March 21, 2003
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Ms. CANTWELL (for herself and Mrs. Murray):
S. 681. A bill to provide for the enhanced protection of electricity consumers under the Federal Power Act; to the Committee on Energy and Natural Resources.
Ms. CANTWELL. Mr. President, I rise today to introduce the Electricity Market Manipulation Prevention Actlegislation I believe is critical in ensuring our Nation's consumers will never again have to suffer from the type of energy price manipulation that has so devastated the economy of my home State of Washington. This bill is simple yet powerful in concept. In essence, it requires the Federal Energy Regulatory Commission to do its jobprotect consumers from energy price manipulation.
This bill says that where FERC gives companies the authority to charge market-based wholesale electricity rates, the Commission must also actively ensure that effective competitionthe only kind of competition that benefits consumers and businessesactually exists. It says that if FERC finds that an entity has attempted to manipulate power markets, the Commission will revoke or modify the company's ability to sell power at market-based rates, and the company will be on the hook to pay back revenues in excess of the average regional cost of generating the power. And lastly, it says that FERC will not be allowed to change the legal standard for reviewing whether consumers deserve relief from market manipulation.
I first want to make a very important point about this legislation. In large part, it does not expand FERC's existing authority under the Federal Power Act. It simply articulates more explicitly how Congress intends for FERC to exercise its existing authority.
Now why is this an important point? As many of my colleagues may know, FERCunder sections 205 and 206 of the Federal Power Actis already given the responsibility of ensuring just and reasonable wholesale electricity rates, and fixing those rates when market activity has gone awry. So why do we need clarification? Because despite overwhelming and undisputed evidence that any number of energy companiesEnron and its ilkengaged in activities designed to manipulate power markets in the west, FERC has to date failed to take action on behalf of consumers.
While prices started skyrocketing out of control during the summer of 2000, it took the Commission nearly a year to step in and reign in those prices throughout the west. The provisions of this legislation that require FERC to perform annual reviews of how well markets are functioning would help ensure the Commission's active oversight, and prevent the type of price gouging from which consumers and businesses in my sate continue to suffer.
While the Commission did finally step in to cap pricesunder intense congressional pressure, I might addit has, almost 2 years later, failed to decisively act on the billions of dollars' worth of refund and long-term contract complaints resulting from the crisis. What's more, the Commission's Administrative Law Judges have taken every opportunity to throw additional hurdles in the path of the Northwest consumers, who have suffered more than any as a result of California's ill-fated restructuring scheme. That's why this legislation specifically articulates what legal standard should apply to the Commission's review of complaints for relief.
Even in the face of admitted market manipulationin the most brazen of cases, where Enron has described its own schemes to drive up prices and Reliant's transcripts quote company traders explicitly voicing their plans to drive up prices throughout the west by withholding powerFERC has, more than two years later, failed to use all the tools at its disposal to send a message that such activities will not be tolerated, levying fines that are clearly inadequate compared to the economic devastation these activities have caused.
This bill makes the remedies for market manipulation far more transparent, doing away with the multiple years of arcane proceedings in which we are currently embroiled. The protracted cases resulting from the western energy crisis have yet to benefit anyonecertainly neither the industry nor consumersexcept, perhaps, for energy attorneys.
This legislation tells energy companies that if they are going to attempt to manipulate markets, there will be harsh and immediate consequences. It says that if the commission finds that an entity has attempted to gouge consumers, it will revoke or revise its market-based rate authority, set a just and reasonable rate going forward, and order the refund of revenues collected above the average wholesale generation cost within the relevant regional power market. Concrete, explicit consequencescommensurate with the level of damage caused by marketplace shenanigansshould provide a powerful disincentive for companies tempted to engage in the types of behavior that have crippled the economy of Washington and other western states.
Now, I can already hear the outcry from somebut not all sectorsof the energy industry. They will claim that putting concrete remedies on the bookstransparent mechanisms for consumer relief, and tangible penalties for companies that endeavor to gouge consumerswill breed too much uncertainty for participants in energy markets.
To those who would make that argument, I would simply say, it is absolutely absurd to suggest that energy companies can't make money unless they retain their legal rights to rip off the ratepayers of this country. Ensuring that FERCwhich is supposed to be, in Chairman Pat Wood's own words, "the tough cop on the beat"takes swift and decisive action when energy companies attempt to manipulate markets is an issue of simple fairness and common sense. Afterall, it is our Nation's ratepayersresidential and industrial customers alikewho pay the price for FERC's inaction, and FERC is the only cop on the beat.
I have stood on this floor many times to speak of the economic train wreck created in my state by FERC's inaction in the face of the western energy crisis, which we now know resulted in large part from bad actors who decided to take advantage of a near-historic drought and tragically flawed market rules in California. Today, retail rates in many parts of my State of Washington have risen almost 50 percent, our unemployment is consistently among the top five in the nation, the demand for low-income energy assistance is at record levels, we are struggling to stave off yet another regional rate increase, and there is no end in sightunless FERC takes long-overdue action.
This bill sends a clear signal to FERC: we expect you to right the wrongs from which consumers throughout the west continue to suffer, and we expect you to use your authority to ensure a repeat of the western energy crisis never occurs. There is no other competitively traded commodity aside from electricitysoy beans, wheat, pork bellies, metalsfor which a prolonged price run-up can single-handedly cripple industries as diverse as aluminum smelting, microchip manufacturing, irrigated agriculture, paper production or aerospace. Clearly, the economic stakes are exceptionally high when it comes to electricity, and as such, Congress must demand a greater degree of accountability from both the industry itself and those who regulate it.
With this bill, we make Congress' intent perfectly clear: FERC must protect consumers; there will be swift and decisive action against those who endeavor to manipulate markets; and the deck will not be stacked against the consumers and businesses who are the victim of Enron-like schemes.