Transmission, I think, is our key issue here, and reliability, and now we have 25 States that are underway in doing some things, and all the rest are taking a look at it. And I think our commitment in the beginning, at least mine, was that we were going to let the States have some flexibility to do what they think is best for their State. We have come in with supporting things on the Federal level, and hopefully that is where we are.

Senator Akaka.

STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR
FROM HAWAII

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

Many things are happening in the field of electric utility restructuring. Some changes are driven by Federal and State initiatives. Some are driven by the market forces. Technology is also an engine of change.

America's electric utility industry, including investor-owned, cooperatively owned and public-owned utilities, and non-utility generators, has proven to be one of the most successful and reliable systems in the world. The States and the Federal Government played an important role in regulating this industry. Over the past 100 years, Federal and States' roles in regulating the utility industry have evolved.

Today, we are at a point where congressional action is necessary for Americans to obtain the benefits that a restructured industry can provide. We must take action to ensure that the industry continues to perform as effectively and efficiently as it has in the past. Mr. Chairman, we have been talking about the restructuring of this industry for some time. Several bills have been introduced. Some of those bills are more narrowly focused, while others, such as Chairman Murkowski's bill, S. 2098, address the issue in a comprehensive manner. The electric utility industry plays a critical role in the economic health of our Nation. It contributes to our prosperity and progress. It is essential to our quality of life. This issue is too important to be not addressed in a thoughtful, comprehensive manner.

Any legislative action on electric utility restructuring must ensure that Americans continue to enjoy electricity at reasonable rates, that utility systems continue to provide a high degree of reliability, and that we continue to promote environmental values. We have made progress in advancing the development of renewable energy resources, and more progress is possible. The current energy price spike teaches us that energy efficiency and energy conservation programs need greater support.

Regional transmission organizations, if properly structured, may provide an effective tool for streamlining the transmission and for providing oversight. However, if not properly structured, the independence of these bodies may be compromised. If these bodies are to function properly and further the goals of competition, they must remain independent.

I look forward to hearing what our witnesses have to say, Mr. Chairman, about these and other issues. Thank you very much. Senator THOMAS. Thank you, Senator.

Senator Landrieu.

STATEMENT OF HON. MARY L. LANDRIEU, U.S. SENATOR FROM LOUISIANA

Senator LANDRIEU. Thank you, Mr. Acting Chairman.

I am pleased to join Senator Murkowski as an original cosponsor of the Electric Power Market Competition and Reliability Act. I look forward to working with him and all the members of this committee on this issue.

Restructuring is one of the most important issues that our committee will deal with this year as well as one of the most important issues that Congress will take under consideration. Affordable and reliable electricity, has long been an underpinning of America's economy and will remain so in the future.

This is an issue which is as massive in scope as it is complex in its details. So we appreciate you all testifying to that end this morning.

Let me hasten to add, although I am very proud of the bill that we have introduced, we have a lot to learn and much to consider before this or any of the other seven bills we have before us advance. For instance, in the bill that we are considering this morning, one of the issues we must explore is the repeal of PURPA and PUHCA and the effects of this repeal will have on certain types of co-generating industries, many of which are in my State. I look forward to full discussion of this issue and others as we work on this measure.

The Electric Power Market Competition and Reliability Act proceeds from the notion that electricity restructuring is principally the province of the States and of the marketplace. It is a bill which recognizes that many important steps have already been taken by States and in the marketplace, but it recognizes that it would be inappropriate to interfere with what has already been accomplished.

At the same time, this measure recognizes that certain aspects of restructuring can only be dealt with at the Federal level. It is Congress which should resolve jurisdictional ambiguities between State and Federal regulators. Only Congress can put in place an enforceable national program for electric reliability.

This makes it doubly important that Congress begin this process. We have already had several hearings on this subject. We must continue to press ahead and lead the way. Failure to do so would increasingly threaten the progress that has already been made in the markets themselves.

I have additional remarks in my statement, but to save time Mr. Chairman, I will simply submit them for the record. I look forward to working with you and all the members of our committee diligently on this issue that is powering our country and the world today.

Thank you.

[The prepared statement of Senator Landrieu follows:]

PREPARED STATEMENT OF HON. MARY L. LANDRIEU, U.S. SENATOR FROM LOUISIANA Thank you, Mr. Chairman. I am pleased to join my colleague from Alaska as an original co-sponsor of the Electric Power Market Competition and Reliability Act (S. 2098). Electricity restructuring is one of the most important issues that the Energy Committee, and indeed, the Congress, will address in the coming year. Affordable, reliable electricity has long been an underpinning of America's economy. Every

household, every business, every industry has a stake in this debate. It is an issue which is as massive in scope as it is complex in its detail. Today's hearing on this bill, as well as the other seven pending electricity bills, is an important first step in the process of federal reform.

Let me hasten to add that this is but a first step. We have much to learn, much to consider, and much to discuss before any of these bills advance. For example, the Electric Power Market Competition and Reliability Act is not, nor does it pretend to be, a perfect bill. It is not a bill which proposes to solve every problem or address every issue. For instance, one issue that we must explore is the repeal of PURPA and PUCHA, and the effects this repeal will have on certain types of co-generating industries. I look forward to full discussion of this issue and others as we work with this measure.

The Electric Power Market Competition and Reliability Act proceeds from the notion that electricity restructuring is principally the province of the states, and of the marketplace. It is a bill which recognizes that many important steps have already been taken by the states and in the marketplace—and it recognizes that it would be inappropriate to interfere with what has already been accomplished.

At the same time, this measure recognizes that certain aspects of restructuring can only be dealt with at the federal level. It is the Congress which should resolve jurisdictional ambiguities between state and federal regulators. Only Congress can put in place an enforceable, national program for electric reliability. This makes it doubly important that Congress begin this process. Failure to do so would increasingly threaten the progress that has already been made in the restructuring of markets.

I recognize that this legislation will go too far in the minds of some, and not far enough in the minds of others. I also recognize that there are issues which are not addressed by this legislation. It is important for all observers to keep in mind that the approach embodied in this bill is not set in stone. But it is an admirable starting point that will begin a necessary, important and long overdue dialogue on the subject. It is a dialogue that I hope will be widely embraced, and it is one in which I very much look forward to participating.

I commend Chairman Murkowski for his leadership on this issue and look forward to the testimony both today and Thursday.

Senator THOMAS. Thank you, Senator.

Senator Lincoln.

STATEMENT OF HON. BLANCHE L. LINCOLN, U.S. SENATOR FROM ARKANSAS

Senator LINCOLN. Thank you, Mr. Chairman.

I would like to thank the panel that is here to testify. I am glad to see that the committee is continuing to investigate electric deregulation this year.

I want to commend our chairman for holding a separate hearing to allow the FERC chairman and all of the FERC commissioners to testify later on. FERC will be central to any Federal deregulation bill, and we need to ensure that all of their views are completely heard by the full committee. So I applaud the chairman for that action.

As you know, Arkansas is one of the 24 States that have enacted legislation to mandate electric competition. We need to be sure that anything that we do here in Washington does not get in the way of or overstate each State's ability to implement their own competition plans and to bring consumers more choice, improve service, and lower costs. I think we can all agree that we need to complement the States' efforts and to improve on what they have begun.

We should not forget that the goal of any Federal electric deregulation legislation to deregulate the industry is to provide greater consumer choice, freer market access and more reliable electric power-not to re-regulate the industry or simply move the regu

latory authorities around. We should not be mess with what is already working.

I was involved in the deregulation of the telecommunications industry during my tenure in the House. My particular focus in that debate was protecting rural, residential customers from the potential results of cherry picking. I was concerned then that rural customers would miss out on the benefits of competition in the telecommunications industry. So far, unfortunately, that has been true. True telecommunications competition has arrived in some urban areas, but very few rural towns.

I live in a very rural area of my State, and to date I still do not have a choice in terms of my local provider. In fact, Arkansas' largest city, Little Rock, is just beginning to see the effects and benefits of true telecommunications competition. And it has been over 4 years since we passed that legislation.

Clearly, it is more cost effective and profitable to serve urban businesses than residents of rural areas. But as we look at deregulating the electric utility industry, I am focused on ensuring that rural customers do not see their rates shoot up with deregulation, and that they are fairly represented in any Federal deregulation bill. I am interested in ensuring that the benefits of the Rural Utility Service and the Federal Power Administrations are perpetuated with any Federal deregulation effort.

In Arkansas, we have a good balance of investor-owned utilities, rural cooperatives and public power. Each of them has an important role to play in serving customers in Arkansas. I look forward to ensuring that any Federal legislation takes each group into consideration and provides a level playing field for all.

Some examples of issues that can be addressed only in Federal deregulation legislation are the repeal of PURPA and PUHCA, the delineation between State, FERC and RUS jurisdictions, and the control and reliability of the transmission of electricity. These are what any final Federal deregulation bill should be centered around, in my opinion.

As I mentioned before, we should also ensure that any new jurisdictions given by a Federal bill do not overstep the State authorities or the current regulatory authorities already in place. Again, we need to deregulate and not re-regulate. I hope that as we continue this debate, we will take the testimony of the witnesses here today and later on in the week and come up with a good bill that can be good for all of the country.

Thank you, Mr. Chairman.

Senator THOMAS. Thank you.

I think we are ready now to hear from our witnesses. Let me tell you that your full statements will be entered into the record. And if you have the slightest inclination to summarize, please pursue it recklessly.

I will start with Mr. Adelberg. Please proceed.

STATEMENT OF ARTHUR W. ADELBERG, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, CENTRAL MAINE POWER GROUP, ON BEHALF OF ALLIANCE FOR COMPETITIVE ELECTRICITY

Mr. ADELBERG. Good morning, Mr. Chairman, honorable members of the committee. My name is Arthur Adelberg, and I am executive vice president and chief financial officer of a company called CMP Group. CMP Group owns Maine's principal electric utility, with over 500,000 customers. I am appearing today on behalf of the Alliance for Competitive Electricity, which is a group of 11 pro-competition electric utilities, whose service territories range over 20 States, from California in the West to Maine in the East. Our unregulated activities probably cover just about all of the 50 States. I really have come today with two principal messages. The first is that the time for action is now. As you all know and many of you alluded to in your own remarks, Congress has been considering these issues for several years. In the meantime, a number of States have acted to open their markets, but there are things that only Congress can do to make sure that these open markets can function efficiently.

The second message that I wanted to bring to the committee this morning is that acting now is practical. It is practical because there has developed a growing consensus on I would say the majority of the difficult issues that need to be addressed in competitive electric deregulation legislation.

Just focusing a little bit more on why action is needed now, there really are two reasons in my opinion. The first is that, as some of you have already acknowledged, while the States are acting to open their markets, there are a number of things that only Congress can do to remove barriers to full and effective competition in the marketplace. Some of those things which only Congress can do include clarifying, first, jurisdiction.

I think, as this committee is well aware, there has been a fairly significant controversy over the delineation of jurisdiction between the FERC and the States. Resolving that while it is being worked on in the courts will be much cleaner, more effective and more decisive if it is accomplished by Congress. And I think that the FERC would agree with that as well.

There has already been mention of the need to repeal the Public Utility Holding Company Act and the Public Utility Regulatory Policies Act, PUHCA and PURPA. I am glad to hear a number of members of the committee acknowledge that those are essential components of any deregulation legislation.

I would note that while the Alliance for Competitive Electricity agrees wholeheartedly with the concept that these repeals must be done in a balanced manner, and we certainly support provisions in many of the bills that are before the committee that would ensure that the States and, if necessary, the FERC, have access to books and records upon repeal of the Holding Company Act, on the issue of PURPA repeal, I think it is important to recognize that repeal of PURPA in itself is a balanced act. There is not a need to balance that with pro-competitive acts. Repealing PURPA, in itself, is procompetitive because it eliminates a mandate which has cost consumers billions of dollars in over-market charges for electricity.