| ENERGY MARKETS
Utility lobbyists fill Enron void to 'paralyze' electricity debate |
| Colin Sullivan,
Greenwire senior reporter
Several years removed from the two events that sent shockwaves through U.S. energy markets -- the California power crisis and financial collapse of Enron Corp. -- Congress and federal regulators are still wrestling with how best to reform the nation's electricity markets. But the debate this year is markedly different than two years ago, when Enron remained a Washington heavyweight. Now a block of regional investor-owned utilities with their own ideas about electricity reform has stepped in to fill the void vacated by Enron, stalling sweeping efforts at electricity market reform and leaving free-market power advocates struggling to build consensus. The lack of progress on electricity restructuring is best illustrated in the Federal Energy Regulatory Commission's hamstrung attempt to nationalize power grids under its "standard market design (SMD)" reform proposal. Thwarted by utilities in the South and West seeking to protect their low rates, the battle over SMD has come to represent a fundamental shift in lobbying muscle on Capitol Hill, with the Enrons of the world losing turf to old-style investor-owned utilities. Observers see the SMD debate, which is still playing out in the House and Senate, as an indication that congressional momentum has swung from supporting federal reform efforts to retreating behind state-controlled markets and regionally protected transmission grids. Hal Harvey, director of environmental programs at the Hewlett Foundation, said the lobbying dynamic in particular has changed since the days when Enron wielded tremendous influence in the push for open electricity markets, leaving FERC unable to advance its reforms in the face of mounting opposition from well-positioned Southern and Western lawmakers. Since the collapse of Enron in December 2001, power utilities like Southern Co., Exelon and Entergy, and the lobbying groups that represent them, have been able to drive the policy debate in an almost reverse direction, spiking FERC's aggressive reform efforts and reestablishing dominance in the minds of lawmakers on Capitol Hill, experts say. Add to that a general squeamishness following California's failed deregulation effort, and you get precisely what entrenched utilities want -- the status quo. "You take away the dominant force, and you're left with a paralyzed force," said Harvey. The net effect has been proposals in the Senate to delay SMD implementation until 2005 or 2008 and House language that would maintain state authority over transmission lines and greatly reduce SMD's effect on "native-load" utilities in the South, effectively protecting the vertically integrated power companies from federal oversight or interference. Beyond the controversial SMD provisions, many anticipate little progress on electricity reforms in Congress, primarily because power companies are winning the lobbying battle on Capitol Hill and opponents lack the clout to counter their positions. Without a free-market heavyweight like Enron pushing for open markets, Harvey said there has been little impetus for pushing through the reforms. "A lot of states just want to protect their low rates," he said, adding that "one cannot underestimate the backlash to the California problem." An energy attorney who represents energy firms said the investor-owned utilities have "pretty much stopped things in their tracks" and that "SMD has gone by the wayside." Those in the independent power industry say Enron was active in virtually every state and fought for opening markets wherever possible, for itself and for others that stood to gain from price competition and free access to regional transmission grids, both of which lie at the heart of SMD and its organizing scheme known as regional transmission organizations (RTOs). But today, one independent power industry source said, the energy traders are "outgunned at all levels" by entrenched utilities. A independent power provider like Calpine Corp., for instance, protects its interests at the federal level and in 23 states with a staff of less than a dozen people, the source said. By contrast, Southern Co., AEP, Exelon and Entergy "can deploy resources virtually without limit" and need to wield influence in only a few states to meet their objectives. "What we have is a wildly uneven competitive playing field, with rules that are under constant threat of reinterpretation," said the source, describing an expensive labyrinth of state and federal lobbying battles in which independent generators fight against vertically integrated utilities and their affiliates. "In sum, we have [investor-owned utilities] that are protected by their lobbying powers," the source said. The money trail Tyson Slocum, an energy markets specialist with the nonprofit watchdog group Public Citizen, agreed there has been a significant shift in influence with the 108th Congress. He points to data from the Center for Responsive Politics showing Atlanta-based Southern Co. at the top of the list of energy sector campaign contributors during the 2002 election cycle, a place Enron held just two years before. "That's clearly the big difference this year," Slocum said. "The big contributors used to be Enron, Williams, Dynegy, Reliant. Now it's Southern and the other big vertically integrated utilities. That is the big variable explaining why Congress has been more eager to aggressively address what FERC is doing." Ironically, Slocum and other environmentalists applaud the shift in lobbying influence because they support slowing deregulation efforts and protecting consumers, even if they disagree with the investor-owned utilities on repealing the Public Utility Holding Company Act. Slocum acknowledged the situation has created some strange bedfellows, while the Natural Resources Defense Council's Ralph Cavanaugh said any sort of agreement between utilities and environmental groups means progress. Cavanaugh added that Southern Co.'s agenda is hardly representative of all utility companies, especially in the West where power producers like PacifiCorp have won over environmentalists by agreeing to strict demand-side responses to energy supply problems. "The utility industry is not the Southern Company," Cavanaugh said. "There are new voices worth looking at." Slocum and Cavanaugh both said that before the market meltdown of 2000-1, Enron and other energy firms pursued free markets religiously, but the belief that free markets always lower product prices turned out to be less certain, as evidenced in California. They attribute the slow movement in Congress to California's failed deregulation effort, with the demise of Enron a significant contributing factor. Others say energy debates in Congress often start strong but fizzle because lawmakers may have a vested interest in not producing legislation in order to continue the flow of dollars. Electricity is a perfect example of this dynamic, they say, given the wide dispersal of interested parties with money to spend on lobbying and campaigns. "You peak everybody's interest as long as you propose it but never dispose of it," the energy attorney said. "It's one of the great cash cows, because there are some big companies out there with a lot to lose." Southern Co. leads the way Political analysts often claim that tracking the influence of lobbyists in Congress is as simple as following the money trail. As charted by the Center for Responsive Politics, 2002 election cycle contributions point to heavy influence from Southern Co., Exelon, Dominion Resources, Entergy and the Edison Electric Institute, the trade group that represents investor-owned utilities. Together, these five entities accounted for $5.8 million in campaign contributions in 2002, with Southern Co. the leading energy sector contributor at $1.9 million. In 2000, when Enron topped the energy sector money list, it gave $2.6 million to candidates. Southern Co. was second on the list in 2000, with $1.48 million in contributions. More interesting, perhaps, is the disproportionate level of spending by electric utilities, which significantly outspent oil sector companies in campaigns during the 2002 elections. For example, Southern Co. and El Paso Corp., a company that has retreated to its core business, gas pipeline operations, since the California crisis, outspent oil giants ChevronTexaco and ExxonMobil by more than $1 million in 2002. Calls and e-mails to several utility companies and their trade group, EEI, seeking comment on contributions were not returned. Several key lawmakers in the energy debate also refused to comment. The latest Sensing an unbalanced fight over the SMD and other electricity reforms, this week officials from four states that support opening wholesale markets came to Capitol Hill to voice support for FERC's reform efforts. The regulators -- from Massachusetts, Michigan, Pennsylvania and New Jersey -- told lawmakers that derailing SMD could hurt deregulation efforts in their states, where they say it is helping consumers. A spokesman for one of the visitors, Pennsylvania Public Utility Commissioner Glen Thomas, said the trip to Washington was a conscious effort to offset opposition to SMD in the South. "There's been a lot of attention paid to the California crisis and the Enron meltdown, but not as much attention goes to states that [deregulated] in the right way," the spokesman said. Specifically on their minds was a recent amendment to the Senate energy bill from Sens. Richard Shelby (R-Ala.) and Trent Lott (R-Miss.) that would postpone SMD implementation until 2008. That adds three years to the Senate bill's current language calling for FERC to implement the plan in 2005. Michigan Public Service Commissioner David Svanda described Senate amendments to delay SMD implementation as "very problematic," adding that "this would essentially prevent us from doing our work in our states." The Shelby/Lott amendment came just days after a resolution from the Southeastern Association of Regulatory Utility Commissioners condemned the SMD concept, essentially rebuffing FERC Chairman Pat Wood's attempts to ease opposition in the South. Regulators from Alabama, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Virginia approved the resolution, citing the need to protect electricity consumers in the Southeast from federal encroachment and defend state jurisdiction over power lines. Utilities should not be ordered to turn transmission assets over to RTOs, the states said, nor should Southern customers be forced to assume costs borne by customers in other regions in the interest of nationalized competition. The 2002 election cycle The top 10 energy sector
contributors for the 2002 cycle, according to the Center for Responsive
Politics:
Southern Co.: $1.9 million,
32 percent to Democrats, 68 percent to Republicans.
To contrast, in the 2000 cycle, Enron outspent the next closest contributor (Southern) my more than $1 million. Enron gave 71 percent of its 2.6 million to Republicans, with 29 percent going to Democrats. |