Draft electricity legislation would phase out QF contracts

By Ann de Rouffignac
OGJ Online

HOUSTON, July 6 -- Electricity draft legislation authored by Rep. Steve Largent (R-Okla.), a member of the House Energy and Commerce Committee, was circulated Friday among industry stakeholders for comment.

The draft bill, obtained by OGJ Online, outlined details for a proposed Electric Reliability Organization to enforce transmission operating standards on a national level. The bill also included sections that repeal the Public Utility Holding Company Act of 1935 and modifies and eventually phases out the Public Utility Regulatory Policies Act of 1978 that governs qualifying facilities.

Once the major provisions are agreed on, industry sources said the language will probably be added to the House Energy and Commerce Committee package before that legislation reaches the House floor for consideration.

Industry groups in Washington believe the only hope of passing any electricity legislation is as part of the energy policy bill. There is little hope of passing separate electricity legislation this year, sources said.

Largent's draft bill specifies how a Electric Reliability Organization would work. The legislation would put in place an organization with authority to set national standards of reliability and the ability to enforce those standards.

The organization would be able to impose penalties, limit activities, functions, or operations by a wholesale power user, if the organization finds the user violated a standard. The Federal Energy Regulatory Commission would be able to order and ultimately enforce compliance with all rules and orders issued by the organization.

Under the draft legislation, regional reliability entities would still exist and could be allowed to enforce reliability standards, if approved by the organization and FERC. But FERC would ultimately enforce transmission grid reliability standards.

The bill spells out a role for the newly created regional transmission organizations that would maintain short term reliability of the bulk power system. Other provisions of the draft legislation shift all costs of interconnection from the transmission and distribution utility to the individual generator.

In terms of qualifying facilities, the draft bill specifies no electric utility shall be required to enter into a new contract to purchase or sell electricity by a QF. Existing contracts would not be affected, if they are in effect at the time the legislation is adopted. But even with existing contracts, no utilities can be forced to absorb directly or indirectly the costs of purchasing power from a QF.