Adelberg, Arthur W., Executive Vice President and Chief Financial Officer, Central Maine Power Group, on behalf of Alliance for Competitive Elec- Rowe, Bob, Commissioner, Montana Public Service Commission, and Presi- dent, National Association of Regulatory Utility Commissioners Akaka, Hon. Daniel K., U.S. Senator from Hawaii 153 Montoya, Benjamin, President and CEO, Public Service Company of New Murkowski, Hon. Frank H., U.S. Senator from Alaska Nogee, Alan J., Energy Program Director, Union of Concerned Scientists 96 Zimmerman, Gary, Executive Vice President, Michigan Municipal Electric 107 Page THURSDAY, April 27, 2000 Bingaman, Hon. Jeff, U.S. Senator from New Mexico 161 Breathitt, Linda, Commissioner, Federal Energy Regulatory Commission 178 162 162 208 Hebert, Jr., Curt L., Commissioner, Federal Energy Regulatory Commission 188 164 183 159 164 The committee met, pursuant to notice, at 10:05 a.m., in room SD-366, Dirksen Senate Office Building, Hon. Frank Murkowski, chairman, presiding. OPENING STATEMENT OF HON. FRANK H. MURKOWSKI, U.S. SENATOR FROM ALASKA The CHAIRMAN. I would like to call the hearing to order. I apologize for starting a little late. It is not conducive to making a speech down at the Mayflower Hotel before you hold a hearing and get back through the traffic. There were a few potholes. We almost went down for a third time in one of them. In any event, today we are holding the first of two days of hearings on the eight bills pending before the committee. Four are comprehensive. Four are focused more narrowly. Senator Bingaman and I hope that through this process we can come to grips with reality. And reality suggests that we are going to have to have some kind of a compromise. My style of management is let us go through what we have got. And the things that we can agree on, we will put in this pile. The things we disagree on, we will put in this pile. And then, at the end of that process, we will come back and look at both piles and see if we can take another shot at the things we disagree on. And then we will evaluate where we are and what we have got and whether we have anything really meaningful. Now, there has been some confusion on the FERC witnesses, and I will not go into any great detail. But we will schedule the full FERC for April 27, all of the commissioners. After that hearing, it would be my intent to discuss with the members of the committee how to proceed, and so forth and so on. The issues before us are competition and reliability. And we are always reminded, as we look at deregulation in the electric industry, that the industry is not broken. And when we are advised that we are here to fix it, some of you feel a little uneasy. And I can understand that. But the consumers have benefitted from competition in other industries. We have seen it in the natural gas industry, telecommunications, trucking, and they tell me airlines, but I am not convinced. In each case, competition has reduced prices, enhanced supply and encouraged innovation. I expect competition will do the same in the electric power market. That is the intent. In the 8 years since we enacted the Energy Policy Act of 1992, there has been a great progress, certainly, in both States' retail competition and Federal wholesale competition. The innovation of the States, I think, is very noteworthy. Twenty-four States have adopted retail competition, and these cover 60 percent of U.S. con sumers. FERC is creating vigorous competition in the wholesale market through the Orders 888, 889 and 2000. The legislative tasks that we face is building on this progress and not starting from scratch. And this is the starting point for the legislation that Senator Landrieu and I introduced, as well as the other bills that are in here from Senator Bingaman and others. Now, our legislation promotes competition by deregulating and letting the market work, not by creating more Federal command and control or by preempting the States. Let me highlight one key aspect of our legislation, which is critically important. And that is protecting reliability. We are going to have some exposures this summer in that area, and we all know it. We are going to have exposures on price relative to the Northeast Corridor and those areas that are about 30 percent dependent on fuel oil for their electric generation. The odds are that we are looking at somewhere between $22 and $28 a barrel. And if those folks think they had high heating oil costs, there is an awakening coming. And that is just a reality, as well as the reliability issue. So we want to try and have this legislation protect reliability in several ways. First, it protects retail reliability by making sure that the State public utility commissioners continue to be fully able to protect retail consumers. Secondly, it assures generation reliability by promoting competition, and the generation will respond hopefully to the consumers' needs. And it protects transmission reliability in three ways. One, it hopes to ensure open access to all transmission lines, not just those owned by investor-owned utilities. Two, it creates a comprehensive, reliable organization that has clear enforcement authority. And, three, it provides a mechanism for incentives for building new transmission lines. Transmission is the key to both competition and reliability. We need a market-driven and business-oriented resolution to transmission issues, with voluntary development of transmission institutions, flexibility of the market to determine the structure of regional transmission organizations, and encouragement of additional investment in transmission. The conclusion, I think, that we are going to try and use to guide us is, first, to respect the traditional role that the States have played in regulating this industry. And with due respect to the FERC, I think the States are more innovative and I am inclined to be more responsive to their suggestions than a one size fits all regulation from Washington, D.C. And I think then we have to get our Federal house in order. I think we have to amend Federal law to ensure reliability, to clarify the ambiguity between Federal and State jurisdiction, and we need |