Comprehensive Electricity Competition Plan

On Wed, DOE announced the Clinton Administration’s plan for the Electric Power Industry. The Summary, complete text, and Q&A, appear on the DOE’s home page (attached) at:

Here is the press release

March 25, 1998

NEWS MEDIA CONTACT: Tom Welch, 202/586-5806

Administration’s Plan Will Bring Competition
To Electricity, Savings to Consumers

$20 Billion a Year in Savings for Consumers

The Clinton Administration today announced a proposal to bring competition and consumer choice to the electricity industry, saving consumers roughly $20 billion a year and improving the environment by reducing pollution and greenhouse gas emissions.

The Administration’s Comprehensive Electricity Competition Plan will provide customer choice by 2003, but will allow states to opt out of competition if they believe that their consumers would be better off under the status quo. Replacing a regulated monopoly system with competition will also encourage efficiency, bring new products and services, strengthen reliability of service and protect consumers.

“This proposal will provide incentives for increased efficiency in the electricity market, saving American consumers $20 billion a year and reducing greenhouse gas emissions. Both the economy and the environment will benefit,” said President William J. Clinton.

“We will bring America’s electric industry into the modern era and save consumers money. A family of four will save $232 a year — about two weeks of groceries. For the average family, this is the equivalent of getting a 5 percent income tax cut,” said Secretary of Energy Federico Pe–a. “Competitive forces will also create a more efficient, leaner and cleaner industry. And the environment will benefit as reduced emissions accompany this increased efficiency.”

“This comprehensive plan is the Clinton Administration’s blueprint to Congress so that together we can design legislation that protects the environment, public health and the economy,” said EPA Administrator Carol Browner. “In addition to bringing competition to the electricity industry, this plan will reduce greenhouse gas emissions in cost-effective ways and march in lockstep with our previous commitments to clean air.”

“Sixteen states have already moved to provide for electricity industry competition. There are, however, issues that only the federal government can deal with,” said Secretary Pe–a. “Federal legislation is needed to enable states to implement retail competition effectively. And only federal legislation can modify or repeal outdated federal laws, cover regional electricity markets, address concerns about market power, ensure that the interstate electricity grid is reliable, and establish uniform standards so that all Americans are receiving the same information about their utility suppliers. We want to work with Congress to get comprehensive legislation that benefits all consumers.”

The Administration’s Comprehensive Electricity Competition Plan:

– Provides for customer choice by January 1, 2003, but allows states to opt out of the competitive market structure if they believe that their consumers would be better off under the status quo system or their own unique restructuring proposal. This will give states the freedom to structure retail competition that works best for their citizens.

– Supports stranded cost recovery for utilities that might not otherwise be able to recover the costs of certain past investments that are no longer economic in the low-cost competitive market. The plan encourages states to provide for recovery of stranded costs, supporting their fundamental authority in these matters.

– Strengthens electric service reliability by requiring that all participants in physical electric transactions on the grid comply with mandatory standards. The plan improves reliability by building on the industry’s tradition of self-regulation and giving the Federal Energy Regulatory Commission (FERC) authority to approve and oversee a private, self regulating organization that develops and enforces mandatory reliability standards.

– Gives FERC authority to require transmitting utilities to turn over operational control of transmission facilities to an independent system operator. The plan also includes a proposal to amend federal law to encourage the development of regional transmission planning and siting groups.

– Requires all utility companies to disclose, in a consistent format, information about the services they offer so customers can comparison shop and know what they are buying. Just as the Food and Drug Administration requires manufacturers to disclose nutrition information on a cereal box, utilities will use a standard consumer label that will include information on prices, terms, conditions, and the environmental impacts of the electric power being sold.

– Establishes a Renewable Portfolio Standard to ensure that at least 5.5 percent of all electricity sales include generation from renewable energy sources by 2010. This would double the projected amount of energy from non hydroelectric renewable sources such as wind, solar and biomass. If companies cannot generate power from their own renewable sources, they can purchase credits from those who exceed their targets. The proposal includes a backup cost cap to limit program costs.

– Cuts pollution and greenhouse gases. When costs start to matter, there will be increased economic incentives to cut the two-thirds of energy currently wasted in fossil fuel electricity generation. Greater power plant efficiency saves fuel, cuts oil imports and reduces greenhouse gas emissions.

– Establishes a Public Benefits Fund to provide matching funds of up to $3 billion to states for low-income assistance, energy-efficiency programs, research and development, and renewable technologies. These costs are currently passed on to consumers by regulated utilities in their rates. For example, many utilities include in their rates the cost of programs that make sure the poor and elderly do not have their heat shut off during the winter months. This funding approach will no longer work under competition because utilities will have to compete with new suppliers who do not have to pay for these costs. Many states that are moving to competition intend to continue funding these programs through a separate distribution fee on all electricity customers. The Public Benefit Fund would encourage and support states to ensure that the current level of funding for these programs, estimated at about $6 billion in 1996, is preserved.

– Gives EPA authority to provide interstate nitrogen oxide trading authority to assure that we achieve NOx reductions as cost-effectively as possible and enhance air quality.

– Modernizes federal electricity law to get the right balance of competition without market abuse, including giving FERC the authority to mitigate market power in the event that some companies begin to acquire excessive control over retail electricity markets and repealing outdated laws like the Public Utility Holding Company Act of 1935 and the “must buy” provision of the Public Utility Regulatory Policies Act.

“The electricity industry is still operating under a regulated, monopoly system — rules, regulations and laws that were first enacted decades ago. Consumers can’t choose their own suppliers and there is little incentive for companies to be cost- and energy-efficient. Why? Because a regulated monopoly supplier doesn’t have to compete and essentially has a guarantee that its costs will be recovered.

“If you’re the only game in town, you set the rules of the game,” Pe–a said. “With competition, we’re going to change this. With competition, the customer will come first.”

– DOE –


[Comprehensive Electricity Competition Plan]

Comprehensive Electricity Competition Plan on-line
Download a copy of the Comprehensive Electricity
Competition Plan (*PDF format)

Summary on-line
Download a copy of the Summary (*PDF format)

Questions and Answers about the Plan 0n-line
Download a copy of the Questions and Answers about
the Plan (*PDF format)

News Release on the Comprehensive Electricity Competition Plan

Fact Sheets

Benefits of Plan
Need for Federal Action
Retail Competition Policy – Flexible Mandate
Stranded Cost Principle
Consumer Information
Strengthen Electric System Reliability
Renewable Portfolio Standard
Public Benefits Fund
Air Quality
Download a copy of all Fact Sheets (*PDF format)
Download a copy of Fact Sheets about Impact of Plan on
Consumers by Identified Regions (*PDF format)


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