to repeal outdated Federal law. As you know, that is PUHCA and PURPA. FERC already has adequate authority to provide incentives to encourage new transmission, but FERC needs to act.

Lastly, we should do no harm. The industry is not broken.
Senator Bingaman.

STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR
FROM NEW MEXICO

Senator BINGAMAN. Thank you very much, Mr. Chairman, for having the hearing.

Since we had the first hearing on this subject several years ago, I think a consensus has developed that Federal legislation is probably needed. We still obviously do not have a consensus on exactly what that should contain. It seems to me there are two choices. First, we can focus our efforts on passing a narrowly tailored reliability bill to deal with the issues you just mentioned, a bill similar to Senator Gorton's bill, which I support.

It, of course, is based on a proposed draft by the North American Reliability Council. It is supported by a broad coalition of investorowned utilities, public power, the co-ops, and industrial consumers. At a bare minimum, I think we should report Senator Gorton's bill, to help ensure the reliability of the electric grid. That is something that we can get done in this Congress, and I strongly support doing

it.

The alternative to just doing this narrowly tailored bill on reliability would be to try to pass a balanced and comprehensive restructuring bill. At a minimum, a comprehensive bill needs to clarify FERC jurisdiction, ensure open, nondiscriminatory access to the electric grid, and ensure the reliability of the grid.

But a comprehensive bill, to be enacted, needs to be balanced. It must offset PUHCA repeal with consumer protections against market power abuses and industrial mergers. It must balance PURPA repeal with support for renewable energy. It must, in other words, benefit consumers and the public as well as the utility industry. And striking the right balance for such a bill will not be easy.

I am encouraged with the recent efforts that the pro-competition stakeholders group and the Mid-American Electric group have made. They share a lot of common ground on FERC jurisdiction, on RTO's, on reliability, and on PUHCA and PURPA repeal. We ought to encourage the two groups to get together and resolve their remaining differences and to reach out to a still broader group.

I also appreciate, Mr. Chairman, your willingness to schedule a third day of hearings on these bills, with the FERC commissioners. I think the story that appeared in this morning's trade press was inaccurate and an unfortunate reading of the decision to hold a dedicated hearing with the FERC commissioners and your intentions on this. We are all looking forward to hearing from the FERC commissioners, from all of them, on this legislation. In many ways, a dedicated hearing is even more advantageous to our committee and FERC, in terms of being able to explore the issues.

So I commend you for having the hearing. I think this is our last best chance to do something useful on this subject this year. And I hope these three hearings will help us to do that.

Thank you.

The CHAIRMAN. Thank you, Senator Bingaman.

In the order of appearance, we have Senator Campbell, Senator Bunning, Senator Burns, Senator Thomas.

Senator CAMPBELL. I would ask to place my statement in the record, Mr. Chairman.

The CHAIRMAN. Senator Campbell's statement will be entered into the record.

[The prepared statement of Senator Campbell follows:]

PREPARED STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR
FROM COLORADO

Thank you, Mr. Chairman I would like to welcome all of the witnesses before the committee today and I am looking forward to the testimony that they will be providing us shortly. I would also like to thank you Mr. Chairman for holding this series of hearings on electricity restructuring. Over the next couple of hearings we will go over numerous bills that will try to shed some light on the electricity restructuring debate.

Competition in the retail electric market is being administered by a number of states, and the role of the federal government in this process is still being debated. With all of the groups that regulate some part of the electricity field, from FERC to State Public Utility Commissions, even the EPA for some issues, we have to make sure that everyone will benefit from restructuring, not just people with high rates. Also, state authority needs to be preserved to regulate some aspects of retail electricity service.

We need to ensure that reliability is a core principle in our findings from these hearings. Consumers are worried about their electricity rates just as much as they are about reliability. When they go to turn on the lights, they want them to come on. The U.S. has the most reliable electric system in the world, and we need to make sure that our level of reliability is not compromised in any restructuring legislation.

States are approaching restructuring in a variety of ways because each state has unique circumstances. As you all know, the average price for electricity varies across the country. Average electricity rates vary from nearly 12 cents per kilowatt hour in some northeastern states and Hawaii to around 4 cents per kilowatt hour in Washington, Idaho, and Kentucky. This difference reflects the availability of low cost power in some regions. The prices and availability of fuels to generate electricity affects the ultimate price to consumers, too. For example, in the Pacific Northwest federal dams provide inexpensive hydropower which keeps costs low. Colorado already enjoys relatively low-cost power, both in urban and rural areas. And, there has been some concerns circling around the benefits that restructuring could bring to my home state, if any, especially in rural areas.

In November 1999, a majority of the Colorado legislature's Electric Industry Advisory Panel voted against competition, but the two-thirds majority needed to make a formal recommendation was not obtained. In fact, USDA in a report indicated that Colorado would be one of 19 states that could be negatively impacted by deregulation of the electric industry. If restructuring is implemented, I want to know that Colorado's rates in both urban and rural; commercial, industrial, and residential; low-income and high-income are secured and not increased.

Currently, the average price of electricity in Colorado is around 5.95 cents per kilowatt hour. This ranks Colorado in the top half of least expensive state for electricity prices in the nation.

Also, PMAs are important to Colorado and the West. For years, the PMAs have been providing cost-based rates to rural and municipal consumers in our region while paying back the U.S. Treasury. The PMAs play an important part in the development and economic security of Western communities.

Colorado and I are approaching the restructuring debate very carefully so that the best interests of my home state are taken into consideration. I have some questions for the witnesses that I would like them to address so that we can further explore this issue during the time for questions.

Thank you Mr. Chairman.

The CHAIRMAN. Let me just bring the witnesses forward, then we will call on Senator Bunning.

The witnesses this morning are Mr. Arthur Adelberg, executive vice president and chief financial officer of the Central Maine

Power Group, on behalf of the Alliance for Competitive Energy; the Hon. Bob Rowe, commissioner of the Montana Public Service Commission, and president of the National Association of Regulatory Utility Commissioners. As you know, we have a colleague who hails from the State of Montana. He almost did not make the rostrum, but he is up there somewhere. I am sure you will hear from him. Mr. David Cook, general counsel of the North American Electric Reliability Council. Good morning.

Mr. Stephen Ward, public advocate, from the State of Maine, on behalf of the National Association of State Utility Consumer Advocates.

And Mr. William Mayben, president of the Nebraska Public Power District, on behalf of the Large Public Power Council. That is quite an organization.

On panel two, we will have our Secretary of Energy, the Hon. Bill Richardson.

Senator Bunning.

STATEMENT OF HON. JIM BUNNING, U.S. SENATOR
FROM KENTUCKY

Senator BUNNING. Thank you, Mr. Chairman. I appreciate your holding this hearing today to review a number of bills that have been introduced to deregulate our electric market.

For some parts of this country, this is a worthwhile mission. But being from a low-cost power State, I do have some reservations about what the end result may be if we pass a comprehensive bill. In my State of Kentucky, we have some of the lowest electric rates in the country, and I am not going to do anything to jeopardize those rates. I will not support a bill just to say we passed something or vote for a bill that raises Kentucky rates just so New Hampshire and New York can pay less for their power.

Unfortunately, these hearings ring a little hollow for me, because we do not have the largest producer of power in this country at the table. The Tennessee Valley Authority produces more power than any other company in the country. Yet, today they are not here to explain why my constituents within the TVA fence line pays $250 million more for their power than those outside the TVA fence. Even when rates in Kentucky are trending lower, TVA has stated that it plans to hold rates at current levels through the year 2007. Unfortunately, TVA's wholesale rates are $47 per megawatt hour, while other providers in Kentucky offer rates of $29 per megawatt hour. And according to the public rate filings, those rates will decrease even further over the next 5 years. It is just not fair that we have a system that makes you pay more for your power because you live on the wrong side of the fence. It is time for TVA to be reined in.

Unfortunately, none of the bills on this table today address TVA's problem in a comprehensive way. However, in the future, I plan on changing this by offering an amendment to the chairman's bill, to add language that I have introduced, with Senator McConnell, to add a TVA title to this bill. The TVA Customer Protection Act will go a long way in lowering electric rates in the Tennessee Valley, and will also bring some sunshine on the way TVA has con

ducted business for the last 60 years. Needless to say, it is long overdue.

In any event, I hope that when the committee has further hearings on deregulating the electric market, that TVA is included in the hearing. It is probably the one component of our Nation's power system that needs to be scrutinized more than any others.

Thank you very much.

The CHAIRMAN. Thank you, Senator Bunning. And I appreciate your frankness, because it gives all of us a flavor for what is ahead. And that is a sobering reality.

We have Senator Burns next, and then Senator Thomas, followed by Senator Akaka, following by Senator Landrieu.

Senator Thomas has agreed to sit in for me while I go over on the floor and make a brief statement on the gas tax, which I am told I am committed to do by the leadership. So if you would be kind enough to proceed, I would appreciate it. I intend to get back as soon as I can.

Senator THOMAS [presiding]. Senator Burns.

STATEMENT OF HON. CONRAD BURNS, U.S. SENATOR
FROM MONTANA

Senator BURNS. Thank you very much, Mr. Chairman.

Let me ask unanimous consent that my complete statement be made part of the record.

Senator THOMAS. Without objection.

Senator BURNS. And to add to the flavor of the moment, there are a lot of us who come from States where we have very good rates now and we do not want those jeopardized, and we will be very protective of those rates.

I want to welcome Bob Rowe. Commissioner Rowe is on our Public Service Commission in Montana. We have worked together on not only this issue, but communications issues.

As we move along, we notice about half the States have restructured and half have not. It has always been my approach to this thing that the States should take a role in restructuring and do it from the grassroots up instead of a top-down sort of approach to the deregulation. But we know that in some areas we are not building distribution lines anymore. We have to take into account that some folks have brownouts, and we have to address their problems. And of course there are always the problems of the consumers. I can tell you that, in electricity, the most important thing is reliability. When you hit the switch, something happens. And of course that is very, very important.

I welcome Nebraska here. I went to Nebraska once. I got married. And I'm not going back there and go through that again. [Laughter.]

Senator BURNS. My wife is from North Platte.

We welcome you here and I look forward to the witnesses this morning.

[The prepared statement of Senator Burns follows:]

PREPARED STATEMENT OF HON. CONRAD BURNS, U.S. SENATOR FROM MONTANA

Mr. Chairman, thank you for the opportunity to address the committee today. Once again we sit down to examine the need of Congress to implement federal legislation to guide the electricity restructuring activities of the states. I have been vis

ited by many of the groups that will testify before us today, and they have each explained their concerns very concisely.

Essentially, we are faced with a scenario where about half of the states have moved forward with a plan for restructuring, and the other half have not. The result is a patchwork of new plans and an uncertainty in the industry that has slowed investment in the infrastructure necessary to transmit power around the nation.

However, we are also faced with a number of bills that could fail the first question that all of us should ask ourselves when we consider legislation pending before us. First, do the measures do no harm? I am not sure that any of the legislation before us passes this test.

As I have said time and time again, I am not convinced that rural states will fair well if we move any of these pieces of legislation. I am not satisfied that any of the proposals before the committee fully protects my state's interests as a low cost state, and I have yet to hear a compelling argument that lays out what exactly is broken and how Congress can fix it.

The states are moving ahead with deregulation and they are doing a good job at it. Montana moved ahead early, and we tried to make sure that Montana's needs were addressed. Despite only having to deal with Montana's concerns and trying to protect our interests, it hasn't been an easy process. To be honest we still don't have the all the answers, and some argue that the verdict is still out as to whether restructuring was a good move for our state. However, we are now well ahead of the ball game. We have faced some growing pains, and Montana Power Company's recent announcement to divest their power interests underscores the impacts that restructuring can have on rural America. With thousands of jobs at stake, and about 500 of them in the boom-and-bust town of Butte alone, you can imagine the caution that is exercised by Montanans as we look at expanding this "experiment" in deregulation.

As a result, I have yet to hear anyone involved in Montana's deregulation process demand that the federal government step in this year and right any wrongs in the system. There are bound to be issues we need to address in the future, but right now I am not convinced that we know how to do it, especially this year with few legislative days available to adequately discuss the issue. Čongress has moved ahead blindly before. We generally know what becomes of it. We look back in a few years at a faulty piece of legislation that didn't work and we blame it on each other. Our nation's energy delivery system is too important to mess up. Currently, we have factions within the industry moving toward one another and coming to a consensus on what needs to be done to address the investment concerns that may be preventing us from fixing current bottlenecks in the system. In addition, more movement is occurring at the state level, and our power supply remains fairly stable. There will be a need for us to address the issue and smooth out the wrinkles, but I am not convinced that now is the time.

Mr. Chairman, I thank you for allowing me to convey my thoughts on the issue. I know you are dedicated to moving forward with this issue, and I commend you for sending a message to both industry and consumers that this is not a dead issue in Congress. As we are now seeing, these groups are coming closer to a consensus on the issue as a result of your prodding. I am not opposed to looking at deregulation proposals, but feel we must ensure that states like mine are not harmed in the rush to get something done. Too many questions are left unanswered, and rural America must know that their needs will be protected before I can support moving forward with any comprehensive legislation. I look forward to hearing from a good friend of mine, Commissioner Bob Rowe. Having worked with him on issues before the Commerce Committee, I can assure you that he will provide a wealth of information.

STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR

FROM WYOMING

Senator THOMAS. Thank you, Senator.

I am pleased that we are having this hearing. I am also pleased, now that the chairman is gone, that in this chart, side by side, Mr. Murkowski, Mr. Bingaman and myself all have provisions that are very much the same, and I am pleased with that. Certainly we want to leave it to the States all that we can. I believe that we have such a difference in needs and such a difference in the distribution systems, and all those kinds of things.