JOHNSTON INTRODUCES RESTRUCTURING BILL

[Matt Freedman <freedman@Citizen.ORG>]

  SENATOR JOHNSTON INTRODUCES RESTRUCTURING BILL
  CALLS FOR FULL RECOVERY OF STRANDED COSTS AND MANDATED RETAIL WHEELING
  
  Senator J. Bennett Johnston (D-LA) introduced legislation on
  January 25 that includes a number of provisions which would
  direct the Federal Energy Regulatory Commission (FERC) to
  require all states to implement retail wheeling by 2010.  In
  addition, the bill stipulates that FERC enforce full cost
  recovery to utilities for generation stranded as a result of
  retail competition.  
  
  In a speech made to the Electric Generation Association on
  January 22, Johnston stated that he was introducing a bill
  because "comprehensive legislation is needed to avoid a
  patchwork of state policies, to bring competition to consumers,
  and to standardize stranded cost recovery."  This approach
  would, according to Johnston, provide great benefits to
  consumers in the form of lower electricity costs.  The only real
  stumbling block to this goal, he said, is the "full recovery of
  legitimate, prudent and verifiable stranded costs."
  
  In his speech, Johnston disagreed with those who "would argue
  that utility management and investors should be punished for
  'bad business decisions'" and laid the blame on government
  policies, many of which he himself helped to promulgate. 
  Echoing statements made two weeks ago by Representative Dan
  Schaefer (R-CO), Johnston asserted that many problems stemmed
  from the fact that "utilities incurred high fixed costs in
  response to government policies that encouraged investment in
  nuclear generation, and away from certain fuel technologies
  (such as oil and natural gas)."  He cited an analysis that
  showed $70 billion in stranded costs for uneconomical nuclear
  plants and claimed "utility investors stand to lose hundreds of
  billions of dollars if stranded costs are not recovered."
  
  Also included in Johnston's definition of stranded costs are
  underfunded nuclear decommissioning accounts.  Because of a
  concern that "several utilities have estimated their
  decommissioning liability to be in the billions of dollars", all
  costs associated with decommissioning plants should be
  recoverable, he said.
  
  Johnston also blamed the Public Utility Regulatory Policies Act
  of 1978 (PURPA) for additional costs to utilities and called for
  the prospective repeal of Section 210.  In addition, Johnston
  supports replacing the Public Utility Holding Company Act
  (PUHCA) with a watered down and somewhat toothless version that
  he has cosponsored with Senator Alfonse D'Amato (R-NY).
  
  The ranking Democrat on the Senate Energy and Natural Resources
  Committee, which he formerly chaired, Johnston is retiring this
  year after 24 years in the Senate. 
  
  The "Electricity Competition Act of 1996" (S.1526) includes the
  following provisions:
  
      - Within six months, each state's regulators must examine
      and consider proposals to restructure their electric
      utilities and provide either full direct access by 2002 or an
      alternative plan that prohibit a utility from favoring
      its own generators over independent sources.  Within 18
      months, each state must adopt one of these two plans.  All
      decisions would apply only to new generation.
  
      - Section 210 of the Public Utility Regulatory Policies Act
      of 1978 (PURPA), which requires utilities to purchase
      electricity from small renewable producers and
      cogenerators,  will be repealed with respect to new
      qualifying facilities.  Contracts with existing facilities
      under PURPA can not be broken or modified.
  
      - Any non-retail plan adopted by state commissions must
      allocate above market costs of new renewable energy
      generation on a nondiscriminatory basis to all electric
      consumers.
  
      - All states, regardless of the plan adopted within 18
      months, must allow full retail competition by January 1,
      2010.
  
      - Nothing in the bill would prohibit state incentives or
      mandates to promote renewable electric generation or
      voluntary purchases of renewables by any consumer.
      
      - FERC shall ensure that states provide full cost recovery   
  
       for any generation, transmission and distribution assets
      stranded by retail competition.
  
      - FERC shall ensure that all decomissioning costs for
      nuclear generation will be recovered from ratepayers.
  
  The "Electricity Competition Act of 1996" is 10 pages long and
  can be obtained by sending an email to cmep@citizen.org and
  requesting the document.
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