Federal Electricity Reform Legislation Heads to Conference

Print PDFPat Godley, Doug Smith, Janet Woodka, Brian Zimmet
June 30, 2005

The Senate and the House of Representatives now have approved comprehensive energy bills that include substantial reforms to the federal statutes regulating the electricity sector. On June 28, the Senate passed the Energy Policy Act of 2005 by a vote of 85 to 12. The House of Representatives passed similar legislation, H.R. 6, on April 21, 2005. Both bills now will be referred to a Conference Committee, where the differences between the two bills will be resolved.

The chart below provides an overview of key provisions in the House and Senate bills, and highlights differences that will need to be addressed in conference.

Key Provisions in the Electricity Titles

Issue	H.R. 6 as passed by the House of Representatives on 4/21/05	H.R. 6 as amended and passed by the Senate on 6/28/05
Reliability	Provides for Electric Reliability Organization (“ERO”) to develop and enforce mandatory reliability standards, subject to FERC oversight. Imposes limits on annual dues and appropriations to ERO. (§1211)	Similar, but does not contain the limitation on dues and appropriations. (§1211)
Transmission Siting	Provides for DOE to designate “national interest electric transmission corridors.” Allows FERC to authorize transmission projects in those corridors if state cannot or does not timely authorize project or authorizes project only subject to unreasonable conditions. FERC authorization carries eminent domain rights. (§1221)	Details differ, but same basic “backstop” structure. (§1221)
Transmission Jurisdiction Over Public Power and Coops	Authorizes FERC to subject transmission-owning public power utilities and cooperatives to certain open access transmission requirements. (§1231)	Same. (§1231)
RTO Development	Sense of Congress that “all transmitting utilities interstate commerce should voluntarily become members” of an RTO. (§1232) Requires FERC report to Congress on RTO application status. (§1233) No comparable provision. No comparable provision.	No comparable provision. No comparable provision. Creates an interagency task force to study competition in wholesale and retail electricity markets. (§1615) FERC may encourage voluntary RTO/ISO formation, but is prohibited from requiring RTO/ISO participation, either directly or as condition of other approvals. (§1232)
Federal Utility Participation in RTOs	Authorizes TVA, BPA and PMAs to join RTOs. (§1234)	Same. (§1233)
Standard Market Design	SMD rulemaking “remanded.” (§1235)	SMD rulemaking “is terminated and shall not be reissued.” (§1234)
Native Load Service Obligation	Entitles load-serving utilities that hold firm transmission rights (by means of transmission facility ownership or contract) for purposes of serving native load to retain those rights, or comparable financial rights. (§1236) No comparable provision.	Similar, but applies differently to already allocated rights in certain ISOs. (§1235) Prohibits FERC from requiring any entity located in the Pacific Northwest and holding firm transmission rights to convert those rights to tradable or financial rights. (§1236)
Economic Dispatch	Requires DOE to conduct a study on economic dispatch and report to Congress. (§1237) Requires FERC to convene regional joint boards to include a representative from each state and chaired by a FERC commissioner to study economic dispatch in each region and prepare a report for Congress. (§1298)	Same. (§1616) No comparable provision.
Transmission Incentives	Requires FERC to establish incentive-based transmission rate policies to attract capital investment, allow recovery of compliance with reliability requirements, and encourage RTO/ISO participation. (§1241)	Contains similar incentives for transmission investment, but does not include incentives for RTO/ISO participation. (§1241)
Participant Funding	Not addressed.	Authorizes FERC to approve participant funding plans. (§1242)
PURPA Standards	Requires States to consider Public Utility Regulatory Policy Act (PURPA) standards on net metering, fuel diversity, fossil fueled plant efficiency, smart metering and interconnection. (§§1251, 1252, 1254)	Same, except does not include standard on interconnection. (§§1251, 1252)
PURPA §210	Prospectively eliminates utility obligation to buy power from a Qualifying Facility (QF) if QF has access to competitive wholesale markets; prospectively eliminates utility obligation to sell to a QF if QF has ability to purchase from competing seller, and state law does not impose obligation to serve; requires FERC to revise criteria for new qualifying cogenerators; eliminates limitations on IOU ownership of QFs. (§1253)	Same. (§1253)
PUHCA	Repeals the Public Utility Holding Company Act (PUHCA) effective one year from enactment; enhances Federal and State access to books and records of electric and natural gas utilities and their affiliates to ensure that rates, terms, and conditions of service are just and reasonable. (§§1261-1277)	Same, but effective six months from date of enactment. (§§1281- 1297)
Market Transparency	Requires FERC to establish publicly accessible electronic database on transmission and market information. (§1281)	Same. (§1261)
Market Manipulation	Prohibits “round trip trading” and “filing false information.”(§1282)	Prohibits “filing false information” and “any manipulative or deceptive device or contrivance . . . in contravention of such rules and regulations as the Commission may prescribe.” (§§1262-1263)
Refund Authority	Permits FERC to establish a refund effective date on the date that a complaint is filed (FPA now requires delay of 60 days). (§1284) Allows FERC to require refunds from certain non-jurisdictional utilities for “short-term” wholesale sales, defined as sales with a duration of 31 days or less, that violate FERC rules. (§1285)	Same. (§1265) Similar, but authority to require refunds by non-jurisdictional entities only extends to sales with a duration of 48 hours or less made in organized markets. (§1266).
Civil Penalties	Authorizes civil penalties of $1,000,000 per day for “[a]ny violation of Part II [of the FPA].” (§1283)	Same. (§1264)
Sanctions for Market Manipulation	No comparable provision.	Permits FERC to seek injunctions prohibiting persons or corporations found to have engaged in energy market manipulation from engaging in transactions subject to FERC’s jurisdiction. (§1264(e))
Mobile-Sierra	Contracts for sale of electricity or natural gas at market-based rates may not be modified by FERC unless the change is required by the public interest. This restriction does not apply to contracts that expressly provide for FERC review under the just and reasonable standard. (§1286)	No comparable provision.
Slamming & Cramming	Authorizes FTC to issue rules on retail marketing techniques referred to as “slamming” and “cramming.” (§1286)	Same. (§1267)
Merger Review	Raises threshold on size of transactions requiring FERC approval under FPA §203 from $50,000 to $10,000,000; provides for §203 review of public utility holding company mergers or holding company acquisitions of electric or gas distribution utilities. (§1292)	Makes same changes, and requires §203 approval for public utility acquisition of existing generation facilities. (§1298)
Renewable Portfolio Standard	No provision.	Utilities are required to have renewable supplies (or comparable credits) equal to 2.5 percent of the electricity they sell at retail in 2008, rising incrementally to 10 percent by 2020. Renewable energy includes solar, wind, geothermal, ocean energy, biomass, landfill gas, and incremental hydro. A utility may buy renewable energy credits from the Department of Energy at a rate of 1.5 cents/kwh. Small utilities (under 4,000,000 mwh/year retail sales) are not covered.

Next Steps for Energy Legislation

Both the House and the Senate will appoint conferees to a Conference Committee, which will be chaired by Representative Joe Barton (R-TX), Chairman of the House Energy & Commerce Committee. The Committee will meet, both formally and informally, to work through the issues on which the bills differ. If the issues are resolved, the Conference Committee will issue a “conference report” which then will be considered by both the House and Senate under their respective rules. The major differences between the bills on electricity-related issues include: a renewable portfolio standard, expansion of FERC’s merger review authority, prohibitions on market manipulation and related remedial authority, participant funding, economic dispatch, and the approach to be taken toward RTO development.

The White House and Congressional leaders are pushing for final legislation by the end of July. It is more likely, however, that the process of reconciling the House and Senate versions will not be completed before the Fall.

###

Based in Washington, DC — with an office in Seattle, Washington — Van Ness Feldman is a nationally recognized law firm specializing in energy, the environment, natural resources, and infrastructure security. Founded in 1977, the firm now has more than 75 attorneys and public policy professionals. A number of our members have served as counsel or chief counsel to congressional committees with jurisdiction over energy and environmental policy, as well as senior advisors to Democratic and Republican Members of Congress on those committees. Others have held high-level appointments in the Department of Energy, the Department of the Interior, the Federal Energy Regulatory Commission, and the Environmental Protection Agency.

This document has been prepared by Van Ness Feldman for informational purposes only and is not a legal opinion, does not provide legal advice for any purpose, and neither creates nor constitutes evidence of an attorney-client relationship.