[Congressional Record Volume 150, Number 2 (Wednesday, January 21, 2004)]
[Senate]
[Pages S118-S121]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. CANTWELL (for herself, Mr. Feingold, and Mr. Jeffords):
  S. 2015. A bill to prohibit energy market manipulation; to the 
Committee on Energy and Natural Resources.
  Ms. CANTWELL. Mr. President, I rise today to introduce 2 pieces of 
electricity legislation--simple, common-sense bills that enjoy the 
bipartisan support of a majority of United States Senators.
  First, I am pleased to introduce with my colleagues Senators Clinton, 
Jeffords and Feingold the Electric Reliability Act of 2004. This 
legislation would give the Federal Energy Regulatory Commission (FERC) 
authority to devise a system of mandatory and enforceable standards for 
the reliable operation of our nation's electricity grid.
  My distinguished friends from Wisconsin and Vermont, Senators 
Feingold and Jeffords, and I are also

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today introducing a second bill: the Electricity Needs Rules and 
Oversight Now (ENRON) Act, which would put in place a blanket ban on 
manipulative practices in our nation's electricity markets.
  Enactment of these bills is long overdue. And in both cases, their 
provisions have passed the United States Senate within the past eight 
months. They represent crucial steps forward in the effort to modernize 
our nation's electricity grid and reform the rules by which it is 
operated.
  Quite simply, these provisions are too important to be held captive 
to the majority's effort to pass H.R. 6-- the energy bill conference 
report. Resembling a patchwork quilt of special interest hand-outs--
rather than a policy that would help this nation achieve energy 
independence--H.R. 6 capsized under its own pork-laden weight on this 
very floor, a mere two months ago.
  Rather than holding good energy policy hostage for the bad--as those 
who seek to resurrect that 1,700-page legislative monstrosity have said 
they intend--I believe this body can and must make necessary progress 
in upgrading our electricity grid and protecting our nation's 
consumers. That's what the two bills I'm introducing today are intended 
to do.
  As surely my colleagues recall, much of the Northeast and Midwest 
last August suffered a massive power outage, affecting 50 million 
consumers from New York to Michigan. Clearly, the biggest blackout in 
our nation's history has underscored the need for mandatory and 
enforceable reliability standards--as envisioned in the Electric 
Reliability Act of 2004. To date, the system has operated under a set 
of voluntary guidelines, with no concrete penalties for those who break 
the rules and jeopardize the reliable energy service that is the 
foundation of our nation's economy.
  While the August 2003 blackout was certainly a potent reminder, the 
call for reliability legislation dates back at least another five 
years. In 1997, both a Task Force established by the Clinton 
Administration's Department of Energy and a blue ribbon panel formed by 
the North American Electric Reliability Council (NERC) determined that 
reliability rules for our nation's electric system had to be made 
mandatory and enforceable.
  These conclusions resulted, in part, from an August 1996 blackout in 
the Western Interconnection, where the short-circuit of two overloaded 
transmission lines near Portland, Oregon, caused a sweeping outage that 
knocked out power for up to 16 hours in ten states. The blackout 
affected 7.5 million consumers from Idaho to California, resulting in 
the automatic shut-down of 15 large thermal nuclear generating plants 
in California and the southwest--compromising the West's energy supply 
for several days, even after power had mostly been restored to end-
users.
  As outlined in Economic Impacts of Infrastructure Failures, a 1997 
report submitted to the President's Commission on Critical 
Infrastructure Protection, the blackout was estimated to exact between 
$1 billion and $4 billion in direct and indirect costs to utilities, 
industry and consumers. The report also detailed the risks the outage 
posed to public health and safety, including an exponential increase in 
traffic accidents, hospitals forced to rely on emergency back-up power 
generation, and the grounding of more than 2,000 airline passengers.
  While it took time to develop consensus, the Senate recognized the 
human and economic stakes associated with the reliable operation of the 
electricity grid. Stand-alone legislation very similar to what I've 
introduced today passed this body in June 2000, when this chamber was 
under Republican control. And even as the majority has twice changed 
hands since then, the United States Senate has twice passed the very 
provisions included in the Electric Reliability Act of 2004 as part of 
comprehensive energy legislation--most recently, this past summer.
  Likewise, the Senate has previously passed the provisions contained 
in the ENRON Act, which Senator Feingold and I are introducing today. 
Offered under the agreement that last July cleared the way for Senate 
Leadership to replace the then-pending Republican energy bill with the 
107th Congress' Daschle-Bingaman legislation, the ENRON Act was adopted 
as an amendment to the Senate's Fiscal Year 2004 Agriculture 
Appropriations bill, on a strong, bipartisan vote of 57-40.
  The ENRON Act is simple in concept. In the face of overwhelming 
evidence that Enron and other unscrupulous energy companies brazenly 
manipulated western energy markets during the crisis of 2000-2001, it 
would amend the Federal Power Act to put in place a blanket ban on such 
activities.
  It has been estimated that the western energy crisis cost the 
region's consumers and businesses $35 billion in domestic economic 
product--in other words, a 1.5 percent decline in productivity and a 
total loss of 589,000 jobs. After experiencing a devastating blow that 
exacerbated the already-crippling national recession, consumers in my 
state--who continue to pay the price for the unethical gamesmanship of 
these companies--know that our economy simply cannot abide another 
Enron.
  Thus, the ENRON Act is based on language included in the Securities 
Exchange Act--in existence since 1934. This bill would make it illegal 
for any company to ``use or employ . . . any manipulative or deceptive 
device or contrivance'' to circumvent FERC rules and regulations on 
market manipulation. Further, it would specify that electricity rates 
resulting from manipulative practices are simply not lawful. In other 
words, when companies are known to have gouged consumers--in some 
cases, even admitting as much--those same consumers should not be stuck 
with the inflated energy bills that result.
  As Congress and various Federal agencies have over the past few years 
sought to piece together the events that led to the western energy 
crisis--the most devastating energy market meltdown in our Nation's 
history--a number of agencies and officials have weighed in on the 
issue of market manipulation. In addition to simple common sense, their 
statements underscore the need for the ENRON Act. For example: FERC in 
March 2003 issued its Final Report on Price Manipulation in Western 
Markets. The voluminous FERC report found that: ``Enron's corporate 
culture fostered a disregard for the American energy customer; the 
success of the company's trading strategies, while temporary, 
demonstrates the need for explicit prohibitions on harmful and 
fraudulent market behavior and for aggressive market monitoring and 
enforcement.'' The General Accounting Office (GAO) in August 2003 
issued a report entitled Additional Actions Would Help Ensure that 
FERC's Oversight and Enforcement Capability is Comprehensive and 
Systematic. Among GAO's observations: ``The heads of [FERC's] market 
monitoring units told us they recognize the difficulty of defining just 
and reasonable prices. They also said that they believe FERC has made 
some progress in doing so. However, they generally believed that FERC 
had not yet gone far enough.'' GAO further concluded that: ``we 
recommend that the Chairman of FERC more clearly define [the 
Commissions] role in overseeing the Nation's energy markets by . . . 
explicitly [describing FERC's] activities relative to carrying out the 
agency's statutory requirements to ensure just and reasonable prices 
and to preventing market manipulation.'' Republican FERC Commissioner 
Joe Kelliher wrote the following in a November 5 letter to me, just 
prior to his confirmation: ``Markets subject to manipulation cannot 
operate properly and there is an urgent need to proscribe manipulation 
of electricity markets. You have correctly noted there is no express 
prohibition of market manipulation in the Federal Power Act and have 
proposed legislation to establish an express prohibition. This is a 
critical point. The Federal Energy Regulatory Commission only has the 
tools that Congress chooses to give it, and Congress has never given 
the Commission express authority to prohibit market manipulation. I 
believe the time has come for Congress to take that step.'' In the same 
letter, Kelliher goes on to note that, ``This is not to say that the 
Commission cannot take steps to prevent market manipulation under its 
existing legal authority . . . Since there would likely be legal 
challenges to any such effort to proscribe manipulative practices, it 
would be helpful for Congress to give the Commissioner clear

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authority to prohibit market manipulation . . . I support the goals of 
your amendment'' [to the Agriculture Appropriations bill, which 
contains the same provisions as the ENRON Act] ``and believe it would 
go far towards effectively prohibiting manipulation of electricity 
markets.''
  Recent events have clearly demonstrated the need for both the 
Electric Reliability Act of 2004, as well as the ENRON Act. On the 
other hand, the case is far less compelling for many of the provisions 
found in the H.R. 6 conference report. It's not just unpersuasive to 
argue that a 21st Century energy policy must include: liability 
protections for manufacturers of the groundwater pollutant MTBE; the 
weakening of landmark environmental laws such as the Clean Air, Clean 
Water and Safe Drinking Water Acts; and billions of dollars worth of 
subsidies, most infamously, taxpayer-backed bonds for construction of 
an energy efficient mall including a Hooters restaurant, it's absurd.
  When the Senate last July agreed to send a comprehensive energy bill 
to conference with the House, few anticipated that we would get back a 
grab-bag of corporate give-aways so bloated that editorial pages from 
every corner of this Nation, from Yakima to Pensacola; Texarkana to 
Honolulu, would call on this body to put H.R. 6 out of its misery. Nor 
did many of us believe that common-sense legislation such as the ENRON 
Act--with broad, bipartisan support in the Senate--would be so quickly 
jettisoned by the conference report's authors.
  Make no mistake: many of us in this chamber emphatically believe that 
we need an energy policy that will liberate this country from its 
dangerous dependence on foreign sources of oil and position our 
businesses to compete in the emerging global market for clean energy 
technologies. But to paraphrase my distinguished colleague from 
Vermont, Senator Jeffords, who has been a great leader on these issues, 
this Nation needs an energy bill, but certainly not this energy bill.
  So today, we are introducing the Electric Reliability Act of 2004 and 
the ENRON Act, because it's time for this body to put the public 
interest ahead of the special interests poised to profit so handsomely 
from the passage of the energy bill conference report. We should take 
up and pass these individual pieces of legislation, which would mark a 
substantial achievement in the effort to upgrade the reliability of our 
Nation's grid and insulate our economy from the disastrous impacts of 
latter-day Enrons.
  In last night's State of the Union speech, President Bush observed 
that ``consumers and businesses need reliable supplies of energy to 
make our economy run.'' I could not agree more. He also urged Congress 
to ``pass legislation to modernize our electricity system, promote 
conservation, and make America less dependent on foreign sources of 
energy.'' Nowhere in his address did President Bush mention tax breaks 
for Hooters; I did not hear him invoke rollback of environmental laws 
on behalf of polluters; nor did he cite the need to put in place 
protections for corporate looters such as Enron--all those provisions 
that have become the hallmark of the energy bill conference report.
  So I ask my colleagues to recognize that we can make measurable 
progress this year on the objectives the President has outlined. But 
that will happen not by holding good energy policy hostage for bad 
energy policy, as the authors of H.R. 6 would have it. Rather, it will 
happen when we agree to set aside the H.R. 6 conference report and pass 
common-sense, consensus-based energy policy. And both the Electric 
Reliability and ENRON Acts fit this description.
  I ask my colleagues to support these bills.
  Mrs. CLINTON. Mr. President, I am pleased to join Senators Cantwell, 
Jeffords and Feingold in introducing legislation that would create 
mandatory, enforceable reliability standards for our electricity 
system.
  Last week was the five month anniversary of the worst blackout in the 
history of New York, and, indeed, the history of America. Congress has 
yet to pass electricity reliability legislation that would help ensure 
the blackout never happens again. There is strong support for this 
legislation, which has passed the Senate twice before as part of the 
energy bill. But with the energy bill stalled, we simply cannot afford 
to wait any longer to move on reliability standards.
  The blackout had a tremendous impact on New Yorkers and on the 
economy. Some experts put the costs to New York at more than $1 billion 
dollars and the costs nationwide at more than $6 billion.
  In November, the Electric System Working Group of the United States-
Canadian task force on the blackout released its draft report on the 
causes of the blackout. Among the report's findings was that the North 
American Electric Reliability Council's (NERC) voluntary reliability 
standards were violated at least six times during the series of events 
that led to the cascading blackout. This finding reinforced the need 
for swift enactment of mandatory, enforceable electricity reliability 
standards. We clearly need a system that provides real accountability 
for failure.
  New Yorkers, and all Americans, are relying on Congress to help 
prevent another blackout. Congress needs to move swiftly on legislation 
in this area so that rules can be put in place before this summer. I 
urge my colleagues to support this important legislation.
  Mr. JEFFORDS. Mr. President, I am pleased to be joining the Senator 
from Washington, Ms. Cantwell, and the Senator from New York, Mrs. 
Clinton, as an original cosponsor of legislation to ensure the reliable 
delivery of electric power in the United States. This bill is similar 
to Title I of the S. 1754, the Electric Reliability Security Act of 
2003, that I introduced last October in response to the Northeast 
blackout.
  Last night, in his State of the Union, the President urged Congress 
to pass legislation to modernize our electricity system, promote 
conservation, and make America less dependent on foreign sources of 
energy. This bill, the Electric Reliability Act of 2004, addresses the 
President's request, and the Senate should pass it expeditiously. Our 
country needs the new, clear national rules of the road contained in 
this bill to ensure the reliable delivery of electric power.
  As the people in the Northeast will not soon forget, in August 2003 
nearly 50 million people were affected by a massive power outage. But 
this is not an isolated incident. On January 16, 2004, Gov. James 
Douglas urged Vermonters to save power to help avert rolling blackouts 
because of electricity problems in southern New England. Though there 
was likely enough power to meet my State's demand, but we are part of a 
regional grid system. This system, as we learned last year, needs to 
operate in a coordinated fashion or the region faces blackouts.
  The Senator from New York, Mrs. Clinton, whose State was so 
significantly affected during the Northeast blackouts, knows well the 
hardship long electricity outages cause. I am pleased that she and the 
Senator from Washington, Ms. Cantwell, have joined in this effort. The 
Senator from Washington, Ms. Cantwell, has been alerted to the need for 
reliability legislation well before last year, as her State suffered 
during the massive multi-state Western blackout of 1996.
  Be it 1996, 2003 or last week, these events emphasize the 
vulnerability of the U.S. electricity grid to human error, mechanical 
failure, and weather-related outages. Congress needs to do all that is 
necessary to protect the grid from devastating interruptions in the 
future. Those who know this issue well, say that reliability 
legislation is essential. On the first day of this year, Michehl Gent, 
President and Chief Executive of the North American Electric 
Reliability Council, said in the New York Times that all of the actions 
taken by industry and oversight organizations to respond to the 
Northeast blackout do ``not reduce the need for Federal legislation 
that would provide authority to impose and enforce mandatory 
reliability standards.'' He continues, ``whether legislation is adopted 
on a stand-alone basis or as part of a comprehensive energy bill, 
passage is essential. If reliability legislation had been enacted when 
first proposed, I believe that the blackout would not have occurred.''
  Given that Congress has not passed grid reliability legislation, the 
Federal Energy Regulatory Commission decided during its December 17, 
2003 open

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meeting to have its staff develop an order over the next few weeks 
requiring utilities and other jurisdictional entities to report 
violations of voluntary reliability standards set by the North American 
Electric Reliability Council. The Commission also asked for comment on 
its legal authority under existing statutes to mandate compliance with 
those standards.
  Why is Congress making FERC waste time trying to determine whether 
they have the legal authority to act to protect consumers and ensure 
electric reliability? We should simply make that statutory authority 
clear. Reliability legislation has passed the Senate twice, and this 
bill asks the Senate to act on those same provisions again. Congress 
should establish mandatory reliability standards and close other 
regulatory gaps left by state deregulation of the electricity sector. 
We should pass this bill now, and I pledge my support to the Senators 
from Washington and New York, Senators Cantwell and Clinton in doing 
so. Given the high costs of power outages to our country, we cannot 
afford to do otherwise. I invite my colleagues to join us in our 
efforts to advance energy security and reliability in the United 
States.

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