Northeast Blackout Hastens FERC Authority in Energy Bill

By Published On: October 3, 2003

The August 14 Eastern blackout has begun shaping the contents of the federal energy bill. While earlier versions of the legislation pressured the Federal Energy Regulatory Commission to back off from its mandate for regional transmission organizations (RTOs), it appears the new debate includes increasing FERC’s authority as a way to circumvent more blackouts. In hearings before the House Committee on Energy and Commerce, chaired by Billy Tauzin (D-LA), on September 3 and 4, Congress members hosted a stream of witnesses that largely advocated strengthening a national transmission system with FERC at the helm. However, when it comes to allowing federal regulators to trump state and local authorities in siting transmission lines, sharp divisions remain. “This looks and feels to us like a pretty heavy-handed power grab,” Tom Allen (D-ME) said of the potential for FERC to gain siting authority. “Nobody thinks twice if a pipeline or a highway is sited by the federal government,” replied Secretary of Energy Spencer Abraham. “We ought to identify serious congestion areas. We should give the opportunity for states to act. But the question is: if the state’s don’t act, then there should be an opportunity for the federal government to site as a last resort.” FERC chair Pat Wood supported his agency as being the transmission equivalent of the national air traffic control, asking for the ability and the money to address transmission problems. California senators and Southeastern lawmakers are the primary opponents to boosting FERC’s authority. Californians reject increasing federal regulatory power because they dislike what FERC did or failed to do during the energy crisis. Anna Eshoo (D-CA), for instance, used the hearings to rail against “deeply flawed deregulation,” and said that “California has been screwed.” Southerners are balking because a stronger FERC threatens states’ rights. Many members of Congress questioned why there has been a lack of utility and other investment in transmission systems when investments are guaranteed to get about an 11 percent rate of return. Witnesses primarily responded that capital investments cannot be controlled and that investing in a regulated system that may or may not be regulated in the future, or regulated in the same manner, scares off investors. Although Wall Street had only one witness at the hearing, investors are pushing for a stronger FERC. These investors want a stable regulatory environment before they part with their funds, and FERC oversight is seen as a commonality for such stability. In addition, FERC is seen as the organization that can, for instance, mandate common standards for communication between transmission owners-one of the problems fingered in the August 14 blackout. The energy bill saga was last visited before Congress took its August break. To the surprise of many, lawmakers tossed out the existing bill’s provisions, agreed upon by both houses, returning to the original Democratic version of HR 6 authored by Tauzin. Both bills mandate national transmission reliability standards. Both bills repeal the Public Utility Holding Company Act and reauthorize the nuclear industry’s insurance subsidy through the Price-Anderson Act. The original HR 6 now in play, however, discourages FERC’s efforts to establish RTOs and doesn’t allow transferring federally owned transmission to private companies. The current bill also doesn’t allow FERC to overrule states on transmission siting.

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