Sen. Jeff Bingaman (D-NM), chairman of the Senate Committee on Energy and Natural Resources, warned the Bush administration Wednesday to submit a proposal for electricity legislation or be left out of negotiations.
Bingaman said the committee will go forward with debate on proposed comprehensive electricity legislation during the second week of September but welcomed administration input before that date.
Focusing on the nation’s electricity grid, Bingaman said the nation has received “frequent warnings” in the form of price spikes, out of control prices, and blackouts that the electricity system is in dire need of reform. “We need to act,” Bingaman said.
Bingaman laid out a timetable to get legislation under way. He said the committee would begin debate on legislation beginning the second week in September. He implied the Bush administration, which has not submitted recommendations to the committee for electricity legislation, needs to make its position known by then or the process would proceed without administration input.
The biggest questions facing the committee, suggested Bingaman, are clarifying the Federal Energy Regulatory Commission’s jurisdiction over siting of transmission lines, whether or not to extend FERC’s market oversight authority to public power entities, and establishing a market structure that will insure new transmission facilities are built.
Sen. Craig Thomas (R-Wyo.) said he is concerned neither the committee nor the Bush administration has articulated a clear view of “where we want to be in the future” for the nation’s electricity grid.
“There is no overall picture of where we want to go,” he said. “We need to look at a national grid with a third party operator.”
But US Deputy Sec. of Energy Francis Blake said the administration has “no intention to move more broadly than the system of RTO’s (regional transmission organizations).” FERC has called for privately held companies to turn over operation of their transmission systems to RTOs and recently ordered mediation to create single RTOs to serve the Southeast and Northeast.
Sen. Thomas replied, “How can you talk about a national grid when you have regional transmission organizations. We need a broader look.”
Nonetheless, Bingaman honed in on the need for investment incentives for new transmission as being one of the biggest problems facing the nation. Representing the utility industry, John Rowe, co-CEO of Exelon Corp., Philadelphia, Penn., said the industry supported a system of large RTOs that are for-profit. He also said companies that transfer transmission assets to the RTOs should get tax incentives for doing so.
Rowe testified that building transmission was “difficult and risky” business. Representatives from publicly owned power systems and rural electric cooperatives complained creating such incentives for transmission construction and forcing all power entities using the grid to pay for them will raise costs for consumers.
Glenn English, who represented the National Rural Electric Cooperative Association, said a 12% guaranteed rate of return administered by FERC should be sufficient to compensate for risks and get the facilities built.
Witnesses said utilities have not invested in transmission because of disincentives to reduce bottlenecks and choke points. “There are disincentives to invest in transmission for vertically integrated utilities because weak transmission systems protect their generation,” said Roy Thilly, CEO of Wisconsin Public Power Inc.
Thilly said one entity owns 54% of the generation protected by transmission constraints in Wisconsin. English added co-ops should not be required to join RTOs, if the “incentives” to build more transmission adds to their customers’ costs. Instead, he favored a national system with federal oversight based on cost-of-return rate making to avoid loading more expenses on the system.
“The electric transmission system is a conveyance like an interstate highway system. We don’t need to add more toll booths to it,” said English.