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View of Federal Energy Legislation

Sonny Popowsky Pennsylvania Consumer Advocate

September 16, 2004Indiana Energy Conference

PA Office of Consumer Advocate555 Walnut Street

Forum Place, 5th FloorHarrisburg, PA 17101-1923(717) 783-5048 Telephone

(800) 684-6560 (PA Consumers toll-free)spopowsky@paoca.org www.oca.state.pa.us 80764.ppt

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The Current Energy Legislation -

What’s the Point?

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The Energy Policy Act of 1992

Whether you agreed with it or not, the Energy Policy Act (EPAct) of 1992 was the product of a coherent, bi-partisan debate led by Representative Phil Sharp of Indiana.

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The Goal of the 1992 EPAct:

to increase competition in wholesale electricity markets.

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This goal was accomplished by amending the Federal Power Act to require greater access to monopoly transmission facilities, and by amending – not repealing – the Public Utility Holding Company Act (PUHCA) to permit more competition by wholesale generation suppliers.

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No sooner was the ink dry on the 1992 Act than pressure began at both the state and federal levels to establish retail competition.

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I have testified before Congress about electric issues 10 times over

the past 10 years

The debate has been all over the lot.• Do we want to mandate retail competition by a

date certain or prohibit any federal intervention in retail markets?

• Do we want to mandate a standard wholesale market design or prohibit its implementation?

• Do we want to mandate RTO participation or prohibit FERC from requiring such participation?

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What should not be included in the Energy Policy Act of 200X?

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Blanket repeal of the Public Utility Holding Company Act (PUHCA)

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If not for PUHCA, would Enron have owned 10 electric distribution

utilities instead of just one?

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Standard & Poors - 2/19/2004

“The main argument to repeal PUHCA – that it inhibits investment – does not seem to hold much water after the power generation market imploded….However, investor appetite for the debt and equity of companies with stable regulated revenues has not waned. So, repealing PUHCA on the basis of needing more capital in the industry does not seem to be a valid point.”

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Repeal or weakening of FERC merger authority

Utility mergers raise issues that are qualitatively different from mergers of other types of companies that are subject to Department of Justice review.

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Handcuffing FERC’s ability to direct solutions to issues such as the Swiss Cheese approach taken by some utilities in establishing Regional Transmission Organizations.

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Special rate-of-return incentives for utilities to build transmission or join

RTOs.

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If mandatory RTOs are such a bad idea, why would we want to give

utilities a rate-of-return incentive to join them?

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Federal Transmission Siting

• Transmission pricing can be done by FERC, particularly for unbundled states like Pennsylvania.

• Transmission planning can be done on a regional basis, as in the PJM Regional Transmission Expansion Planning Process

• Transmission siting, however, is an intensely local process, which should still be done at the state level.

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What should be included in the Energy Policy Act of 200X?

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Reliability

• We must have mandatory enforceable reliability rules.

• If they do nothing else, Congress should pass stand-alone reliability legislation.

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Energy Efficiency and Low Income Support

• Expanded energy efficiency and low income programs, such as LIHEAP, should be supported at the federal level.

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Renewable production tax credits

• Wind and other renewable resources probably still need tax support to become a major part of our energy resource profile.

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Greater FERC authority to deal with market abuse

FERC must be able to act promptly and authoritatively to prevent problems and punish wrongdoers.

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The elephant in the energy policy room:

When will we confront the issue of global climate change and what will we do about it?