Full speed ahead on energy bill

Deregulators unfazed by Enron woes

By Dan Morgan: The Washington Post Dec.2, 2001

WASHINGTON   Undeterred by the collapse of energy trader Enron, congressional advocates of deregulation plan to press ahead with legislation to encourage a further expansion of the wholesale electricity market pioneered   and subsequently dominated   by the crippled Houston company.

Senate sources said Friday that a major energy bill to be introduced this week by Majority Leader Tom Daschle, D S.D., will contain provisions that support a widening of the competitive electricity trading system, which is intended to promote efficiency and stable prices.

The goal is to help merchant companies such as Enron buy power where it is plentiful and cheap and ship it over borrowed transmission lines to customers in areas where supplies are tight or prices are rising.

The details of the legislation have not been made public, but its principal author, Senate Energy Committee Chairman Jeff Bingaman, D N.M., has been a strong advocate of freer energy markets. Based on early drafts, sources said, they expect the bill to affirm the authority of the Federal Energy Regulatory Commission to force traditional utility companies to open their grid system to electricity marketed by the traders.

Nonetheless, Enron's problems have introduced a wild card into the already complicated politics of the energy bill, the most significant such legislation before Congress since 1992. Along with electricity deregulation, the bill deals with such issues as automotive fuel standards, climate change, energy conservation, tax credits for energy development, and pipeline and drilling initiatives.

Enron was a driving force in the creation of the wholesale electricity market and one of its principal benefactors. Company officials lobbied hard for the 1992 legislation that gave energy merchants and independent generating companies access to the transmission lines of long established utilities.

Some senior government officials cautioned Friday against concluding that Enron's problems would hurt deregulation efforts. "The demise of Enron doesn't change very much," one senior House member said.

"As far as I can tell, this is not about a market failure," said FERC Commissioner Nora Mead Brownell. "In my mind it is a classic case of a company growing very fast and not putting in place the financial controls and management depth that was needed. In fact, the market has worked pretty efficiently.”

But others said it was likely that the failure of Enron, a company that symbolized the movement to establish a new kind of electricity marketing system, will be cited by critics of deregulation.

Among those with serious reservations are states in the South and Northwest, where electricity costs traditionally have been kept low by plentiful local supplies of hydroelectric power, coal and natural gas. State governments have broad legal jurisdiction over utilities and could block those companies from transferring control of transmission lines to regional marketing organizations.

Politically well connected groups that are not now regulated by FERC, including the Tennessee Valley Authority, rural electric co ops and municipal power systems, are also, wary of new federal powers over electricity.

But advocates of expanded competition argue that the nation now has a system that is caught halfway between the old, regulated system, which is still largely in place across much of the South, and new electricity markets in the Northeast, Texas and California.

They contend that Enron's problems and this past summer's energy shortage in California point up the need for a coordinated federal policy on electricity that sets reliable, predictable rules for market forces that cannot be reversed.