[Congressional Record Volume 150, Number 3 (Thursday, January 22, 2004)]
[Senate]
[Pages S173-S174]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   ELECTRIC RELIABILITY ACT OF 2004 AND ELECTRICITY NEEDS RULES AND 
                           OVERSIGHT NOW ACT

  Mr. FEINGOLD. Madam President, I would like to express my support for 
two bills that my colleague, the junior Senator from Washington, 
introduced this week and that I am pleased to cosponsor: the Electric 
Reliability Act of 2004 and the Electricity Needs Rules and Oversight 
Now Act, or ENRON Act. I strongly believe that the country needs to 
achieve a balanced national energy policy. An essential part of a 
national energy policy should be to ensure electricity reliability and 
to protect consumers from energy market manipulation. If Congress 
cannot agree on an omnibus energy bill, then we must act to pass these 
stand-alone bills on electricity reliability and market manipulation.
  Our citizens deserve a reliable, safe power grid. This is one of the 
country's most pressing energy needs. We have to do all that we can to 
prevent blackouts like the one that hit the east coast and Midwest last 
August and the Electric Reliability Act of 2004 takes a crucial step 
toward that goal. The bill grants the Federal Energy Regulatory 
Commission--FERC--the explicit authority to create mandatory electric 
reliability standards. FERC can also approve the formation of electric 
reliability organizations, which will, subject to FERC review, enforce 
these standards. Strong and enforceable electric reliability standards 
will help ensure that our citizens and businesses do not have to worry 
about their respective lives and livelihoods being disrupted by 
blackouts.
  In fact, a joint investigation by a United States-Canadian task force 
found that the lack of mandatory reliability standards contributed to 
the August 14, 2003, blackout. This massive outage affected 50 million 
people in eight U.S. States and parts of Canada. The task force report 
found that an Ohio-based utility and regional grid manager together 
violated at least six reliability standards on the day of the blackout. 
Examples of the reliability violations that contributed to the blackout 
included: not reacting to a power line failure within 30 minutes, not 
notifying nearby systems of the transmission problems, failing to 
analyze what was happening to the grid, inadequately training 
operators, and failing to adequately monitor transmission stations. 
Since the industry is largely self-regulated, violations of these 
voluntary reliability standards carry no penalties.
  In testimony before the Senate Governmental Affairs Subcommittee on 
Oversight of Government Management last fall, regulators declared that 
enforceable reliability standards are vital to a secure power grid. 
This bill is an important step toward that goal. It provides for 
enforceable, mandatory electric reliability standards to ensure that 
our Nation has a secure, reliable power grid.
  In addition to securing our Nation's power grid, we must protect 
consumers from energy market manipulation. We cannot let the market 
abuses that took place during the Western energy crisis a few years ago 
happen again. The ENRON Act would prohibit the use of manipulative 
practices like the schemes used by Enron and other energy traders that 
raised prices and put consumers, and the reliability of the electric 
transmission grid, at risk. We learned from this crisis that 
electricity markets need close Government oversight to ensure that 
companies do not engage in risky trading schemes leading to soaring 
energy prices and their own possible financial failure. In both cases, 
consumers--the people who depend upon the electricity these companies 
generate or trade--are the losers.
  Energy market manipulation crippled the west coast during 2000-2001. 
Just last month, a former energy trader pleaded guilty to manipulating 
natural gas markets 2 years ago during the west coast power crisis. 
This trader admitted to supplying false reports to trade industry 
publications that calculate the price of natural gas indexes, which are 
used by derivative traders to buy and sell natural gas futures and 
real-time transactions. This manipulation apparently benefitted the 
energy company at the expense of energy consumers.
  Other Enron-style trading practices include ``ricochet'' electricity 
deals. In a ricochet transaction, Enron sent California-generated power 
to another company. The electricity was then sold back to California, 
but billed as being generated outside the State. Prosecutors state that 
this practice allowed Enron to evade California electricity price caps. 
There is also the ``Death Star'' trading scheme. Apparently, Enron 
attempted to generate revenue by fraudulently charging fees for 
services Enron did not provide. Enron charged California for 
electricity that was not delivered. Charging the State for undelivered 
power prevented the State from alleviating backlogged transmission 
lines. This market manipulation scheme was especially harmful since it 
came at a time when part of the State experienced rolling blackouts.
  In June, FERC deprived Enron of its right to trade power and natural 
gas. Even though the company is barred from the energy-trading industry 
it helped create, market manipulation remains a threat to consumers. In 
December 2003, another energy company agreed to pay $1.7 billion to 
resolve market manipulation claims brought by the California Public 
Utilities Commission and various business and residential consumers. 
Other companies allegedly bought and sold natural gas simultaneously at 
the same price to make demand appear greater.
  The ENRON legislation requires the Federal Energy Regulatory 
Commission to prohibit the use of manipulative practices like these 
that put at

[[Page S174]]

risk consumers and the reliability of the transmission grid. The Senate 
recently went on record in support of barring abusive market practices 
when it approved an amendment to the fiscal year 2004 agricultural 
appropriations bill offered by Senator Cantwell. I am disappointed that 
this language was stripped from the omnibus spending bill.
  I think the August blackout should make clear to all of my colleagues 
the need for improvements in the power grid system. We need to make the 
electric grid safer and more reliable for all Americans and we also 
need to prevent manipulation of electricity markets. For those reasons, 
I encourage the Senate to move forward and act quickly with respect to 
these bills.

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