Electricity Deregulation - Get the Wiring Right

Trucking, $15 billion. Airlines, $12 billion. Railroads, $5 billion. Depending on whose numbers one uses, deregulation of those three industries is saving American consumers roughly $30 billion each year. If managed correctly, competitive change in the electric power industry will save even more.

Despite its importance, we take electricity for granted. Stick in the plug, flip the switch, and we expect the lights or the computer to turn on - no ifs, ands, or buts. The regulated monopolies that provide the bulk of America's power made this possible and helped us reach our national goal of providing a reliable supply to everyone.

But new technology and a growing awareness of the benefits of market-based competition are ushering in a new and exciting era of change. The era of retail price competition and choice in suppliers of electricity is arriving, and the benefits to average consumers could be immense.

Almost all states are considering ways to increase competition among suppliers. Today one-third of Americans live in states that have taken steps to reform the electricity monopolies and implement retail competition. There are also important federal aspects to this process that Congress must address.

Unfortunately, many of the schemes being weighed in Congress ignore principles of market competition and merely propose new or different regulations. They also increase federal control at the expense of the historical prerogatives of this nation's true laboratories of reform, the states. Many of them fail to address the fundamental questions of public power subsidies and how to achieve a level playing field for future competition.

As chairman of the Senate Committee on Energy and Natural Resources, I am committed to answering such questions in a way that improves the situation for the average consumer. I am also committed to protecting the states and consumers from overzealous manipulation by federal bureaucrats.

Electricity reform is a very complex public policy issue that commands legislators' full attention. Anything less than a wholehearted effort to decide the appropriate federal responses would be highly irresponsible and potentially damaging to the interests of millions of American consumers.

So, what should Congress do?

It should remove federal impediments to retail competition so the states can continue moving ahead with their reforms. Congress should also remember that the rapidity of change - and it is already occurring very quickly - is nowhere near as important as the results. It should allow the states to move forward, monitor their progress and, in the short term, make legislative changes to ease the transition to fuller competition. Those reforms should include:

*Making sure states have the ability to order and carry out retail competition.

*Clarifying lines of jurisdiction over transmission and distribution.

*Creating a level playing field by addressing public power subsidies.

*Repealing federal laws that stand in the way of greater choice and competition.

*Deregulating electricity sales in wholesale markets where open access already exists.

*Reexamining the role of this nation's public agencies for marketing power.

*Making sure suppliers cannot use subsidies, preferences, or uneven taxation to unfairly compete for new customers outside their traditional service areas.

The Senate Committee on Energy and Natural Resources recently completed the third in a series of workshops that allowed senators and a variety of experts, regulators, industry representatives, and interest groups to discuss the issues surrounding electricity reform. Because broad legislation will come only after consensus building and compromise, I am using the sessions to introduce a list of "guiding principles" to help steer the discussion of congressional action. They include:

*Lower electric prices for residential consumers.

*Continued system reliability.

*More choices to all consumers.

*Fair competition.

*Protecting individual and pension fund investment.

*Fair "stranded cost" (investment in plant) recovery.

*Protecting the environment.

*Leaving no person in the US without electricity.

*Empowering states to promote competition.

*Protecting states from overzealous federal mandates.

*Deregulation, not different regulation.

In short, Congress should deregulate what it can, streamline what it cannot deregulate, and empower the states to continue their promotion of retail competition and choice. Above all, it should not legislate for legislation's sake. "Just do it" is a fine slogan for hawking sneakers, but it could be a prescription for disaster when it comes to reforming this $200 billion a year industry so important to our lives.

* Sen. Frank H. Murkowski (R) of Alaska is chairman of the Senate Committee on Energy and Natural Resources.

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