PRESIDENT'S MESSAGE

Electric Perspectives, Jan/Feb 2006 by Kuhn, Thomas R

Short Term, Long Term

Since passage of the Energy Policy Act, the shareholder-owned electric utility industry has been a forceful voice in the debates surrounding the Act's implementation.

Relatively speaking, that implementation effort is in the short and near term. The Department of Energy (DOE) has already released its study on economic dispatch; and the Federal Energy Regulatory Commission (FERC) has issued rules implementing the Public Utility Holding Company Act of 2005 and repealing PUHCA of 1935 (which occurs officially on February 6). As 2006 begins, the industry awaits a flurry of important FERC orders, also stemming from the Energy Policy Act-on the structure of an energy reliability organization, on revising the criteria for mandatory power purchase obligations and "qualifying facilities" under the Public Utility Reporting Policies Act of 1978, on merger reform and the scope of FERC's merger authority.

There's more to come. In August, for example, FERC's report to Congress on economic dispatch and the final rule on transmission pricing incentives are due.

From the beginning, in those cases and myriad others, Edison Electric Institute (EEI) and its member companies have worked the issues diligently and comprehensively-we know how much that short-term work has long-term repercussions. Everyone realizes how crucial these areas are to the industry's structure and vibrancy. The new law will modernize outdated federal electricity laws. It will reinforce the reliability of the grid. It will enhance fuel diversity and promote technological advances for coal, nuclear power, and renewables. The sweeping legislation will benefit electricity customers well into the 21st century.

Efficiency for the Customer

The law's energy efficiency provisions also benefit customers, who see rising energy prices in the current winter heating season. Since the early 1970s, electric utility programs have helped residential, commercial, and industrial customers manage energy use: Over the past 15 years, these programs have saved nearly 700 billion kilowatt-hours. Electric utilities invested more than $4.5 billion in energy-efficiency efforts between 2001 and 2003 alone. Also, utilities nationwide provide nearly 800 programs for low-income customers, including billing assistance, weatherization help, level billing, and more. Utility fuel fund assistance to low-income households totals more than $1 billion annually. With the natural gas challenges facing our nation, these programs are more important than ever.

The Act's measures to encourage wise energy use and energy efficiency will help the industry amplify its efforts: stricter conservation standards for products using large amounts of energy; reauthorization of the Energy Savings Performance Contracts program; builder tax credits for energy-efficient new homes; homeowner credits for energy-efficient home improvements, appliances, and clean cars, such as hybrid vehicles; and funding for public education campaigns.

This February, in accordance with the Energy Policy Act, DOE reports to Congress on recommendations for demand response; it is also filing a report on appliance standards and issuing guidance on advanced metering for government facilities. This August, FERC reports on demand response as well; and DOE releases studies on policies that promote utility programs to reduce energy consumption and on the best way to measure energy efficiency. The industry has been and will be heavily involved.

Such intense involvement and hard work lead to long-term success. It has been that way as the industry has pushed energy legislation over the last decade. It has been that way since EEI moved from New York to Washington in the 1970s to ensure that the industry maintained its strong voice in an increasingly complex and political world. It has been that way since Edison experimented in his lab. I believe that 2006 will be as pivotal as any in the 1970s, because how the Energy Policy Act actually plays out will affect the industry and its customers for years. But I also know that we will always need intense involvement and hard work in the short term, because there are always new challenges waiting in the long term.

Thomas R. Kuhn

President, Edison Electric Institute