Group lights another attempt in electricity deregulation bill

WASHINGTON -- Proponents of national legislation to deregulate the $200 billion-a-year U.S. electricity industry are launching another push, hoping to overcome the opposition that derailed their efforts last year.

House Commerce Committee Chairman Thomas Bliley is pressing for committee action on a bill requiring all states to open the electricity industry to retail competition by December 2000. House Majority Leader Dick Armey wants to bring the bill to a vote in the House in April.

The issue is complicated, though, and the legislation is opposed by powerful coalitions that prefer the status quo. As a result, passage of a sweeping bill this year is a long shot, said Prudential Securities analyst Susan Lynner. "We believe that if -- and that looms as a big if -- Congress does pass retail choice legislation, it is likely a 1999-2000 event." The push for federal deregulation legislation is being driven by a powerful business coalition, including large utilities such as American Electric Power and Wisconsin Energy, which have low costs, and firms such as Enron Co., which hope to expand into the electricity generation business. They are backed by large electricity users such as auto manufacturers, grocery stores and steelmakers who see deregulation leading to substantial cost savings. The opposition comes from public utilities, from some state regulators, and from electricity giants such as Southern Co. and Commonwealth Edison. Many of the traditional utilities are burdened with unprofitable businesses such as nuclear power plants and other costs that would place them at a disadvantage in a competitive arena. Others are simply comfortable with the current arrangement, which has governed the industry for most of this century. A proposal by House Energy and Power Subcommittee Chairman Dan Schaefer of Colorado will be the basis for the debate this year in the House. Schaefer has reintroduced a bill aimed at giving customers a choice in buying electricity by the year 2000, eliminating local monopolies protected by state regulation. The transmission and distribution of electricity would remain regulated by the Federal Energy Regulatory Commission or the individual states. Under Schaefer's bill, the states would have until 2000 to adopt deregulation legislation, with the federal government stepping in wherever the deadline is not met. Schaefer plans to hold hearings in his subcommittee this spring. Schaefer's bill has drawn opposition from those who argue that states should be left to proceed at their own pace with deregulation efforts. These opponents include Senate Energy Committee Chairman Frank Murkowski, a Republican from Alaska, whose position affords him considerable influence over what legislation, if any, reaches the Senate floor. Murkowski argues that a federal deregulation bill raises myriad issues that are best left to the individual states, including what environmental standards electric utilities should be held to and who should bear the costs of reimbursing utilities for their so called stranded costs -- those costs that they incurred as a regulated monopoly with a mandate to provide universal service. The utilities argue that those costs, which analysts say could run as much as $200 billion, should be reimbursed to insure a level playing field in a competitive market. "If we don't develop consensus, legislation will not make it," Murkowski said. "And that consensus involves not only members of (the Energy) committee, but members of the full Senate, the House and the obviously disengaged administration." Murkowski plans to hold hearings in March, and has asked Energy Secretary Federico Pena to present the Clinton administration's position. Pena has spoken of a "flexible mandate," exempting from any federal program states that have already passed electricity legislation. The Clinton proposal is also likely to require that utilities generate some electricity from renewable sources, Pena has said. Nonetheless, Murkowski aides say not to expect deregulation legislation from their committee this year. Murkowski and Sen. Alfonse D'Amato of New York support a separate effort to repeal the 1935 Public Utilities Holding Company Act, which prevents utilities from expanding into new businesses or into non- contiguous states. Proponents of sweeping federal deregulation efforts, including Sen. Dale Bumpers of Arkansas, have prevented a PUHCA repeal bill from coming up for a vote. Financial analysts say the repeal is critical for deregulation."It's really getting in the way of a lot of deregulation," NatWest's Tirello said. "We really need to change those laws." House leaders favor a comprehensive package. "We want to do a larger bill," Schaefer spokeswoman Dana Perino said.

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