Energy Bill Would impose Power Grid Rules

Responding to the summer's massive power blackout (search), Congress is considering in its broad energy bill the first federal rules, with penalties, to protect electricity transmission (search) systems from rapidly cascading outages.

The Republican blueprint for an overhaul of U.S. energy priorities also would direct the government to order construction of critical power lines if states do not act. In addition, companies could charge more for moving power to spur investment in new lines.

Some experts have questioned whether the electricity proposals in the energy legislation are enough to protect against a repeat of the rapidly moving blackout that blackened parts of eight states, from New York City to Michigan, in a matter of minutes in August.

On Tuesday, a U.S.-Canadian task force (search) is scheduled to make public an interim report on the blackout's causes. Documents already released suggests that communications failures, equipment problems and shortcomings in electricity grid management probably played a role.

A final version of the energy legislation is expected to be taken up by the House and Senate as early as Tuesday.

According to details released Saturday, the GOP-written legislation does not attempt to correct the fragmented grid system that some utility officials and regulators contend has added to reliability problems.

The bill calls for a three-year delay of a federal plan that requires utilities to adopt a national grid design and forces utilities to turn operation of their power grids to regional managers.

The measure also stipulates that transmission owners - often entrenched utilities - make giving electricity to their own customers a priority. Independent power producers argue this hinders development of competitive markets and, in turn, transmission line improvements.

But utilities and state regulators across the South and Northwest have opposed the government's attempt to impose a national grid design. They point to California's experience with competition and want no part of it.

Many utility executives and lawmakers who developed the bill a that that the new rules and other measures such as repealing a 1935 law that restricts the activities of large utility holding companies will go a long way toward improving and protecting power grids.

"Over time it will minimize, if not avoid, blackouts like the one we had," said Sen. Pete Domenici, R-N.M., the chairman of the negotiators assembling the legislation. He said the bill will clear up who pays for transmission.

Currently, the private North American Electric Reliability Council (search) establishes grid reliability standards, but has no authority to enforce them. In 2002, the council reported finding 541 violations of its standards which the group estimated would have produced $9 million in fines if it could have collected them.

The House-Senate conference will take up the energy draft on Monday. The bill is not expected to be significantly changed before going to the House and Senate for a final vote later in the week.

According to details of the bill released Saturday, it will speed the requirement to more use of corn-based ethanol. Refiners will be required to use at least 3.1 billion gallons a year of ethanol in gasoline by 2005 and 5 billion gallons, about double today's production capacity, by 2012.

The legislation would make liability protection for manufacturers of the gasoline additive MTBE retroactive to Sept. 5. The provision would apply to a number of recent lawsuits, including one by the state of New Hampshire, filed as a result of MTBE water contamination.

Lawmakers put into the bill a coastal erosion plan that would funnel $1 billion over 10 years to six states from the Gulf Of Mexico to Alaska. Distribution of the money - which comes from oil and gas revenue - is linked to offshore energy development.

Louisiana, the home state of Republican Rep. Billy Tauzin, who led the House energy negotiations, is expected to reap more than half of the erosion funds, according to congressional staff estimates.

Also included is a provision that would allow a number of cities to postpone compliance with federal air quality requirements if they can show that some pollution comes from sources hundreds of miles away. The provision was sought by Rep. Joe Barton, R-Texas., where several of the cities including Dallas-Fort Worth are located.

Environmentalists have criticized the measure as an attempt to circumvent the Clean Air Act (search).