NATIONAL ENERGY SECURITY ACT OF 1991 (Title XV) THURSDAY, MARCH 14, 1991 U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC The committee met, pursuant to notice, at 10 a.m., in room S 216, Hart Senate Office Building, Hon. J. Bennett Johnston, cha man, presiding. OPENING STATEMENT OF HON. J. BENNETT JOHNSTON, U.S. The CHAIRMAN. The hearing will come to order. Today, we consider Public Utility Holding Company Act refo as part of S. 341. I consider PUHCA reform to be a very, very portant part of this legislation. I have a written statement which makes considerably more se than what I have to say off the cuff, so I will put that in the rec and invite you to read it. Conway wrote it, and therefore it pretty good, but let me just give you a few comments. What this bill is about is competition. Why would it be better have a number of sources to generate electricity than to rely o on the company, whether they be exempt companies or whet they be registered holding companies? What we found out in this country in over 200 years is that co petition is better. It is better because people first of all can spec ize in the generation of electricity, either in one form of that g eration, be it natural gas, or coal, or nuclear, or solar-and have specialists that do that very well. We know that we can share the risk. You can have a very plant and you can share that risk first of all among a number utilities. Secondly, you can share it-you can have the genera accept the risk. For example, I was speaking this morning to the natural people and talking about the fact that the big risk today proba in natural gas is not supply so much. Bud Lawrence tells me the is enough natural gas for 3,000 years, I think it is. Not serious but there is a lot of natural gas out there. The risk really is the price, and producers are generators take that risk, or help share that risk, and therefore bring natu gas more into the arena where it can be considered, and you can right down the list of technologies and find that people who deal (1) those technologies can share that risk, both as to the number of people they can sell to, the number of utilities they can sell to, or the fact that they themselves, knowing that market, can share the risk. There are advantages, and some of what we affectionately call the "just say no" crowd would say disadvantages, in the leveraging or the use of credit in building facilities. I believe there are advantages, because the disadvantages can be stipulated against contractually both by the companies who are not required to buy from EWG's and by public utility commissions who can stipulate the terms, it being their duty to protect consumers and to provide for reliability. To say that this is controversial legislation is to put it mildly, because frankly-I mean, from the standpoint of the companies it takes away a guaranteed way to make a profit. It is a good deal to be able to rate-base a big, expensive company, to do so without risk, and to have a guaranteed profit. We understand that, and some of my best friends are in the business of doing that. On the other hand, this is America, where competition says that sometimes it is better to be able to have a number of sources. Not that that company cannot sometimes do the very best job. We have very well-run utilities in this country-very well-run utilities, on the whole. But if their sources of supply include some of these people out there who may be able to deliver it at a lower price because they have either better management, or because they have better financial arrangements, or because they have shared the risk, or been willing to take the risk, or have economies of scale, or whatever the reason, if they can deliver a better product at a better price, then it is better in the consumer interest, it is better in America's interest, because it makes for a stronger economy. Now, S. 341 takes the view that three energy crises in 18 years is too much, is unacceptable to this country, and that we need to do everything we can to produce energy for ourselves, do it in America, conserve energy in America, and have alternate fuels in America, and that by doing so we will get off of our dependence on foreign oil. The efficient generation of electricity is part of that picture, a very important part of that picture. We all remember back in the early 1970's when we were talking about PURPA and whether that would work, and there was a lot of opposition to PURPA. Now we have 30,000 megawatts produced by QF's and by those that are permitted under PURPA to generate alternate sources of energy30,000 megawatts. We have just about run out of steam sources and out of ideas for that, so now the new generation-more competitive we hope, revolutionary, yes-it will not put out of business any utility. It will, we think, create a new benchmark of competition so that, indeed, public utility commissions will know what are the most competitive. Now, we are fully cognizant, and we totally respect, the arguments to the contrary, and we want to hear those and listen to them carefully. My friends in the "just say no" crowd say that we will be required to purchase nonreliable power-the favorite cre ations of some public utility commissions-and they point to the early days of PURPA where that, I believe, happened. Some will say it did not, but I believe the California Commission, for example, in the early days of PURPA got carried away and made utilities purchase some power which turned out to be maybe not the best, because it was their favorite. The California Commission points out that today the record is completely different, that their standard order number whatever it is a model of efficiency. You can debate that or not debate it. But in order to deal with that, we have a provision which would allow people to opt out, to just file a little certificate and say we irrevocably hereby declare that for a period of up to 10 years we may not be part of an EWG or purchase from an EWG-irrevocably file that piece of paper. We want to hear today from some as to whether that is adequate protection or whether that does any good at all. If the "just say no" crowd says that is not protection, we know the other side, including the administration, from whom we will first hear today, feels that should not be there. Well, let us hear as to whether the "just say no" crowd wants it, or that we ought to have it. Let me say one final word before we get on with our witnesses, and that is, some would oppose this legislation because they believe that it will eventually lead to transmission access. I have a long record with respect to transmission access. I do not think it is fair. I opposed it in PURPA, and it did not happen in PURPA. Those of you who were around in 1978 when we had PURPA remember we had a big fight at that time, and we were trying tothere were those who said, you have got to go to transmission access, and I said no, and the Senate said no, and we did not have it at that time. I am equally determined this time not to have it. Why? First of all, I think it is not fair to require you to use your own rope to strangle yourself, and particularly offensive, I think, to pick off your best wholesale clients and use your lines to do it. Secondly, I think it would be inordinately complicated if we tried to detail the circumstances under which it would take place—inordinately difficult, as you get into all those problems of looping and all of that. Third, frankly I think it will evolve to whatever extent with or without PUHCA reform. It is evolving right now, consensually, which is the way it ought to be done-utilities dealing with one another, making arrangements to use their lines in ways that will be mutually advantageous. Finally, I have made a commitment that we will not have it as part of this legislation, because I do not want it to prejudice one way or the other this legislation. So let me just say to those who are worried that we will get over in conference or something and we will take transmission access, the answer is, it will not happen. I have made that commitment, and let us debate PUHCA reform on its own basis and not on the basis whether you fear transmission access. There will be those who will be pushing for transmission access with or without PUHCA reform, but I will be one to resist that and we may or may not be able to pass PUHCA reform, but we will be |