Lawmakers promise energy bill, blackout investigation will top September agenda

Maureen Lorenzetti
Washington Editor
WASHINGTON DC, Aug. 15 --- Responding to the US' biggest power failure, lawmakers and the White House this week promised to update energy policy.

"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, President George W. Bush called the blackouts that impacted 50 million people "a wake-up call" and said the federal government plans to find out what went wrong and will work to 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," President Bush 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.

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 this week, it was not clear whether there would be enough interest to pass legislation, given that fuel prices were not uncomfortably high this summer.

Now, analysts and policy makers 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.

Enron Corp.'s spectacular collapse generated many headlines and hearings, but ultimately did not inspire lawmakers to pass an energy bill. Congress eventually passed 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 analysts. That's because to modernize the grid, some laws must be repealed or rewritten to protect investors.

"This could ultimately prove to be a catalyst to resolve the log jam 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 yesterday's 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, Midatlantic and Northeast utilities," she said.

Busy month ahead
September promises to be a busy month for energy policy makers. Revamping the regulatory framework that oversees wholesale electricity markets will no doubt dominate Congressional discussions, but a final energy bill is also expected to include tax breaks and royalty incentives for more domestic oil and gas exploration.

Even before the blackouts, Republican lawmakers from oil and gas producing states, in concert with the White House, warned that the country's energy policy needed 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 this fall.

An NPC study is due next month, as is a report by House Republican leaders on their own natural gas task force. This summer, the task force held regional hearings, and members later will 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 likely will be sidelined, at least temporarily, as finger pointing and investigations over the regional blackouts command the legislative stage.

House Energy and Commerce Committee Chairman Billy Tauzin (R-LA), a key negotiator for the pending energy bill, Friday said he has launched an investigation into the electricity blackouts that paralyzed large areas of the Midwest and Eastern seaboard this week.

Tauzin said a full committee hearing will be held immediately when Congress returns to work in early September.

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, and others.

Earlier Friday, Chairman Tauzin 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. "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."