[Congressional Record Volume 149, Number 49 (Wednesday, March 26, 2003)]
[Senate]
[Pages S4442-S4443]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. LANDRIEU:
  S. 716. A bill to amend the Federal Power Act to improve the 
electricity transmission system of the United States; to the Committee 
on Energy and Natural Resources.
  Ms. LANDRIEU. Mr. President, today I introduce the ``Federal Power 
Act Amendment of 2003.'' This bill is intended to ensure for the future 
the two things that matter most to all electricity customers: 
affordable electricity and reliable electricity.
  Electricity users, my constituents and your constituents, wake up in 
the morning, flip a switch and expect their lights to turn on. They 
also expect that each month when their electricity bill arrives in the 
mail that they'll pay a reasonable price for that service. Customers 
don't care where the electrons come from or what new scheme the Federal 
Energy Regulatory Commission has in mind for the electricity industry 
or really much of anything else. And frankly, as a representative of 
nearly four and a half million people in my home State of Louisiana, 
affordable and reliable electricity are my primary concerns when it 
comes to electricity policy, and that is the purpose for which I offer 
legislation today.
  Electricity prices in Louisiana, and throughout the Southeast for 
that matter, are some of the lowest in the nation. According to the 
North American Electric Reliability Council's most recent reliability 
assessment report, the Southeast region is expected to enjoy, at least 
for the near term, ``adequate delivery capacity to support forecast 
demand and energy requirements under normal and contingency 
conditions.'' In other words, electricity customers in the Southeast 
should expect to continue to enjoy reliable electric service over the 
short run. My concern, however, is about the future of retail 
electricity service in my State.
  There are several specific areas of concern that I have and that I 
attempt to address in the legislation being offered today.
  First, the current balance between State and Federal jurisdiction, 
which has worked exceedingly well in my home State to provide low-cost 
and reliable electric service, is in jeopardy. Retail transactions, 
regulated by State public utility commissions, have historically 
comprised 90 percent of most utilities' transactions and continue to do 
so in a majority of States that have not restructured their electricity 
markets. In fact, there is not a single State in the Southeast with the 
exception of Virginia that has authorized retail competition. Yet, 
customers in our region of the country enjoy some of the lowest priced 
electricity service.
  The Federal Energy Regulatory Commission or FERC, however, has issued 
a proposed rule that would strip States of much of their current 
jurisdiction over retail electric service, including the transmission 
component of bundled retail sales. In so doing, FERC would dramatically 
impair the ability of States to use retail ratemaking to attain local 
policy goals and to continue to ensure low costs for retail customers. 
It would also prohibit States from ensuring that retail customers are 
given a priority for electricity service. As a result, in the event 
that supplies are tight, retail customers could lose the right to 
priority service.
  FERC's proposed plan is a one-size-fits-all scheme on the entire 
country based on a model that closely resembles the one in place in New 
Jersey, much of Pennsylvania and Maryland. This model may work well in 
the Northeast, but it has never been tested or proven viable in any 
other part of the country. In fact, in a study performed by the 
consulting firm, Charles River Associates, it was concluded that there 
is ``considerable uncertainty as to whether [the FERC's proposed plan] 
would provide greater benefits to the southeast than the implementation 
costs.'' In Louisiana, and I'm sure in many other States throughout the 
Southeast and across the country, customers are happy with their 
electric service. So I ask, what's wrong with the current 
jurisdictional division between the State and Federal government? If a 
State or region wants to adopt a new approach, they should be free to 
do so. But we should not allow a Federal agency to make fundamental 
policy decisions that are best left to State officials who are 
accountable to local interests. We know what happened out West when 
California regulators attempted to institute a sweeping, new plan for 
its electricity markets. I hope to avoid importing those problems into 
Louisiana.
  To address this jurisdictional concern, Section 2 of my bill would 
clarify the Federal-State arrangement under the Federal Power Act by 
explicitly stating that States shall have jurisdiction over the retail 
sale of electric energy, including all component parts of a bundled 
retail sale. In addition, Section 7 would enable States to continue to 
allow utilities to reserve transmission capacity for retail customers. 
This is current law and the current practice in a large number of 
States, including States with some of the lowest average retail rates 
and the best history of reliability. As contemplated by Congress when 
the Federal Power Act was enacted, FERC will retain jurisdiction over 
the wholesale sales of electric energy and States will retain 
jurisdiction over retail.
  My second concern for retail customers is the potential for increased 
rates caused by the costs of accommodating the ``merchant generation'' 
that, over the past several years, have been seeking to connect to the 
electric grid in the Southeast. Though new generation is important to 
wholesale competition, it is a strain on the transmission system. To 
accommodate the new generation, new transmission facilities and 
upgrades to existing facilities are needed. However, customers in 
Louisiana would be forced to pay for the facilities needed to 
accommodate the merchant generators, even though most of their 
customers are out-of-region customers. State regulatory commissioners, 
understandably, are reluctant to pass transmission construction and 
upgrade costs off to local customers who are not benefitting from the 
electricity. Meanwhile energy dependent regions of the country are 
denied cheap and reliable electricity.
  A reason they choose to site in Louisiana is because we are blessed 
with abundant reserves of natural gas--the currently favored fuel 
source for electric generation. Merchant generators are siting their 
facilities to gain access to these resources as cheaply as possible, 
and then are delivering electricity to regions where they can sell 
electricity at a higher cost. If enough transmission is built to export 
just a portion of the new generation that is planned to come on-line in 
Louisiana--10,000 megawatts--the estimated cost would impose a retail 
rate increase of 5 to 11 percent.
  Surely, there must be a more equitable way to allocate cost while 
simultaneously enhancing our transmission capacity. It is not fair to 
expect customers in energy generating States to keep paying for 
transmission expansion when this increased transmission is primarily 
being developed for out-of-region use. In Sections 3 and 4 of this 
bill, I have attempted to provide a more equitable system. Section 3 
would allow for ``voluntary participant-funding'' in which a regional 
transmission organization may choose to establish a system in which 
market participants pay for expansions to the transmission network in 
return for the transmission rights created by the expansion investment. 
This approach gives proper economic incentives for new generator 
location and transmission expansion decisions.
  Similarly, Section 4 of my bill would require the FERC to initiate a 
proceeding to establish rules for interconnecting new generation to 
transmission facilities. As in Section 3, any costs made necessary by 
the interconnecting generator would be funded by the generator, or 
cost-causer, in return for a right to use such facilities funded by the 
investment.
  The third problem that I see is the lack of new investment in 
transmission facilities. FERC noted in its Electric Transmission 
Constraint study that transmission congestion costs retail

[[Page S4443]]

customers across the country millions of dollars every year. Over the 
past 10 years, demand for electricity has increased by 17 percent while 
transmission investment during the same period has continuously 
declined about 45 percent.
  What is even more troubling is that current demand for electricity is 
projected to increase by 25 percent over the next 10 years with only a 
modest increase in transmission capacity. In the short term, this lack 
of transmission investment and the corresponding lack of transmission 
capacity, adversely affects the ability of retail customers to realize 
the benefits of wholesale competition. Over the long term, and if this 
trend continues, the reliability of the bulk power system could be 
compromised. In the summer of 2000, transmission constraints limited 
the ability to sell low-cost power from the Midwest to the South during 
a period of peak demand, causing higher costs for customers. In the 
summer of 2001 during the California electricity crisis, transmission 
constraints along the Path 15 transmission route were a significant 
cause of the blackouts experienced by customers in the northern parts 
of that State.
  To help spur this needed investment in the transmission sector, 
Section 5 of the legislation would provide further guidance to FERC in 
establishing transmission rates in two ways. First, Section 5 would 
amend Section 205 of the Federal Power Act to clarify that the cost 
causer is responsible for paying the costs of new transmission 
investment and that all users of the transmission facilities are 
required to pay an equitable share of the costs such facilities. These 
provisions will help ensure that users of the transmission system have 
proper economic price signals and encourage investment where it is 
needed most. Second, Section 5 would add a new section to the Federal 
Power Act, Section 215, that would require the FERC to initiate a 
rulemaking to establish transmission pricing policies and standards to 
promote investment in transmission facilities. Although the Commission 
may have sufficient authority under current law to initiate such 
policies, our Nation's transmission system has been neglected too long 
and I believe that the FERC could benefit from more specific guidance 
from Congress.
  Finally, customers are not realizing all of the potential benefits of 
wholesale electricity markets because of its balkanization. The likely 
result is higher electricity prices. In different parts of the country, 
electric utilities are in various stages of joining together to form 
large regional markets, or in the terms used by FERC--regional 
transmission organizations. In addition, public power entities, 
including municipal utilities, cooperatives, and federal and State 
power marketing associations have been willing or resisting, to varying 
degrees, to contribute to the efforts to establish regional markets. 
Exacerbating this problem is the underlying fact that FERC does not 
have the same jurisdiction over public power utilities as it does over 
electric utilities.
  Properly functioning regional markets for electricity can bring about 
significant benefits to customers in all parts of the country. More 
competitive wholesale generation, for example, will allow retail 
sellers greater opportunities to purchase generation from independent 
power producers. Improperly functioning markets, or one-size-fits all 
proposals that do not take into consideration regional differences, can 
be devastating. Current law and policy at FERC has been insufficient in 
achieving the proper balance between the need for robust regional 
markets, the reality of regional differences and the legitimate efforts 
of utilities.
  Therefore, in Section 6 of the bill, the FERC would be required to 
convene regional discussions with State regulatory commissions to 
consider the development and progress of regional transmission 
organizations. It would further provide for specific topics of 
discussion between FERC and the States including the need for regional 
organizations, the planning process for facilities, the protection of 
retail customers, and the establishment of proper price signals to 
ensure the efficient expansion of the transmission grid. Section 6 
would also help reduce the balkanization of the electric grid by 
authorizing the federal utilities such as the Tennessee Valley 
Authority and the Bonneville Power Administration to join regional 
transmission organizations. Also, in an attempt to help expand 
wholesale markets, Section 8 would provide for FERC to require that 
public power entities provide a limited form of access to their 
transmission facilities. This provision would give wholesale generators 
increased access to markets and ensure that competitors pay only the 
fair and reasonable price to use the transmission grid owned by public 
power.
  In conclusion, I ask my colleagues to support this legislation and 
consider its affect on retail electricity customers in their States. 
Affordable and reliable electricity should be our objective for all 
customers, in all parts of the country.
                                 ______