to suspend reliability standards or procedures it has already approved. The Gorton bill (S. 2071) already reflects these recommended changes. The specific changes NERC recommends, referenced to Section 301 of S. 2098 that proposes to add a new Section 221 to the Federal Power Act, are shown below: 1. Section 221(c), page 12, lines 12-14, delete the following sentence: "The Commission may, without further proceeding or finding, grant its approval to any standard, guidance or practice for which no substantive objections are filed." 2. Section 221(c), page 12, lines 18-19, delete: "or suspended" 3. Section 221(e)(2), page 14, line 1, delete: 4. Section 221(e)(3)(A), page 14, lines 13-16, delete: "The Commission, either upon complaint or upon its own motion, may sus- 5. Section 221(e)(3)(B), page 14, line 18, delete: 6. Section 221(e)(3)(E), page 15, line 13, delete: 7. Section 221(e)(3)(E), page 15, lines 13-16, delete: "If the Commission determines at any time that the emergency Organization Standard or amendment is not necessary, the Commission may suspend such emergency Organization Standard or amendment." 8. Section 221(g)(4), page 15, lines 44-48, delete: "The Commission, either upon complaint or upon its own motion, may suspend a procedure or governance or funding provision if it determines the procedure or governance or funding provision does not meet the requirements of subsection (d)(4) or is unjust, unreasonable, unduly discriminatory or preferential, or otherwise not in the public interest." Senator THOMAS. Thank you very much, Mr. Cook. STATEMENT OF STEPHEN WARD, MAINE PUBLIC ADVOCATE, ON BEHALF OF THE NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES Mr. WARD. Good morning. My name is Stephen ward, and I direct the Maine Office of Public Advocate where I have served as Public Advocate since 1986. I also serve as president of the National Association of State Utility Consumer Advocates, on whose behalf I am testifying today. NAŠUCA, as it is called, is an organization of 42 State utility consumer advocate offices in 39 States and the District of Columbia, each of which is charged by State statute with representing utility consumers before State and Federal commissions and State and Federal courts. NASUCA members have been intimately involved in the legislative debates that have preceded enactment of electric restructuring legislation as occurred in my State, Maine, in 1997, or are underway in many States today. At the national level, NASUCA has endorsed the policy proposals of the pro-competition stakeholder group and is a member of Consumers for Fair Competition. NASUCA believes that restructuring legislation should not go forward at the Federal level without careful scrutiny of the impacts on retail customers that could result from Federal action, and to assist in evaluating those potential impacts NASUCA has developed a 12 point consumer checklist on key aspects of Federal restructuring legislation, and with your permission we put the checklist up here for you to look at. The checklist covers the following key points, some of which you have already heard from other panel members this morning. Federal legislation should not mandate a date certain for open access or otherwise preempt State authority to pursue restructuring provisions at the State level. The determination of standard costs should be left to the States and not be governed by Federal regulation, even under a so-called back-up provision in Federal law. The third point is a critical one. The mitigation of market power is a key Federal responsibility and requires the grant of additional authority to FERC, in our opinion, to shield consumers from the potential harm of excessive dominance in key markets. This needs to occur at the outset of electric restructuring in a structural manner rather than after the fact in an attempt to impose penalties. We also believe that FERC should receive additional authority to require the creation of ISOs or other truly independent transmission organizations. NASUCA strongly supports efforts at FERC and by North American Electric Reliability Council and by independent RTOs and independent system operators to preserve and protect the reliability of the nation's electric grid as long as such actions are not inconsistent with State authority. So, again, that is a theme that has come up at several points in this panel this morning. Federal legislation should assist States in the vigorous protection of consumers from fraud, from abusive practices, and from misleading marketing claims. This relates to concerns about slamming and cramming, provisions to deal with those problems are present in S. 1047, and we certainly applaud those efforts. There should be a meaningful commitment to provide universal availability of affordable electric service, and that should be an important part of Federal restructuring legislation. The aggregation of individual consumers into powerful purchasing entities is a key element of healthy competition in retail electric markets, and it should not be constrained in any significant way with Federal or State statutory requirements. Moving to the bottom of the list, the full development of renewable resources will be greatly assisted by the implementation of net energy metering and by the limitation of renewable portfolio standards to new as opposed to existing resources. An important point at the bottom of the list here, merger authority that currently is vested at FERC should be expanded to cover so-called convergence mergers where you have gas and electric mergers, and to require the demonstration of a net benefit to consumers rather than merely the absence of harm. We think the kind of consolidation of the country's owners and operators of electric generation and transmission is something that really requires careful attention at the Federal level, and we believe it is time for FERC to look at a new standard that involves net benefits for con sumers. Finally, it is our position that neither PUHCA or PURPA, the Public Utility Holding Company Act, or PURPA should be repealed prior to the onset of real vigorous competition in the nation's electric markets, and we do not believe that we are at that point yet. We are concerned about the danger of unregulated monopolies being able to set prices in the absence of whatever degree of competition PURPA provides. I am grateful to provide these comments on behalf of NASUCA, and we are hopeful that a consensus can emerge on the key points of market power, reliability, and additional FERC authority for dealing with RTO and ISO issues. Thank you very much. [The prepared statement of Mr. Ward follows:] PREPARED STATEMENT OF STEPHEN WARD, MAINE PUBLIC ADVOCATE, ON BEHALF OF THE NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES Chairman Murkowski and members of the Energy and Natural Resources Committee, my name is Stephen Ward and I direct the Maine Office of Public Advocate where I have served as Public Advocate since 1986. I also serve as President of the National Association of State Utility Consumer Advocates (NASUCA) on whose behalf I am testifying today. NASUCA is an organization of 42 state utility consumer advocate offices in 39 states and the District of Columbia which are charged by their respective state statutes with representing utility consumers before state and federal commissions, and state and federal courts. For the most part, consumer advocates represent residential and small commercial consumers in those fora and before their respective state legislatures. As a result, NASUCA members have been intimately involved in the legislative debates that have preceded enactment of electric restructuring legislation as occurred in Maine in 1997-or are underway in many states today. At the national level, NASUCA has endorsed the policy proposals of the Pro-Competition Stakeholder Group and is a member of Consumers for Fair Competition. NASUCA greatly appreciates the opportunity to testify at this hearing and I wish to thank Chairman Murkowski, the members of the Committee and your staffs for specifically seeking the perspective of a national representative of utility consumers to testify today, in conjunction with the other distinguished members of this panel. Thank you also for the previous opportunities you have provided for NASUCA testimony before this Committee. Certainly we commend Chairman Murkowski for consistently recognizing that the impact on consumers of electricity is a key factor in your deliberations. We look forward to continuing to work with you in developing policies that truly benefit all consumers and that complement state restructuring efforts that are now underway. Although we do not agree with all provisions of the eight bills that are before the Committee today, we heartily endorse your efforts to ensure that the voices of consumers will be heard throughout the debate over these proposals. In order to dramatize the diverse views of NASUCA's many members, we have developed a consumer checklist of provisions that we believe need to be included in restructuring legislation in order to benefit rather than harm the nation's electric consumers. This Consumer Checklist for federal legislation has been presented to this Committee once previously, and as well to the House Energy and Power Subcommittee, as a way of focusing attention on the interests of the people who actually end up paying electric bills. I will turn to the NASUCA Consumer Checklist principles and to the extent they are fulfilled in the legislation at hand: 1. Federal Preemption: Federal legislation should permit states to adopt retail competition statutes or rules. There should not be a federal mandate for states to require retail competition by a date certain. Without any legislative mandate from Congress, states are already_considering and adopting alternatives to traditional regulation of electric utilities. For example, my state of Maine has already adopted restructuring legislation, and has completed a comprehensive restructuring proceedings for all the state's electric utilities at the state Public Utilities Commission. In NĂSUCA's view, it is the state legislatures and regulators that are in the best position to tailor restructuring to meet the specific needs of consumers within their states. Because NASUCA believes the "opt out" provision of S. 2047-requiring a formal proceeding and a finding of negative impact from restructuring-is burdensome, we do not endorse that provision. We are, however, encouraged by Energy Secretary Bill Richardson's remarks before the Energy and Power Subcommittee that the Administration is willing to accept an explicit clause grandfathering existing state laws. We encourage this Committee to do the same. 2. Stranded Costs: Retail stranded cost issues should be left to the states. State legislators and regulators are best suited to determine the appropriate sharing of costs and benefits that result from the transition from regulation to competition. Only S. 1047 and S. 516 include stranded cost provisions. S. 1047 contains federal "backup" authority related to stranded costs. This provision causes real concern for NASUCA if it results in a federally mandated stranded cost rule and allows utilities to forum shop for the highest level of recoverable stranded costs. S. 516 specifically leaves it up to the states to determine the recovery of "electric industry transition costs." This provision is obviously consistent with NASUCA policy. 3. Market Power: Legislation should provide the FERC with specific authority to monitor the development of competitive markets, to eliminate undue concentrations of market power in any relevant market, and to remedy anticompetitive conduct or the abuse of market power by any player-incumbents, affiliates, or new market entrants. These powers should include the authority to order divestiture or other structural remedies when necessary. Along with the concerns we have about preserving the nation's high-quality, highly-reliable electric service, market power is the most important concern for which NASUCA seeks a federal role. Language in S. 1047 is the absolute minimum in regard to market power, in our opinion. Unless at the outset of industry restructuring FERC has the authority to order the necessary structural and behavioral remedies, there will be little fear of sanctions for market abuses by incumbent monopolies, and little hope of retail competition ever actually developing. This would leave us with deregulated monopolies in increasingly large concentrations due to merger, the worst of all possible worlds. Recent experience in Maine has underscored this point. Recently, we have seen evidence that has led ISO-New England and other enforcement agencies to look into whether market power in the capacity markets is being exercised to the disadvantage of consumers. We believe granting FERC explicit authority to deal with such situations is desirable. 4. Transmission/ISO's: Legislation should authorize FERC to require the creation of ISO's or other independent and competitively neutral regional transmission operation organizations. Legislation should authorize FERC to rectify transmission policies, practices or prices, which create a competitive advantage for services offered by the transmission provider or affiliates. Simply stated, open, fair and nondiscriminatory transmission access is the key to developing a competitive electricity market. To encourage open access, S. 1047 and S. 1273 include provisions on new institutional arrangements known generally as "Independent System Operators." S. 1047 permits FERC to "approve interstate compacts that establish regional transmission planning agencies," while S. 1273 goes further, giving FERC authority actually to "order the formation of a regional transmission system and order any transmitting utility operating within such region to participate in the regional system." NASUCA welcomes the language found in S. 1273 that would clarify FERC's authority to approve ISO's, mandate minimum standards, and order their formation. 5. Reliability: Legislation should authorize FERC to review the reliability requirements imposed by an independent North American Reliability Organization to promote reliability of electricity supply. The reliability of the nation's electric system is of paramount importance to the consumers represented by the members of NASUCA and, along with mitigating market power, represents our highest priority. First and foremost, under any scheme, the "lights must stay on." NASUCA supports the efforts taken to date by NERC to strengthen its representation, but recognizes that additional changes will be necessary to preserve system-wide reliability in a competitive environment that is increasingly volatile. Reliability provisions must be included in any legislation you consider. S. 1047 contains a praiseworthy reliability section, which NASUCA supports with one modification. It must be made clear that states have a vital role in maintaining the reliability, safety and adequacy of electric systems within each state's borders. As long as states do not act in a manner that interferes with NERC's or FERC's requirements in interstate commerce, the states must not be preempted from taking action to insure that the "lights stay on." 6. Consumer Protection: Legislation by Congress should adopt provisions, which would set minimum standards for basic consumer protection. States should retain authority to set additional or more stringent or more specific standards. Legislative consumer protection standards should: • Provide all consumers access to reliable, safe and affordable electric services. • Require protections from unreasonable deposit and credit requirements and service denial. • Require the provision of default energy supply service at a fair, reasonable and affordable price. • Protect consumers from unfair, deceptive, fraudulent or anti-competitive practices such as slamming, cramming and pyramid schemes. • Develop accreditation or other appropriate financial requirements for market ers. • Ensure that all consumers are given clear, unbiased and accurate information concerning price and terms of service. • Require the disclosure of resource mix and environmental characteristics of generation. • Establish the right of consumers in privacy. • Establish or maintain access to an independent complaint process. • Protect consumers from price increases resulting from inequitable cost shifting. • Establish service quality standards. The only legislation before this Committee that addresses consumer protection issues in a comprehensive manner is S. 1047. These provisions include a grant of authority to the FTC for slamming and cramming and, as well, enforcement authority for both FTC and the States. These provisions, however, need to be expanded and strengthened to ensure that consumers have workable protections from the abuses of unscrupulous marketers in the new competitive environment. By themselves, market forces can never ensure that all Americans have access to safe, affordable electric services. Of all the legislation before this Committee, only S. 1047 includes a comprehensive universal service provision, including a matching fund provision. While NASUCA supports the concept underlying the universal service and public benefits programs, we have not taken a position on the issue of the public benefits language as a whole. We would point out that the creation of a Joint Board to administer the public benefits fund is a logical place to consider the appointment of a NASUCA representative to such a Joint Board, along with NARUC representatives, as has already occurred in the context of the Universal Service provisions of the Telecommunications Act of 1996. 8. Aggregation: Aggregation of small customers should be encouraged. Federal legislation should not preclude states from facilitating the aggregation of small customers by any entity. Aggregation is needed to ensure that small customers benefit from restructuring. S. 1047 includes a provision which mandates aggregation subject to "legitimate and nondiscriminatory state requirements." Rather than mandating aggregation, we would propose provisions which merely facilitate aggregation and prohibit discrimination against small customers. 9. Renewable Energy: Legislation should remove any barriers to state implementation of net energy metering. If a renewable portfolio standard is established to promote renewable energy, it should apply only to new renewable resources. NASUCA supports the development and increased use of renewable resources for electric production, and has promoted regulatory strategies to encourage their development at the state level. Net metering is one of those strategies, and currently over 20 states, including Maine, require utilities to make net metering available. While we admire the intent of the renewable energy portfolio provision in S. 1047, NASUCA believes federal legislation should focus on the removal of barriers to participation in state renewables programs. If a federal renewable portfolio standard is adopted, we believe that it should be targeted to promote the development of new resources, rather than provide a windfall for existing projects. 10. Mergers: Legislation should specifically revise merger standards to require a net benefit to consumers. Legislation should expand FERC merger authority to include combinations that are currently outside of FERC jurisdiction, such as electric-communications and electric-gas mergers. It is the case today that FERC interprets court precedent to require only a "do no harm" standard for approving mergers. However, state statutes generally and §§ 201 of the Federal Power Act in particular require action to minimize costs and to promote the public interest. Mergers are undertaken by utilities in emerging markets for strategic purposes. If those mergers are to truly promote the public interest, they must provide a demonstrable net benefit to consumers. Unfortunately, language establishing such a net benefit standard is lacking in all of the bills under consideration today. In addition, so-called "convergence mergers" can have a significant impact on incumbent market power; cross-industry consolidation and can cre |