Energy Policy Act of 2003-Conference Report-Continued

ENERGY POLICY ACT OF 2003-CONFERENCE REPORT-CONTINUED

Ms. CANTWELL. Mr. President, I commend the Senator from Alaska for bringing up an important issue of jobs in this bill, because clearly one of the key components that we in the Northwest are interested in is that this bill might move us forward on an energy policy that would create jobs and diversify Northwest power.

When we ran into a drought in 2000 and ended up having to go out on the spot market and buy electricity, we certainly were gouged by some manipulated contracts. But one of the things that could provide us some long-term relief in the near term from future droughts and overreliance on the hydrosystem would be a natural gas pipeline from Alaska down to the continental United States which would help us in diversifying and protecting against such incidents in the future.

But let us be clear. This bill doesn't get the job done. The Alaska pipeline that we have all talked about as it relates to natural gas doesn't have the framework within this legislation to move forward.

I commend the Senator from Alaska for focusing on job issues. I agree with her that an energy policy must accomplish two things. It must set a policy for us to get off our dependence on foreign oil and again for America to have an advantage in job creation as we move on a 21st century energy policy. But this bill does nothing to help us diversify in the short term on natural gas that is available to us in Canada and Alaska. It does very little to help us in the future with the hydrogen fuel economy which, it is estimated, could create 750,000 jobs over the next 10 years. That is not just the kind of activity that would make us a leader in the United States; it is the kind of activity that would make us a global leader in the energy system of the future.

I will take a few minutes to talk about where we are with the Energy bill and where we have been because yesterday I spent quite a bit of time talking about the overall aspects of the bill. Something of great concern to me, being a member of the Energy and Natural Resources Committee, I wanted to make sure, given the fact this bill has been drafted mostly in secret, starting with the Vice President's energy task force. That left many Americans out of the process of understanding what the administration's energy proposal would be, which led to a conference report that was done in secret by the Republican Party. Yesterday I needed to spend my time talking about the various aspects of this bill in a comprehensive way that would give my colleagues a perspective of someone from the Energy and Natural Resources Committee who has dealt with some of the challenges and problems.

Clearly, this 2003 Energy bill is becoming known as the bill about Hooters, polluters, and about the looting of America that has happened, particularly on the west coast, particularly in my State.

Americans are trying to understand this. I have had phone calls to my office: I don't understand. I understand conservation, I understand renewable energy, I understand incentivizing. What does Hooters have to do with an energy policy?

In this legislation we have included green bond projects; that is, we would help in the public financing of proposals to various developers in Colorado, New York, Iowa, and Louisiana, with $2 billion in private bonds to build energy-efficient developments. I am for energy efficiency, but last I heard Hooters had its own airline, was doing quite well and probably could borrow any money it needed to invest in energy efficiency.

I have small businesses all over the State of Washington that got smacked with the energy crisis. They had to conserve; they had to shut down. Employees were coming up with all sorts of creativity: nobody got to borrow money from the Federal Government that would allow them to have a line item in a bill that said specifically, this project is for you.

Broad tax credits for conservation programs in which all companies can apply for some of the incentives to get America to conserve-because conservation is a great program, particularly in times of less supply-is a very good idea. But that is not what Hooters got. This particular project, and the three others mentioned in this legislation, specifically include a line item for particular projects. What qualifies them? I find it very hard to explain to my constituents. I know there is a daiquiri bar in and an energy efficient bowling alley and a movie theater and everything else as part of this Hooters restaurant development. But I don't understand why they should get some sort of line item for bonds, for money that needs to be borrowed for fuel efficiency when everyone else in the country has had to do their own jobs, to turn out the lights and conserve. What is so special about this particular restaurant?

As far as the polluters, obviously, my colleagues have done a great job talking about the MTBE provision and the fact that people who have been involved with that product are seeking relief from being liable for cleanup. I have heard from elected officials all over the State of Washington that they do not want to be the deep pocket. Cities have asked: Why is it that you are going to let these particular polluters in this bill off the hook and stick us with the cleanup cost of this particular product? It is very unfair that that is the approach we would take. My colleague, the Senator from Illinois, and everyone else has been very articulate on that issue.

I am also amazed, as we look at the other aspects of the bill, particularly relating to clean water and the Clean Water Act. Why would my colleagues would want to say, under the Clean Water Act, this is legislation that would somehow say to any coal-producing, oil, or gas company producer in the future under this bill, the 2003 Energy bill, that you do not have to comply with clean water runoff standards. Why should they be exempt? I cannot understand that. You build a shopping center. Guess what. You have to comply with runoff standards from the Clean Water Act. If you build a hotel, you have to comply with getting a runoff permit and saying how you are going to deal with runoff. Why? Because there are two sources of pollution. We have the source point pollution and then we have pollution that occurs from the runoff. We want to control that.

We are demanding every other business in America has to get a permit when they go through development to deal with runoff, to make sure we have clean water. But somehow we are going to allow certain types of industries in the Energy bill, particularly oil, gas, and coal, to be exempt? What kind of policy is that?

The most famous person on this chart is Ken Lay. Why is he the most famous person on this chart to people in Washington State? My constituents want to know why, when they have been gouged with higher energy prices, why this man is not in jail. I don't have a very good answer.

This bill is about pollution. It is about special deals. It is about allowing a part of our country to be looted, to allow special interests to stick their hands in the pockets of ratepayers. That is what I will focus on tonight. This bill takes a drastic step backward. While complex to understand, it is critically important for my colleagues to know they cannot take the drastic steps in this measure that will overturn 70 years of case law, protecting consumers with just and reasonable rates.

I talked a little bit about the Clean Water Act. I don't know that I have to go over that again, but I ask my colleagues, why make every other business in America comply with the Clean Water Act? There are probably lots of other industries in the country; yet they have to comply-if they want to develop-with runoff standards. Yet we will let oil, gas, and coal companies off the hook. They do not have to get a permit anymore.

What is the price gouging that has gone on in this legislation? It is significant, and I will talk about that price gouging because it is very important to understand.

I see my colleague from Florida, and I agreed to yield him some time. Would the Senator like that time now?

Mr. NELSON of Florida. If the Senator from the State of Washington would yield.

BREAK IN TRANSCRIPT

Ms. CANTWELL. Mr. President, I thank the Senator from Florida for his solid statement about the challenges facing us in drafting an Energy bill. The Outer Continental Shelf areas are somehow thrown up in the open as to whether they are going to be part of the policy discussion, whether States have rights, whether the development along those coastal areas is going to go through the normal process or whether industry is going to be able to just run roughshod over that.

So I appreciate the Senator's statement.

Mr. President, how much time remains?

The PRESIDING OFFICER. The Senator has 12½ minutes remaining.

Ms. CANTWELL. Mr. President, I will try to be brief to explain why I have a major objection to this legislation as it relates to what we are doing or failing, I should say, to do to protect consumers from the Enron price gouging that has happened. I think it is an amazing story.

Some of my colleagues were on the Senate floor earlier today talking about how part of the California crisis was that in California they did not pass on the cost of electricity to the retail side and somehow artificially suppressed demand. They asserted maybe that would have worked everything out.

Well, let me tell you, in Washington State we paid the cost at the retail level because we have a lot of public power in Washington State. And we had a drought. It was the second worst drought in the history of our State. It just so happened when that drought occurred it was the same time that California had deregulated, and the spot market was going crazy, and the Federal Energy Regulatory Commission, which has oversight of these issues, was failing to do anything about it.

But public power has a requirement that they have an obligation to serve. So that obligation to serve meant they had to go find power somewhere. Now, they had reserves. They had alternative plans. But they went to the marketplace to buy power and found out the power was selling at exorbitant rates because of the deregulation that happened in California and the fact that the Federal Energy Regulatory Commission was failing to take action.

In fact, it got so bad in our State because of the high rates that we had, in the county I live in, 14,000 people basically lost their electricity that year. We had a 44-percent increase in the disconnect rate in Snohomish County, my home county, that year because of the high cost of energy. People could not pay their bills.

Now, I know some people think: Well, bad decisions were made by a company, and that may not happen again, or somebody did not plan for enough power in the future. But we all know now that Enron manipulated these rates. They have admitted to manipulating the rates. The Federal Energy Regulatory Commission has said they manipulated those rates. So we all know what has gone on in those situations. But I don't think America knows that people in my State are still paying on those manipulated rates.

And my consumers are mad. They are furious. They are furious that this Energy bill not only fails to recognize we need stricter guidelines against market manipulation to prevent that from occurring in the future, but somehow this bill actually goes further in condoning those acts by saying it is going to try to preserve those Enron contracts resulting from manipulation.

Let me give you an idea of what consumers have said to me.

One of my constituents writes:

We are writing to express our extreme concern regarding our latest electricity bill. We have done everything in our power to conserve, and that is reflected in our usage, which has been down to a very minimal level. We have lived at this address since 1979, and we cannot continue to live in Snohomish County because the electricity bills are almost greater than our mortgage payments. We are currently considering moving.

Another constituent writes:

I just received my bill today. I tried to prepare myself before opening the envelope, but, guess what, I didn't prepare myself 6,000 times enough because my bill was $800. That's absolutely crazy. We have lived at this address for 23 years, and we have tried our best at conserving. Where is it going to end?

So my constituents-and I could read many more. I could tell you how the Everett School District in Snohomish County ended up having a million-dollar increase in their energy budget, how small businesses have had huge increases in their energy budgets.

It includes the grocery industry in the State of Washington-everybody knows that grocery stores operate on slim margins and use a lot of electricity. Do you know what they have said to me? "We are not going to build another grocery store in Snohomish County because your rates are too high."

And our rates are too high because we continue to have to pay on Enron contracts that Enron admitted they manipulated. Why is it that we have to continue to pay on these contracts?

You would think that at least at a minimum the Energy bill would take a step forward and say: Let's prevent the kind of Enron manipulation from happening again. But we are not doing that.

In this bill, originally Senator Domenici's proposal, roundtrip trading is prohibited. But there are other things we proposed: basically making sure people don't dodge price caps; making sure people don't falsify demand schedules, like the load shifting that happened in California; people who would go out of the region and then sell power back into the region; obviously, under the scheme Fat Boy, people were hiding some of the energy supply that they had-all those things are still allowed under this Energy bill.

As much as my colleagues have tried to articulate this on the floor, somehow the other side of the aisle wants to ignore the reality: This bill is not dealing with the Enron manipulation schemes and blocking them from happening again. I don't see, just on this issue alone-if there was nothing else in the Energy bill-why people would support this Energy bill because of this policy.

I ask my colleagues, I know it may not seem to you like an issue because it didn't happen to your State, but find me a Member on the other side of the aisle who would accept having a 50 percent rate increase for their consumers, not just for 1 year but for the next 5 years because that is what we are paying. And we are paying on those contracts to Enron. I have a letter from a woman. I will not go into the details, but she basically ended up losing her job and having to move to a different area because of this.

What is the real issue? These contracts have been manipulated. These rate are the increases. These are the numbers from 2002, but as I said, almost a 50 percent rate increase in Snohomish County where I live. Seattle City Light had a 60 percent increase. So we are talking about real dollars that my constituents are paying on these Enron contracts.

Enron admitted they manipulated contracts. They admitted that they weren't just and reasonable rates and that they used all these schemes. You would think my utilities could get out of those contracts. You would think my utilities could reform those contracts. In fact, I am amazed; the Department of Justice actually went after Enron and got them to reform a contract as it related to a Federal entity, the Bonneville Power Administration, because they had the power of the DOJ behind them. But when my little utilities, which don't have the Department of Justice working on their side, tried to go to court and get those contracts reformed-no luck. They were sent to the Federal Energy Regulatory Commission, which got on a conference call with Wall Street investors, told the Enron company and their interests, don't do anything to negotiate and reform those contracts because basically we are going to rule in your favor.

That is in a Wall Street Journal article. I ask unanimous consent to have it printed in the RECORD.

There being no objection, the article was ordered to be printed in the RECORD, as follows:

[From the Wall Street Journal, Mar. 31, 2003]

POWER POINTS: SECOND THOUGHTS ON FERC'S CALIFORNIA D-DAY

(By Mark Golden)

NEW YORK.-Even though the Federal Energy Regulatory Commission's big day on California began Wednesday with a 400-page catalog of bad behavior by energy companies, the second look by Wall Street was that things weren't so bad.

FERC staff reported to Congress that Reliant Resources (RRI) was significantly responsible for the high prices for natural gas in southern California in the winter of 2000-2001, which may have cost consumers billions of dollars.
Reliant and BP PLC (BP) did sham electricity trades, the staff alleged, and dozens of companies used trading strategies like the infamous "Get Shorty" stuff that Enron Corp. (ENRNQ) used in California's power market. That was illegal, staff said, and all those companies should be forced to cough up any related profits. Refunds due California for overpriced crisis-era power sales could be increased.

But the "D" in what one Wall Street analyst has been calling "D-Day" turned out to stand for "dirt": A lot of ugly stuff that will make it hard for energy companies to continue claiming as they have that there wasn't much funny business during the crisis, but which isn't that horrible from a financial or legal perspective for most of the companies involved.
Reliant's "churning" of the gas market, for example, wasn't illegal, FERC staff said, and the conclusion that the practice caused prices to rise required a leap of faith. The Reliant-BP trades may cause BP to wonder if its trader rigged a higher bonus, but they had nothing to do with the soaring prices that prevailed during the crisis.

FERC staff exonerated Williams Cos. (WMB) from claims it manipulated the California gas market. And FERC commissioners said they were going to take some time to decide whether their staff was right about the Enron-like trades being illegal.

During the public meeting, the stock prices of several companies named in the investigation fell hard. Most recovered Thursday and again Friday as the smoke cleared.

MIXED MESSAGES

FERC's Donald Gelinas, who headed the investigation into market manipulation for the past year, presented his findings in the well-attended public meeting.

After the meeting and a press conference, FERC Chairman Pat Wood and Commissioner Nora Mead Brownell, the commission's two Republicans, held a password-protected conference call with a select group of Wall Street analysts. According to several of those present, the commissioners conveyed the message that the staff findings weren't that bad.

According to one analyst on the call, the split approach makes sense, FERC wants to present a public image as a tough cop on the beat so that states and the U.S. Congress support its push for advancing electricity deregulation. On the other hand, FERC doesn't want to scare away more investment from the decapitalized electricity sector, which is in desperate need of new transmission lines and will need more power plants soon in some regions of the country.

"It was the typical thing they've been doing-trying to please Wall Street at the same time they are trying to please California, and they end up not pleasing anybody," that analyst said.

Brownell discussed the prospects for the commission's decision-expected but postponed on Wednesday-on whether to abrogate long-term power contracts signed during the crisis. She said there are likely two votes against abrogation on the three-member commission, and that the commission will hopefully issue an order in the next couple of weeks, according to one analyst on the call, who took notes.

Brownell's comments on the contracts were similar to what was said in the public meeting, even if the latter tone was more assuring to investors.

Schwab Capital Markets energy stock analyst Christine Tezak didn't agree that the commission has presented different messages to different audiences. Instead, their discussion with the analysts reflected the audience's primarily financial concerns.

"For Wall Street, the whole blame game thing isn't that interesting to us," she said. "We want to know what actions they took and what it's going to cost and when."

FERC APPROACH DEFENDED

Observers shouldn't necessarily expect the messages of the staff report and the commissioner's discussion with analysts to be consistent, a FERC spokesman said.

"The intent was to get an independent fact-finding analysis about whether Enron or any other company had the ability to manipulate the markets for power and gas in the western states in 2000 and 2001," spokesman Bryan Lee said.
Chairman Wood wouldn't try to influence the outcome of that investigation, nor does the investigation reflect his opinion on the matters, Lee said.

Still, a press release issued at the time of the report promised "tough action" from commissioners based on the report. Wood said that any doubts about FERC's role as effective "cop on the beat" should be dispelled.

Ms. CANTWELL. Enron is actually suing consumers across America. They are suing consumers in my State, in Washington, in Oregon, California, Nevada, Idaho, in the Midwest, in the East. The States on this map, those are States in which Enron is saying to utilities and to consumers and ratepayers: I am taking you to court to make sure you continue to pay on manipulated contracts because really you are going to be the deep pocket for these energy prices.

It is just plain wrong. It is plain wrong that that is what America is dealing with and that this particular bill does nothing about it.

Since the beginning of these contracts in my area, I have probably paid $700 on my own energy bill-$700 more than I would have paid if we would have had normal rates. Here is a check from me. It is not really my bank. It obviously doesn't have my bank number on there. But that is what I am going to next pay to Enron because of the fact that my utility can't get out of those manipulated contracts. My utility can't get out of those contracts. That is what everyone in Snohomish is going to have to pay, $370 more, even though we have already paid $796 more since the crisis began.

There is another example of a woman in Snohomish County, where I live, who was trying to take care of her mother. Basically, she got laid off from Boeing. She got a utility bill for $605, nearly double the last bill she had. Her mother got a bill for $747. Her mother is on a fixed income. She only has $1,500 a month from Social Security, and she is supposed to pay 747 of those dollars out to Enron to foot the bill for manipulated contracts. And this body can't do any better than to condone those contracts and further protect them under this bill? It is amazing. It is truly amazing.

So where are we on this problem and this issue? Just look at what ratepayers in my region have had to pay since 2001. The total my ratepayers have had to pay is $1.5 billion, over and above the amount they otherwise would have had to pay in the Northwest, all because they are stuck with long-term Enron contracts. It is unfair. It is unjust. It certainly isn't reasonable.

What is the problem with this legislation in front of us? Again, you would say: That is an issue of manipulated contracts. You ought to go to court. You should figure out what the court has to say about those contracts.

Actually, many of my constituents did go to court. Snohomish County PUD went to court. Enron turned around and countersued. Basically, the court said: You don't have standing here because this isn't a decision before our courts. You have to go to the Federal Energy Regulatory Commission. They are the people who oversee these issues.

So when they went to the Federal Energy Regulatory Commission, they said: There is market manipulation, but we are not going to do anything about it. And, frankly, it is a problem, but our report only is going to demonstrate that there was manipulation and we are not going to do anything.

So what we have had to do is really push on the fact that the Federal Power Act says there should be just and reasonable rates.

This bill further amends the Power Act, and it basically says that these contracts should stand. It basically gives the contracts sanctity. It goes one step further than 70 years of case law and says: Even though the Power Act requires just and reasonable rates, we are going to guarantee these contracts. And FERC and the courts don't have to reform them ever, unless somehow someone can prove that a failure to do so is somehow contrary to the public interest.

We are setting a whole new legal standard in this bill. We are failing to correct the Enron manipulations. We are failing to give direction in a key area of consumer protection. Not only that, we are changing 70 years of case law and saying it is OK to manipulate contracts.

It is time to defeat this bill which supports Hooters, polluters, and the Enron looters that are gouging American ratepayers.

I yield the floor.