment set aside the most divisive questions about "restructuring" the industry in favor of targeted, common sense reforms designed to ensure that FERC and the Securities and Exchange Commission (SEC) can and do fulfill their responsibilities to protect consumers and investors. Most significantly, the amendment banned fraudulent or manipulative 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 updated the Federal Power Act’s penalties for civil and criminal offenses to the same levels included in the Sarbanes-Oxley Act enacted during the last Congress. It directed the SEC to review existing PUHCA exemptions, so that it does not miss another Enron, only to discover belatedly that the company should not have had the "exempt" status that enabled it to exploit investors and consumers. The amendment required FERC to issue rules against affiliate abuse to ensure that entities that are regulated by the Commission are not exploited financially by affiliates that FERC does not regulate, and reformed the Federal Power Act to allow the Commission to issue refunds for "unjust and unreasonable rates" from the date they were charged. Finally, the amendment reformed FERC’s market-based rate policy, to require frequent review of such rates and the revocation of this privilege when it was abused. Unlike the Democratic substitute, Title VII does not provide FERC with anti-fraud authority, despite the fact that the Commission staff has found some western market abuses were not illegal under current law and its Chairman’s support for such authority. It repeals PUHCA, and erodes the just and reasonable standard for contracts. It 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 Congress’ responsibility to stabilize this critical industry. Hydroelectric Relicensing The hydroelectric relicensing provisions contained in Title III, like many other sections of this legislation, abandon the bipartisan consensus that was reached during the last Congress in favor of an approach that drastically alters the licensing process to benefit the hydropower industry and undermines several decades of important environmental and fish and wildlife protections. The title also contains a costly new subsidy program for hydroelectric utilities, an unnecessary measure given the maturity of the industry. Title III confers super-party status on license applicants by allowing them to propose alternatives to the mandatory conditions of the resource agencies. The Secretary of the relevant agency must accept the alternative provided it meets certain criteria, one of which is a weaker standard for the protection of public lands. License applicants are also entitled to an on-the-record, trial-type hearing, and a referral of their disputes to the FERC's Dispute Resolution Service. None of these procedural entitlements are granted to other legitimate stakeholders in the relicensing process including states, tribes, sportsmen or concerned citizens. This represents a fundamental shift away from the principle that has guided licensing of hydroelectric facilities for decades: that our rivers are public resources in which many stakeholders have legitimate interests. Instead, this legislation treats these resources as the private dominion of utilities. The legislation commits egregious offenses against the environment as well as fish and wildlife through the rollback of fishway prescriptions that have been a part of the law for nearly 100 years. By allowing license applicants to substitute a hatchery for a fishway, the bill could have disastrous effects on migratory fish species. Allowing fish to pass upstream and downstream of a dam ensures that their natural patterns and life cycle are not interrupted. This is vital not only to the species, but to river health in general. The title's subsidy program or "incentive payment" scheme is an unnecessary and costly addition to an already offensive title. Hydroelectricity is a very mature technology that hardly needs the benefit of taxpayer dollars at a time when the nation is facing massive deficits and an uncertain economic outlook. A Democratic substitute offered by Rep. Dingell proposed a superior alternative to this title. It consisted of the bipartisan compromise language passed by the full House in last year's energy bill. The compromise introduces flexibility into the licensing process by allowing any party to propose an alternative to mandatory conditions. This approach recognizes that there may be less costly means of meeting licensing requirements without sacrificing natural resource or fish and wildlife protections. JOHN D. DINGELL | |
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