Energy Policy Act of 2003

ENERGY POLICY ACT OF 2003

Mrs. MURRAY. Mr. President, I rise today to support the amendment that has been offered by my colleague from Washington State, Ms. Cantwell, that will help protect our consumers from this electricity market manipulation.

I begin by thanking Senator Cantwell for her tremendous work on the energy commitment and her long-time work on trying to make sure consumers in my home State of Washington finally receive the attention and the help they need from us at the Federal level because of the gouging that has gone on in this market manipulation. We have seen the dramatic impacts that she has so eloquently talked about.

I thank her for speaking out on behalf of our Pacific Northwest consumers who are hurting. We have had the first, second, or the third highest unemployment rate for almost 2½ years, much of that precipitated by the fact of the energy spike costs that have hit the west coast, causing many of our cold storage companies, the aluminum industry, to shut down. They are laying people off. The effects of that reverberated throughout our economy, as other industries were hurt. Even our schools were hurt as they had to lay off teachers in order to pay energy bills.

It has had a tremendous impact on our economy and continues to do so. Bringing this amendment to the Senate floor today is absolutely critical. If we are going to have an electricity title, and if we do not deal with what happened in market manipulation, we are only going to see this continue.

We have a responsibility at the Federal level to protect our consumers at home. In fact, that is the responsibility of the Federal Regulatory Energy Commission. This amendment is so critical to making sure that we can go home and tell our consumers we are doing the right job of protecting them and the market manipulations that have occurred in the past will not occur again. Without this amendment, we will not have the ability to say that.

As Senator Cantwell stated, all of us on the west coast remember the energy crisis of 2001. Our consumers and our businesses were hit with massive increases in the cost of energy. In California, they saw shortages and brownouts that were incredible. In Washington State we have felt the impact in every sector of our economy and in every home in our State. In fact, as I will talk about in a moment, we in Washington State are continuing to be penalized for the failures in the energy market and failures by our Federal energy regulators.

There were certainly many causes for the energy crisis that hit us, but the most disturbing is the fact that energy companies manipulated the marketplace specifically to take advantage of the customers. As we saw throughout that crisis, the Federal Regulatory Energy Commission did not take aggressive action to protect consumers from market manipulation. The amendment that has been offered by my colleague, Senator Cantwell, will direct FERC, the Federal Energy Regulatory Commission, to revoke those market-based rate authority companies that have been found to knowingly engage in electricity market manipulation.

Our experience on the west coast shows why this amendment is so important and why FERC needs to be better policed in the energy market. For more than 2 years, many of us in the northwest delegation have been urging FERC to better protect our consumers. In fact, way back in March and April of 2001 and again in May of 2002, I sent letters to FERC calling for relief from this energy crisis. I asked for Federal price caps to stabilize the market. I asked for Washington State utilities to receive refunds, as California utilities received, and I urged FERC to report criminal activity to the Department of Justice.

Finally, on March 26 of 2003, FERC found that market manipulation occurred during the 2001 west coast energy crisis.
Unfortunately, FERC indicated it was highly unlikely that Washington State ratepayers would be reimbursed for the harm that was caused by that market manipulation. That is really unfair when we look at what happened throughout that crisis.

At the height of the 2001 energy crisis, when Enron and others were manipulating the system, FERC was urging companies to enter into long-term contracts. Many of our utilities in the Pacific Northwest followed their request and entered into
long-term contracts at highly inflated rates.

According to the Seattle Times, during the energy crisis the Northwest wholesale market averaged $276 per megawatt hour.
That is 16 percent higher than the average prices in northern California, and 28 percent higher than in southern California.
So it was really disturbing to all of us to see FERC agree that there was manipulation but then leave Washington State ratepayers holding the bag with no relief for the harm they experienced and continue to experience because of these contracts.

Clearly, FERC needs to be more aggressive in protecting our consumers. It needs to uncover and it needs to report market manipulation much earlier. It needs to have the authority to take action against companies that defraud the public and defraud the people in our States by manipulating the electricity market. The amendment that Senator Cantwell has offered will direct FERC to take aggressive action against predatory energy companies that manipulate the market, and I strongly urge my colleagues to support this amendment.

This amendment will improve the underlying bill. It is extremely important. We need to have this kind of confidence if we want to see our ratepayers able to survive in the coming years.

I do have a lot of other concerns about the Energy bill and about an effort by Federal energy regulators. As my colleagues know, FERC is now pushing what they call a standard market design which would set uniform national standards for operating regional transmission grids, transmission grids that allow energy to be passed back and forth between
communities that are in each region and their wholesale energy markets. Unfortunately, what FERC does not understand, what the bill does not understand, is that a one-size-fits-all solution is not going to fit the unique needs of the Pacific Northwest.

In New England, if they want to increase or decrease energy production, they burn more gas or more coal. They can regulate that industry. But in the Northwest, we cannot make it rain more or less based on some kind of profit schedule. Standard market design does not work in the Pacific Northwest. We cannot run our system that way because it is not designed to meet all of the needs we have. It means more opportunities for market manipulation and price gouging by big out-of-State energy companies.

As we have already talked about, we know FERC has already failed to protect Washington ratepayers from market manipulation. Given that, I think it is particularly unwise to allow FERC to take authority away from our State regulators through this standard market design and other proposals that are floating around through Congress and in this bill.

I am also very concerned that the Energy bill repeals the Public Utility Holding Company Act of 1935 which restricts utility ownership.

Although Senator Domenici's substitute electricity amendment—which we have just gotten, we are reviewing, and is now in this bill—does include some remedies to protect consumers, it does not go far enough. Just look at the devastating effects of the 2001 energy crisis to see we have to do more to protect our consumers. It is our utmost responsibility. I am concerned the electricity title in this bill fails to do that.

It is clear this Energy bill we are debating does not do enough to protect consumers against market manipulation and could actually facilitate more opportunities for manipulation. As currently written, it does not provide enough remedies to help our consumers who have been victimized by market manipulation.

That is why I am in the Senate today to support my colleague from Washington State, Senator Cantwell, and the amendment she has offered. We have the utmost responsibility to assure market manipulation is not going to continue again. We know the effects in the Pacific Northwest. Senator Cantwell has outlined the average rate increases that have hit our State because of market manipulation. Energy price increases affect every sector of our economy. They affect every person in our State. They affect everything from how we can operate our schools, how many teachers we can have versus how many energy bills our schools have to pay, to whether potential new homeowners can afford a home. A 51 percent rate increase means we have more families in the State of Washington who cannot afford to buy new cars, new refrigerators.
That affects our economy in the Pacific Northwest and has a rippling effect to our businesses, which have laid off thousands of employees because they cannot afford to pay their increased electricity costs.

The market manipulation amendment of Senator Cantwell is an absolutely critical amendment to assure we can protect our consumers in the future. Failing to pass it is a failure of the responsibility we have as Senators. I urge its passage.

I thank my colleague for yielding on this critical matter.