[Congressional Record Volume 147, Number 22 (Thursday, February 15, 2001)]
[Senate]
[Pages S1529-S1530]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

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                         SMITH AMENDMENT NO. 12

  Mr. SMITH of Oregon submitted an amendment intended to be proposed by 
him to the bill S. 287, to direct the Federal Energy Regulatory 
Commission to impose cost-of-service based rates on sales by public 
utilities of electric energy at wholesale in the western energy market; 
which was referred to the Committee on Energy and Natural Resources.

  On page 3, strike subsection (d) and insert the following:

       (d) Limitations.--
       (1) In general.--A cost-of-service based rate shall not 
     apply to a sale of electric energy at wholesale for delivery 
     in a State that--
       (A) prohibits public utilities from passing through to 
     retail consumers wholesale rates approved by the Commission; 
     or
       (B) imposes a price limit on the sale of electric energy at 
     retail that--
       (i) precludes a public utility from recovering costs on a 
     cost-of-service based rate; or
       (ii) has precluded a public utility from making a payment 
     when due to any entity within the western energy market from 
     which the public utility purchased electric energy, and the 
     default has not been cured.
       (2) No orders to sell without guarantee of payment.--
     Notwithstanding any other provision of law, neither the 
     Secretary of Energy, the Commission, any other officer or 
     agency in the Executive branch, nor any court may issue an 
     order that requires a seller of electric energy or natural 
     gas to sell electric energy or natural gas to a purchaser in 
     a State described in paragraph (1) unless there is a 
     guarantee that, as determined by the Commission, is 
     sufficient to ensure that the seller will be paid the full 
     purchase price when due.
       (3) Requirement to meet in-state demand.--Notwithstanding 
     any other provision of law, a State public utility commission 
     in the western energy market may prohibit a public utility in 
     the State from making any sale of electric energy to a 
     purchaser in a State described in paragraph (1) at any time 
     at which the public utility is not meeting the demand for 
     electric energy in the service area of the public utility.
       (e) Report.--Not later than 120 days after the date of 
     enactment of this Act, the Secretary of Energy shall--
       (1) conduct an investigation to determine whether any 
     public utility in a State described in subsection (d)(1) has 
     been rendered uncreditworthy or has defaulted on any payment 
     for electric energy as a result of a transfer of funds by the 
     public utility to a parent company or to a subsidiary of the 
     public utility (except a payment made in accordance with a 
     State deregulation statute); and
       (2) submit to the Committee on Energy and Commerce of the 
     House of Representatives and the Committee on Commerce and 
     Committee on Energy and Natural Resources of the Senate a 
     report describing the results of the investigation.
       (f) Duration.--A cost-of-service based electric energy rate 
     imposed under this Act shall remain in effect until such time 
     as the market for electric energy in the western energy 
     market reflects just and reasonable rates, as determined by 
     the Commission.
       (g) Repeal.--This Act is repealed, and any cost-of-service 
     based electric energy rate imposed under this Act that is 
     then in effect shall no longer be effective, on the date that 
     is 2 years after the date of enactment of this Act.

  Mr. SMITH of Oregon. Mr. President, today I am filing an amendment to 
S. 287, bill to direct the Federal Energy Regulatory Commission to 
impose cost-of-service based rates on sales by public utilities of 
electric energy at wholesale in the western energy market.
  My amendment would clarify the circumstances under which the 
Commission may impose interim limitations on the cost of electric 
energy, and provide a sunset date. While I applaud my colleague's 
efforts to help restore stability to the wholesale electricity market 
on the west coast, I believe S. 287 continues to insulate retail 
customers in California from the energy crisis in a way that is 
hampering conservation and investment in new generation.
  By contrast, my constituents and energy-sensitive businesses in 
Oregon are already feeling the effects of the price volatility in the 
west. Utilities in the northwest are facing current rate increases of 
eleven to fifty percent. The customers of the Bonneville Power 
Administration are facing the prospect of 95 percent rate increases 
beginning in October, when current contracts expire.
  I know that there is significant support for short-term wholesale 
price caps for the entire western market. However, that doesn't address 
what is still going on in California, where retail prices are capped at 
a level that is insulating consumers from the price shocks being felt 
by the rest of the West. So long as these retail rates remain capped at 
the current levels, there is no incentive to conserve, and no incentive 
for additional generation. Both conservation and additional generation 
are the keys to the long-term solution.
  Much of the media attention in recent weeks has focused on efforts to 
keep the lights on in California and to keep that state's two largest 
utilities from going bankrupt. But the West Coast energy market extends 
to eleven other western states, including Oregon, that are all 
interconnected by the high-voltage transmission system.
  I believe there is more that California can and must do immediately 
to address this situation. I know the California legislature is 
grappling with this situation, and I hope it will take the steps to 
restore the creditworthiness of California's utilities.
  First and foremost, it must approve further electric rate increases. 
This is necessary to send the right price signals to Californians to 
conserve energy. Further, price increases are necessary to help 
California's investor-owned utilities--which have recently been reduced 
to ``junk bond'' status--from going bankrupt.
  Avoiding bankruptcy for these utilities is important for Oregon and 
other western states. Since the middle of December, Northwest utilities 
have been forced to sell their surplus power into California, with no 
guarantee of being paid. If the California utilities subsequently seek 
bankruptcy protection, it will be Oregonians who are stuck with the 
bill for California's failed restructuring effort.
  In fact, certain Oregon utilities are already receiving bills from 
California's power exchange for funds owed to the exchange by 
California utilities. In addition, the Bonneville Power Administration 
is owed over 100 million dollars for power sales it made into 
California in November 2000.
  My amendment to the legislation offered by my colleague from 
California would do the following: It limits the authorities provided 
to the Federal Energy Regulatory Commission (Commission) to impose 
west-wide wholesale price caps by stipulating that the wholesale price 
cap cannot be imposed on sales into any state that has refused to allow 
utilities to pass on Commission-approved rates, has capped retail rates 
at levels that do not allow utilities to recover costs on a cost-of-
service based rate, or has capped rates at a level that results in a 
default of payments for electricity.

[[Page S1530]]

  Further, the amendment stipulates that the Secretary of Energy, the 
Commission, or the courts may not order sales of electricity or natural 
gas into any such state without guarantees of being paid. It also 
allows state public utility commissions in other western states to make 
sure that utility service areas are served before utilities in their 
respective states can sell into what might be a higher market in 
California.
  It also orders the Secretary of Energy to conduct an inquiry into the 
charges of shifting funds between utilities and parent holding 
companies. Two weeks ago, at a hearing of the Energy Committee, I asked 
three California utilities if they were seeing any decrease in demand 
in response to calls for conservation. The answer was no.
  I also asked several energy experts if, in their opinion, state 
officials in California were taking the measures needed to fix their 
broken restructuring effort. Again, the answer was either ``No'' or 
``Mostly, but not completely.''
  To put a human face on what is happening in my state, I would like to 
discuss a letter I recently received from a rural school district in my 
state. Basically, they are pleading for the energy crisis to be fixed 
because, as a small school district, they are having to take resources 
away from students to pay energy bills. Their local utility has just 
added a 20 percent surcharge to the cost of electricity. The district 
also heats a number of its school buildings with natural gas. In 
November 1999, the bill was $4,383.59. By November 2000, the bill to 
heat the same buildings was $11,942.
  Another small school district in my state is concerned that its power 
bills may go up by $100,000. For them, that means laying off two 
teachers.
  Oregon is doing its part to conserve, and to build new resources. My 
amendment today is trying to prod California to send the right price 
signals to its consumers to join us in this fight.

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