Responding to the US's biggest power failure ever, lawmakers and the White House said the country must update its energy policy sooner rather than later.
"The massive power outage in the Northeast and Midwest emphasizes once again what I have been saying for 2 years now—we need to get a national energy policy in place as soon as possible for the nation," said Senate Energy and Natural Resources Chairman Pete Domenici (R-NM). "This outage clearly demonstrates how close the nation is to its energy production and distribution limit. I hope that when Congress returns in September the House-Senate conference on an energy policy bill will make rapid progress."
Talking to reporters in California Aug.14, President George W. Bush called the blackouts that impacted 50 million people "a wake-up call" and said the federal government will find out what went wrong and then fix the system. "We need to take a look at what went wrong, analyze the problem, and come up with a solution. We don't know yet what went wrong, but we will," he said.
President Bush and key lawmakers in Congress said a good way to avoid future problems is to pass comprehensive energy legislation that gives regulators and investors the roadmap they need to modernize the country's antiquated transmission system. Congressional Republican leaders told the president they plan to begin working out the differences between pending House and Senate bills within 20 days.
Looking at Congress
Congress has been struggling for years on how to update the wholesale electricity market. Competing regional interests make the subject a chronically controversial and complex topic that cuts across party lines.
New electricity restructuring rules were being considered as part of a larger energy reform bill, but lawmakers walked away from that package last year. This year the White House called on the Republican-led Congress to revive a bill. But until the blackouts came earlier this month it was not clear whether there would be enough interest to pass legislation, given that fuel prices have been moderate this summer.
Now analysts and policymakers readily agree there will be plenty of interest to do something when Congress returns in September. But whether that something will translate into meaningful legislation is unknown.
Two years ago, Enron Corp.'s spectacular collapse generated lots of headlines and hearings but ultimately did not inspire lawmakers to pass an energy bill. Congress did eventually pass several financial reforms designed to patch accounting loopholes that the energy marketer, and other companies outside the energy business, exploited. But as far as energy policy goes, Enron's legacy meant more regulatory than legislative changes, most notably from the Federal Energy Regulatory Commission.
But to repair investor confidence in electricity markets and to shore up an aging infrastructure, Congress needs to step in, according to energy consultants and Wall Street analysts. That's because to modernize the grid, some laws must be repealed or rewritten to protect investors and consumers.
"The experience last week makes it all the more important for a final energy bill with an electricity title," said Shirley Neff, energy consultant and former economist for the Senate Energy Committee. "A mandatory reliability organization is critical. The Senate unanimously passed such a bill in June of 2000; unfortunately the House didn't take up the bill."
Now 3 years later, lawmakers may finally have the political motivation to reach consensus, added a Wall Street analyst. "This could ultimately prove to be a catalyst to resolve the logjam on electricity issues in the pending energy bill in Congress. While a minority of senators have been trying to hold the FERC back from implementing market stimulating incentives until 2007, it is clear in the wake of [the Aug. 14] events that such a course is probably bad for the economy, bad for national security, and bad for politicians," said Christine Tezak, energy analyst with Schwab Capital Markets, Washington, DC.
"If other language in the current electricity titles from both sides of the Hill is ultimately passed—and the moratorium language proposed by the Senate is dropped—we see a positive outlook for transmission infrastructure growth, particularly for Midwest, mid-Atlantic, and Northeast utilities," she said.
Busy month ahead
September promises to be a busy month for energy policymakers. Revamping the regulatory framework that oversees wholesale electricity markets will no doubt dominate Congressional discussions, but a final energy bill also is expected to include tax breaks and royalty incentives for more domestic oil and gas exploration.
Also expected to highlight the agenda are fuel distribution issues in light of a Phoenix gasoline shortage brought on when the area's sole 60,000 b/d product pipeline broke down. Gasoline marketers, for example, want to retool reformulated gasoline rules so clean fuels that contain different oxygenates may be commingled.
Even before the blackouts, a bipartisan group of lawmakers from oil and gas-producing states, in concert with the White House, warned that the country's energy policy needs updating. To hammer that point home to consumers, the Department of Energy in June called an emergency session of its industry advisory board, the National Petroleum Council, to address concerns that there may be natural gas supply problems later this fall.
An NPC study is due next month, as is a report by House Republican leaders on their own Natural Gas Taskforce. This summer, the taskforce held regional hearings, and members will later consider possible legislative and regulatory remedies to protect consumers and businesses from price spikes. Meanwhile, House Democrats and several Democratic presidential hopefuls also have their own energy policy strategy that will be debated as part of the larger energy reform bill.
But fears over higher heating costs this fall are likely to be sidelined, at least temporarily, as finger-pointing and investigations over the regional blackouts commands the legislative stage.
House Energy and Commerce Committee Chairman Billy Tauzin (R-La.), a key negotiator for the pending energy bill, has launched an investigation into the electricity blackouts.
Tauzin said a full committee hearing would be held Sept. 4-5 soon after Congress returns to work.
Among those who will be invited to testify include Sec. of Energy Spencer Abraham, FERC Chairman Pat Wood, New York Gov. George Pataki, New York City Mayor Michael Bloomberg, as well as others. Chairman Tauzin also directed committee investigators to begin collecting information pertaining to the blackouts.
"While deeply troubling, it is not especially surprising to me that there has been a failure of a major North American power grid," Tauzin said Aug. 15. "Yesterday's massive blackouts—the worst in American history—highlight the critical need for Congress to enact a comprehensive national energy bill this year. We simply cannot afford to wait any longer—our economy and our way of life are at stake."
