• Perspective on Federal Stranded Costs Debate by Charlie Higley of Public Citizen (September, 1997)

Both the Clinton Administration and House Speaker Newt Gingrich are preparing electric restructuring legislation which may preempt state and local proposals and eliminate local community options in the process of deregulating the industry.

The most significant of these bills was submitted by Representative Dan Schaefer (R-Colorado), chairman of the House Commerce Subcommittee on Energy and Power. The "Electric Consumers' Power to Choose Act of 1996," (HR3790) mandates that all states deregulate their electric industries - including municipal utilities and consumer-owned coops - by December 15, 2000 or face federally imposed deregulation by the Federal Energy Regulatory Commission (FERC).

While Schaefer's proposal would repeal the Public Utility Holding Company Act of 1935, reducing the power of the federal government to prevent a recurrence of monopolistic abuses by massive electric holding companies, critics say the bill neither adequately addresses the industry's flourish of mergers and acquisitions over the past year, nor protect against the anti-competitive practices of "deregulated monopolies."

Alan Richardson of American Public Power Association said the bill "undercuts the principles of federalism and community decision making" by stripping state and local governments of historic powers under the plan. State commissions would be prohibited from regulating rates, and neither state nor local authorities would have the power to stop an electricity supplier from selling power over local distribution wires. "Mark this date on your calendar--December 15, 2000!," announced Citizens for State Power. "That's the day the Federal Energy Regulatory Commission--the unelected, highly unaccountable regulatory cousin on the Department of Energy--gets to start wiring electricity rate policy for the states." According to Energy Online, the bill subjects local governments' historic authorities - imposing license and permit fees, making universal service and quality of service requirements, and protecting consumer rights, safety and welfare - to a federal "nondiscriminatory and competitively neutral basis" requirement designed to protect the electric industry's free access to local distribution wires against local community resistance.

These measures appear strange from a Congress that purports commitment to handing federal powers over to state and local governments. Under a similar criterion, the Federal Communications Commission has prohibited state and localgovernments from banning cellular tower construction on health grounds, and is currently considering a ban on local government interference with radio tower construction or even taxes on permits as "barriers to entry" under the 1996 Telecommunications Act. Schaefer's bill is silent on who must pay up to $300 billion in "stranded cost" claims by utility owners. With the President and House Speaker preparing bills for 1997, the issue will be actively taken up in the next session, with major ramifications for local communities, cities and towns.