Electric Co-Ops Warn of Potential Boom-and-Bust Cycle for Nation's Electric Utilities

Apr 25, 2001, 01:00 ET from National Rural Electric Cooperative Association

    WASHINGTON, April 25 /PRNewswire/ -- "The electric utility industry risks
 falling into the boom-and-bust cycle prevalent in other sectors of the
 nation's energy industry," warned Glenn English, CEO of the National Rural
 Electric Cooperative Association (NRECA).  "Driving prices and profits up when
 power is in short supply and down when it isn't.  A situation that could be
 exacerbated by short term fluctuations in fuels such as natural gas," he said.
     In testimony today before the House Agriculture Committee, Subcommittee on
 Conservation, Credit, Rural Development & Research, English drew attention to
 the increasing distance between America's electricity consumers and the big
 utilities that have historically served many of them.  "In the era of
 deregulation, when generating capacity is separated from distribution systems,
 an every-man-for-himself business culture has set in," said English.  "No
 longer do those producing the power have a responsibility to serve consumers;
 instead they have a responsibility to maximize profits for shareholders -- a
 situation, that if left unchecked, will lead to market power abuse."
     English noted that co-op consumers are, in many ways, protected from much
 of this cycle.  "Electric cooperative consumers own the utility that serves
 them," he said.  "Its only priority is providing reliable power at the lowest
 possible rate.  In many cases they also own their power plants further
 insulating them from predatory or unscrupulous business practices."
     English pointed out that current generating capacity margins, averaging
 10% below 1992 levels, are inadequate to fully insure against interruptions
 and cautioned that brownout and blackout conditions are likely in some markets
 this summer.
     "In the aftermath of FERC order 888, and the deregulation of wholesale
 power markets, no entity has clear responsibility for capacity planning,"
 English said.  "In the vacuum, market forces have prevailed offering no
 guarantee that infrastructure development will keep up with demand."
     English urged the subcommittee to consider the interests of consumers
 first when developing plans to increase transmission capacity.  Stating member
 cooperatives' belief that the nation would be best served by reducing the
 financial risk of long-term transmission line ownership, English suggested
 providing Regional Transmission Organizations with the authority to approve
 facilities and enter them into the regional rate base thereby eliminating the
 risk of stranded investment and reducing the cost to taxpayers and consumers.
     English also warned against the repeal of the Public Utilities Holding
 Company Act, warning that without adequate protections, big power companies
 would quickly shed themselves of their least profitable customers, leaving
 those in rural and agricultural communities without any choice at all.
 "Historically, the fortunes of America's farmers rise and fall on the smallest
 and least predictable of variables, a quarter inch of rain or few cents per
 bushel of produce.  Over the last 60 years, affordable, reliable electricity
 has been one of the few things upon which they could depend.  We must work
 together to insure that they do not loose that small measure of stability and
 security," he said.
 
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SOURCE National Rural Electric Cooperative Association
    WASHINGTON, April 25 /PRNewswire/ -- "The electric utility industry risks
 falling into the boom-and-bust cycle prevalent in other sectors of the
 nation's energy industry," warned Glenn English, CEO of the National Rural
 Electric Cooperative Association (NRECA).  "Driving prices and profits up when
 power is in short supply and down when it isn't.  A situation that could be
 exacerbated by short term fluctuations in fuels such as natural gas," he said.
     In testimony today before the House Agriculture Committee, Subcommittee on
 Conservation, Credit, Rural Development & Research, English drew attention to
 the increasing distance between America's electricity consumers and the big
 utilities that have historically served many of them.  "In the era of
 deregulation, when generating capacity is separated from distribution systems,
 an every-man-for-himself business culture has set in," said English.  "No
 longer do those producing the power have a responsibility to serve consumers;
 instead they have a responsibility to maximize profits for shareholders -- a
 situation, that if left unchecked, will lead to market power abuse."
     English noted that co-op consumers are, in many ways, protected from much
 of this cycle.  "Electric cooperative consumers own the utility that serves
 them," he said.  "Its only priority is providing reliable power at the lowest
 possible rate.  In many cases they also own their power plants further
 insulating them from predatory or unscrupulous business practices."
     English pointed out that current generating capacity margins, averaging
 10% below 1992 levels, are inadequate to fully insure against interruptions
 and cautioned that brownout and blackout conditions are likely in some markets
 this summer.
     "In the aftermath of FERC order 888, and the deregulation of wholesale
 power markets, no entity has clear responsibility for capacity planning,"
 English said.  "In the vacuum, market forces have prevailed offering no
 guarantee that infrastructure development will keep up with demand."
     English urged the subcommittee to consider the interests of consumers
 first when developing plans to increase transmission capacity.  Stating member
 cooperatives' belief that the nation would be best served by reducing the
 financial risk of long-term transmission line ownership, English suggested
 providing Regional Transmission Organizations with the authority to approve
 facilities and enter them into the regional rate base thereby eliminating the
 risk of stranded investment and reducing the cost to taxpayers and consumers.
     English also warned against the repeal of the Public Utilities Holding
 Company Act, warning that without adequate protections, big power companies
 would quickly shed themselves of their least profitable customers, leaving
 those in rural and agricultural communities without any choice at all.
 "Historically, the fortunes of America's farmers rise and fall on the smallest
 and least predictable of variables, a quarter inch of rain or few cents per
 bushel of produce.  Over the last 60 years, affordable, reliable electricity
 has been one of the few things upon which they could depend.  We must work
 together to insure that they do not loose that small measure of stability and
 security," he said.
 
                      MAKE YOUR OPINION COUNT - Click Here
                http://tbutton.prnewswire.com/prn/11690X62521766
 
 SOURCE  National Rural Electric Cooperative Association