|
Congressional Testimony
July 27, 2001 Testimony
on behalf of The Large Public Power Council Herman Morris, Jr. MMy name is Herman Morris, Jr. and I am the President and Chief Executive Officer of Memphis Light, Gas and Water Division (MLGW). I am testifying today on behalf of the Large Public Power Council (LPPC). The LPPC is an association of 22 of the largest public power systems in the United States. LPPC members directly or indirectly provide reliable, affordably-priced electricity to approximately 18 million customers, produce over 11,610,000,000 megawatt hours of generation, and own and operate approximately 26,000 circuit miles of transmission lines. LPPC members are located in states and territories representing every region of the country, including several states represented by members of this Committee - such as Tennessee, Texas, California, New York, and Arizona - and include several state public power agencies as well. The majority of LPPC companies perform the same functions as traditional vertically-integrated utilities, however, LPPC members are publicly-owned, not investor-owned. As a result, LPPC member companies are not-for-profit entities that are service-focused and committed to the local residents and communities we serve. Therefore, the benefits resulting from the reliable and cost-effective provision of generation, transmission, and distribution service flow directly to public power customers and communities. Mr. Chairman and members of the Committee, the LPPC appreciates your efforts to develop comprehensive electric industry restructuring legislation. I would also like to thank Congressman Ed Bryant, whose congressional district includes Memphis and who has been a long-time friend of MLGW and public power and who was kind enough to address the LPPC CEOs at their last meeting this past May in Memphis. We thank him for his interest in these issues. The LPPC supports the enactment of comprehensive legislation that promotes a competitive, efficient wholesale power market of benefit to all consumers. We believe that there is a need for a comprehensive energy strategy, which addresses market concerns, promotes fuel diversity, promotes energy efficiency and conservation, and encourages environmentally responsible behavior. The LPPC supports efforts to increase competition so long as low-cost, reliable service is ensured for consumers and believes that a robust wholesale market must be encouraged. We further believe that there should be environmentally responsible development of all our fuel sources and that unnecessary constraints on the use of any energy source should be removed. There is a need for hydro licensing reform, streamlining of environmental permits and siting decisions, and incentives for renewable energy, conservation and efficiency. In addition, my utility, MLGW and another of LPPC's members, the Knoxville Utilities Board (KUB), are among the largest customers of TVA and we, and LPPC, believe that any restructuring legislation must include a TVA title that would remove the many statutory impediments to a competitive wholesale power market in the Tennessee Valley and bring that part of the country in step with the rest of America. We appreciate the efforts this Committee has made to advance the debate on how to achieve a competitive market that benefits consumers and we would like to offer the Large Public Power Council's assistance in crafting legislation to facilitate competitive markets. During the debate on these issues in the last Congress, the LPPC provided our input to the Committee and contributed our views to the debate. We appreciate this opportunity to continue our involvement. In light of these overarching objectives, I would like to comment on several issues of particular importance to our members. FEDERAL LEGISLATION SHOULD ADDRESS RESTRUCTURING Wholesale power markets can deliver reliable, clean and low-cost power, but only if the FERC, the Congress, and the states do their jobs. The LPPC believes that competitive regional wholesale electricity markets can benefit consumers. However, federal protections are necessary to ensure a level playing field for electric consumers and producers and to promote effective and sustainable competition. The benefits are eliminated if one competitor uses its dominant ownership of generation and/or transmission to stifle competition. Federal legislation should ensure that a mechanism is in place to protect against anti-competitive concentration of generation ownership and against abuse of market power. This is particularly true if consumer protection laws such the Public Utility Holding Company Act (PUHCA) are repealed. We believe eliminating this law without updating the Federal Power Act (FPA) would harm consumers. As such, we oppose stand-alone repeal of PUHCA if other critical restructuring issues are not also address and if FERC is not provided with adequate tools to address the issues associated with market power and holding company mergers. Specifically, the LPPC supports legislation that would clarify FERC's authority over holding company-to-holding company and generation-only mergers. We oppose limiting FERC's current authority to review such mergers and believe that such authority is necessary to ensure competitive and robust markets. In order to effectively bring benefit to the consumer and prevent market power abuses, the LPPC believes that Congress should take two additional steps. First, the Congress should confirm the authority FERC asserted in Order No. 2000 to order jurisdictional public utilities to participate in RTOs as a remedy for undue discrimination or anticompetitive effects, where supported by the record in a particular case. Second, in addition to authority FERC currently has under the FPA, it should be authorized to require a jurisdictional public utility having market power in FERC-regulated wholesale markets to submit a market power mitigation plan that FERC can approve, disapprove or modify. The LPPC supports the enactment of legislation that ensures competitive markets and provides benefit to the consumer. Such legislation must resolve the "private use" tax issue and should recognize the distinct nature of public power and its contribution to the electricity industry. Without resolution of current tax restrictions relating to private use, restrictions on tax-exempt bonds could (1) prevent public power from fully opening up its transmission and distribution systems for use by investor-owned utilities, (2) could prevent our participation in Regional Transmission Organizations (RTOs), and (3) will constrain our ability to make long-term sales of surplus power. Absent reform of private use, one of the key problems - how to move electric power from generation to load - will continue to plague the system, and the objectives of comprehensive legislation, the development of a robust, competitive, and fair market, will not be achieved. The LPPC supports proposals to ensure that all market participants have access to the transmission system on a fair and open basis. "FERC-lite," as included in the subcommittee's bill in the last Congress, is part of such open access. It would require public power entities to provide transmission services at rates that are not unduly discriminatory and require the company's non-rate terms and conditions to be comparable to those required of the investor-owned utilities. We believe that open transmission access, including the FERC-lite provision, will encourage a robust and competitive market. The LPPC does not support unnecessary expansion of FERC transmission jurisdiction. The LPPC strongly opposes extending full FERC ratemaking jurisdiction to our public power systems. In addition, we do not believe that FERC jurisdiction needs to be expanded to cover the transmission component of our bundled retail sales, as some members of the Committee have proposed. Because of "private use" tax restrictions, our transmission-owning members have sized their transmission systems to supply their own wholesale or retail native loads. We have limited transmission capacity available for other entities. To the extent we have such capacity, we are willing to make it available to all comers on a non-discrimination basis, as FERC-lite would require. But, a rule that required us to make available to others transmission capacity we need to serve our native load will result in power curtailments or higher prices to our own customers. Any expansion of FERC transmission jurisdiction must respect the interests of the customers for whom the transmission facilities were built. The LPPC will spell out its approach on these issues in greater detail in its subsequent testimony on transmission policy before this subcommittee. The LPPC believes that regional transmission organizations (RTOs) should have a broad geographic scope, preferably be not-for-profit, and, in all cases, be fully independent of market participants. This type of organization will operate more cost-effectively and will more likely result in the open transmission necessary for a fully functioning market. The LPPC opposes granting FERC broad new authority to compel transmitting utilities to join RTOs. However, we support confirming FERC's authority to order jurisdictional utilities into an RTO on a case-by-case basis in order to remedy undue discrimination or anticompetitive conduct. We believe that RTOs should be created to foster competition and, as a result, the LPPC believes that RTOs must be independent and must be separate from all market participants. As noted above, MLGW and LPPC also strongly urge this Committee to remove the statutory impediments to a competitive wholesale power market for TVA distributors. The two primary statutory barriers to wholesale power competition in the Tennessee Valley are popularly known as the TVA Fence and the anti-cherry picking provisions of the Energy Policy Act. These provisions prevent MLGW and other TVA customers from buying power from other suppliers and prevent a mature wholesale market from developing in the Valley. We believe that, as part of comprehensive energy legislation, these provisions should be repealed. In addition, we believe that FERC jurisdiction standards should be extended to include regulation of TVA's transmission system and of TVA's wholesale power rates, as well as subjecting TVA's stranded cost determinations to FERC oversight. To this end, MLGW, TVA, the distributors and customers of the Valley have agreed to consensus language which we would urge the Committee to adopt in any legislation proposed. FEDERAL LEGISLATION SHOULD ENCOURAGE EXPANSION OF The LPPC strongly supports an energy policy that encourages environmentally responsible use and development of the nation's diverse energy supply, including coal, wind, solar, hydropower, natural gas, biomass, landfill methane and nuclear energy. We believe that sound energy and environmental policy should flow from this "fuel diversity" strategy. Fuel diversity means better consumer options, lower power prices, and a more stable economy. Plans to encourage fuel diversity include classifying hydro electric generation as renewable energy, removing regulatory impediments to power plant or transmission upgrades, providing advanced coal generation funding, streamlining nuclear plant relicensing, resolving the issue of nuclear waste, and increased R & D for renewable energy and advanced coal technologies. Fuel diversity prevents dependence on one source of fuel and provides supply options from multiple sources during disruptions or times of price volatility on any one given source. For example, coal, is an essential part of this country's fuel mix. Coal accounts for over 50% of electric generation and approximately 23% of all the energy consumed. The continued and expanded use of coal contributes to fuel diversity, dampens prices, decreases reliance on natural gas and helps stabilize market prices. The LPPC supports the use of increased incentives and federal funding for more efficient, clean coal technologies that will lessen the impact of health-based pollutants and will improve efficiencies in generation. Hydro-electric generation is another important component in our fuel mix. It is emission free, has no fuel cost, and because of its virtually instantaneous start-up capability, provides an invaluable operating reserve. However, the current federal licensing/relicensing process for non-federal hydro projects is time-consuming, expensive, and extremely complex, creating an unworkable framework that imposes significant costs in terms of time, resources, and capital. The administrative costs of relicensing proceedings and licensing conditions imposed in these proceedings threaten to eat up much of the national economic benefit derived from continued operation of existing hydro projects. The LPPC believes reform of the current system is desperately needed and supports the efforts to do so. Renewable energy resources have proven to be a necessary element of the national energy supply and help maintain fuel diversity. Renewable energy resources have a less significant impact on the environment than other fuels. Renewable energy is becoming increasingly cost competitive and is a potentially important future resource. The LPPC believes that the need for federal incentives for renewable energy production is crucial. We support continued use of such incentives, which will encourage the quick installation of renewable energy resources and help additional technologies reach the market. However, it is crucial that there is parity among incentives such that they can be enjoyed by public power and investor owned utilities alike. To this end, we support efforts to develop a tradable or transferable tax credit to encourage development of renewable energy resources. The inclusion of nuclear energy is essential to a fuel diversity strategy. Existing plants must continue to operate safely and efficiently. The licenses on these facilities should be extended and the process for doing so should be streamlined. There have been significant advances in new technologies and the commercialization of these new options should be encouraged, as should continued R&D. However, for public health, safety, and economic reasons, the issues of nuclear waste and its long-term disposal must be addressed. Safe, publicly acceptable interim and long-term storage and disposal facilities must be developed. The increased use of distributed generation (DG) technologies by users during the West Coast crisis has been a crucial tool to shave peaks and to mitigate shortages, extending the time that more power is available between emergencies. The inclusion of distributed generation resources allows our energy policy to provide energy to the consumer while contributing to a diverse energy supply. The LPPC recommends that federal legislation support the use of emerging technologies and the increased use of established technologies such as DG. A number of LPPC members have been proactive in the use of this technology. For example, the New York Power Authority recently installed eleven combustion turbines (440 MW) in New York City. The purpose was to avoid 308 MW summer shortfall projected by the New York ISO. In addition, another LPPC member, the City of Tacoma responded to the energy crisis in the West by siting 30 diesel micro turbines. This allowed them to better manage their demand and continue to serve their customers without interruption. My own company, MLGW has proposed to TVA building new gas-fired generation to meet its growing demand. CONCLUSION As the House Energy and Commerce Committee prepares to act on comprehensive restructuring legislation, the LPPC stands ready to offer our assistance. We would be happy to share proposals to properly tailor FERC transmission jurisdiction to the unique structures and responsibilities of public power systems, ensure market power and merger protections for consumers, and retain the appropriate level of flexibility for FERC as it approves new RTOs. In conclusion, the LPPC believes that comprehensive legislation addressing the deficiencies in the energy sector is necessary. We look forward to working with the Committee to develop comprehensive electric restructuring legislation that addresses our concerns, garners wide support and can ultimately be enacted. I will be happy to answer any questions you have. ### |
home | llpc | public power | issues | press releases | trivia | glossary | contact