Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Ms. CANTWELL (for herself, Mr. FEINGOLD, and Mr. JEFFORDS):

S. 2015. A bill to prohibit energy market manipulation; to the Committee on Energy and Natural Resources.

Ms. CANTWELL. Mr. President, I rise today to introduce 2 pieces of electricity legislation-simple, common-sense bills that enjoy the bipartisan support of a majority of United States Senators.

First, I am pleased to introduce with my colleagues Senators CLINTON, JEFFORDS and FEINGOLD the Electric Reliability Act of 2004. This legislation would give the Federal Energy Regulatory Commission (FERC) authority to devise a system of mandatory and enforceable standards for the reliable operation of our nation's electricity grid.

My distinguished friends from Wisconsin and Vermont, Senators FEINGOLD and JEFFORDS, and I are also today introducing a second bill: the Electricity Needs Rules and Oversight Now (ENRON) Act, which would put in place a blanket ban on manipulative practices in our nation's electricity markets.

Enactment of these bills is long overdue. And in both cases, their provisions have passed the United States Senate within the past eight months. They represent crucial steps forward in the effort to modernize our nation's electricity grid and reform the rules by which it is operated.

Quite simply, these provisions are too important to be held captive to the majority's effort to pass H.R. 6- the energy bill conference report. Resembling a patchwork quilt of special interest hand-outs-rather than a policy that would help this nation achieve energy independence-H.R. 6 capsized under its own pork-laden weight on this very floor, a mere two months ago.

Rather than holding good energy policy hostage for the bad-as those who seek to resurrect that 1,700-page legislative monstrosity have said they intend-I believe this body can and must make necessary progress in upgrading our electricity grid and protecting our nation's consumers. That's what the two bills I'm introducing today are intended to do.

As surely my colleagues recall, much of the Northeast and Midwest last August suffered a massive power outage, affecting 50 million consumers from New York to Michigan. Clearly, the biggest blackout in our nation's history has underscored the need for mandatory and enforceable reliability standards-as envisioned in the Electric Reliability Act of 2004. To date, the system has operated under a set of voluntary guidelines, with no concrete penalties for those who break the rules and jeopardize the reliable energy service that is the foundation of our nation's economy.

While the August 2003 blackout was certainly a potent reminder, the call for reliability legislation dates back at least another five years. In 1997, both a Task Force established by the Clinton Administration's Department of Energy and a blue ribbon panel formed by the North American Electric Reliability Council (NERC) determined that reliability rules for our nation's electric system had to be made mandatory and enforceable.

These conclusions resulted, in part, from an August 1996 blackout in the Western Interconnection, where the short-circuit of two overloaded transmission lines near Portland, Oregon, caused a sweeping outage that knocked out power for up to 16 hours in ten states. The blackout affected 7.5 million consumers from Idaho to California, resulting in the automatic shut-down of 15 large thermal nuclear generating plants in California and the southwest-compromising the West's energy supply for several days, even after power had mostly been restored to end-users.

As outlined in Economic Impacts of Infrastructure Failures, a 1997 report submitted to the President's Commission on Critical Infrastructure Protection, the blackout was estimated to exact between $1 billion and $4 billion in direct and indirect costs to utilities, industry and consumers. The report also detailed the risks the outage posed to public health and safety, including an exponential increase in traffic accidents, hospitals forced to rely on emergency back-up power generation, and the grounding of more than 2,000 airline passengers.

While it took time to develop consensus, the Senate recognized the human and economic stakes associated with the reliable operation of the electricity grid. Stand-alone legislation very similar to what I've introduced today passed this body in June 2000, when this chamber was under Republican control. And even as the majority has twice changed hands since then, the United States Senate has twice passed the very provisions included in the Electric Reliability Act of 2004 as part of comprehensive energy legislation-most recently, this past summer.

Likewise, the Senate has previously passed the provisions contained in the ENRON Act, which Senator FEINGOLD and I are introducing today. Offered under the agreement that last July cleared the way for Senate Leadership to replace the then-pending Republican energy bill with the 107th Congress' Daschle-Bingaman legislation, the ENRON Act was adopted as an amendment to the Senate's Fiscal Year 2004 Agriculture Appropriations bill, on a strong, bipartisan vote of 57-40.

The ENRON Act is simple in concept. In the face of overwhelming evidence that Enron and other unscrupulous energy companies brazenly manipulated western energy markets during the crisis of 2000-2001, it would amend the Federal Power Act to put in place a blanket ban on such activities.

It has been estimated that the western energy crisis cost the region's consumers and businesses $35 billion in domestic economic product-in other words, a 1.5 percent decline in productivity and a total loss of 589,000 jobs. After experiencing a devastating blow that exacerbated the already-crippling national recession, consumers in my state-who continue to pay the price for the unethical gamesmanship of these companies-know that our economy simply cannot abide another Enron.

Thus, the ENRON Act is based on language included in the Securities Exchange Act-in existence since 1934. This bill would make it illegal for any company to "use or employ . . . any manipulative or deceptive device or contrivance" to circumvent FERC rules and regulations on market manipulation. Further, it would specify that electricity rates resulting from manipulative practices are simply not lawful. In other words, when companies are known to have gouged consumers-in some cases, even admitting as much-those same consumers should not be stuck with the inflated energy bills that result. As Congress and various Federal agencies have over the past few years sought to piece together the events that led to the western energy crisis-the most devastating energy market meltdown in our Nation's history-a number of agencies and officials have weighed in on the issue of market manipulation. In addition to simple common sense, their statements underscore the need for the ENRON Act. For example: FERC in March 2003 issued its Final Report on Price Manipulation in Western Markets. The voluminous FERC report found that: "Enron's corporate culture fostered a disregard for the American energy customer; the success of the company's trading strategies, while temporary, demonstrates the need for explicit prohibitions on harmful and fraudulent market behavior and for aggressive market monitoring and enforcement." The General Accounting Office (GAO) in August 2003 issued a report entitled Additional Actions Would Help Ensure that FERC's Oversight and Enforcement Capability is Comprehensive and Systematic. Among GAO's observations: "The heads of [FERC's] market monitoring units told us they recognize the difficulty of defining just and reasonable prices. They also said that they believe FERC has made some progress in doing so. However, they generally believed that FERC had not yet gone far enough." GAO further concluded that: "we recommend that the Chairman of FERC more clearly define [the Commissions] role in overseeing the Nation's energy markets by . . . explicitly [describing FERC's] activities relative to carrying out the agency's statutory requirements to ensure just and reasonable prices and to preventing market manipulation." Republican FERC Commissioner Joe Kelliher wrote the following in a November 5 letter to me, just prior to his confirmation: "Markets subject to manipulation cannot operate properly and there is an urgent need to proscribe manipulation of electricity markets. You have correctly noted there is no express prohibition of market manipulation in the Federal Power Act and have proposed legislation to establish an express prohibition. This is a critical point. The Federal Energy Regulatory Commission only has the tools that Congress chooses to give it, and Congress has never given the Commission express authority to prohibit market manipulation. I believe the time has come for Congress to take that step." In the same letter, Kelliher goes on to note that, "This is not to say that the Commission cannot take steps to prevent market manipulation under its existing legal authority . . . Since there would likely be legal challenges to any such effort to proscribe manipulative practices, it would be helpful for Congress to give the Commissioner clear authority to prohibit market manipulation . . . I support the goals of your amendment" [to the Agriculture Appropriations bill, which contains the same provisions as the ENRON Act] "and believe it would go far towards effectively prohibiting manipulation of electricity markets."

Recent events have clearly demonstrated the need for both the Electric Reliability Act of 2004, as well as the ENRON Act. On the other hand, the case is far less compelling for many of the provisions found in the H.R. 6 conference report. It's not just unpersuasive to argue that a 21st Century energy policy must include: liability protections for manufacturers of the groundwater pollutant MTBE; the weakening of landmark environmental laws such as the Clean Air, Clean Water and Safe Drinking Water Acts; and billions of dollars worth of subsidies, most infamously, taxpayer-backed bonds for construction of an energy efficient mall including a Hooters restaurant, it's absurd.

When the Senate last July agreed to send a comprehensive energy bill to conference with the House, few anticipated that we would get back a grab-bag of corporate give-aways so bloated that editorial pages from every corner of this Nation, from Yakima to Pensacola; Texarkana to Honolulu, would call on this body to put H.R. 6 out of its misery. Nor did many of us believe that common-sense legislation such as the ENRON Act-with broad, bipartisan support in the Senate-would be so quickly jettisoned by the conference report's authors.

Make no mistake: many of us in this chamber emphatically believe that we need an energy policy that will liberate this country from its dangerous dependence on foreign sources of oil and position our businesses to compete in the emerging global market for clean energy technologies. But to paraphrase my distinguished colleague from Vermont, Senator JEFFORDS, who has been a great leader on these issues, this Nation needs an energy bill, but certainly not this energy bill.

So today, we are introducing the Electric Reliability Act of 2004 and the ENRON Act, because it's time for this body to put the public interest ahead of the special interests poised to profit so handsomely from the passage of the energy bill conference report. We should take up and pass these individual pieces of legislation, which would mark a substantial achievement in the effort to upgrade the reliability of our Nation's grid and insulate our economy from the disastrous impacts of latter-day Enrons.

In last night's State of the Union speech, President Bush observed that "consumers and businesses need reliable supplies of energy to make our economy run." I could not agree more. He also urged Congress to "pass legislation to modernize our electricity system, promote conservation, and make America less dependent on foreign sources of energy." Nowhere in his address did President Bush mention tax breaks for Hooters; I did not hear him invoke rollback of environmental laws on behalf of polluters; nor did he cite the need to put in place protections for corporate looters such as Enron-all those provisions that have become the hallmark of the energy bill conference report.

So I ask my colleagues to recognize that we can make measurable progress this year on the objectives the President has outlined. But that will happen not by holding good energy policy hostage for bad energy policy, as the authors of H.R. 6 would have it. Rather, it will happen when we agree to set aside the H.R. 6 conference report and pass common-sense, consensus-based energy policy. And both the Electric Reliability and ENRON Acts fit this description.

I ask my colleagues to support these bills.