January 25, 2005

U.S. ELECTRIC TRANSMISSION SYSTEM MUST BE UPGRADED TO MEET CONSUMER DEMANDS ACCORDING TO EXPERT PANEL

Consumer and Industry Leaders Team with Policymakers
To Recommend Electric Transmission System Improvements

WASHINGTON, D.C. January 25, 2005 - A group of senior executives and leading experts from industry, government, and the public interest sector today announced the results of a consensus strategy to improve the nation's electricity transmission system, released by the Consumer Energy Council of America (CECA).

The report by CECA's Transmission Infrastructure Forum, Keeping the Power Flowing: Ensuring A Strong Transmission System to Support Consumer Needs for Cost-Effectiveness, Security and Reliability, found that coordinated regional planning, consumer input in decision making, clearly established jurisdictional boundaries between federal and state regulators, and mandatory reliability standards are critical elements in ensuring that the nation's future electricity needs are met. (A copy of the report can be found on the CECA website.)

"The transmission grid is the backbone of our nation's economy," said CECA President Ellen Berman. "The challenges confronting the transmission system are real, immediate, and consequential, as evidenced by the August 14, 2003 Blackout. To keep the power flowing, we are issuing a broad call for action to government leaders and industry," Berman said.

"The study undertaken by the CECA Transmission Infrastructure Forum will inform consumers on the ways our nation's transmission system is operated. The CECA Forum has recommended policies that are essential to meeting the nation's future electricity requirements in the next decade and policymakers should implement these recommendations," said John Derrick, Chair of the CECA Forum and former Chairman of the Board of PEPCO Holding, Inc.

The CECA Forum determined that future transmission policy should provide for: critically needed consumer input into transmission policy; provision of electricity that is affordable, reliable and environmentally stable by each region of the country; a durable regulatory framework; flexibility for institutional and structural options; clear cost recovery and allocation mechanisms; coordinated regional transmission planning; and the availability of necessary public/private-sector funding of advanced technology research and development.

The CECA Forum recognized that each region of the country has a unique perspective on how it operates and how best to serve its consumers. The CECA Forum was unique in that it evaluated how each region coordinates and plans for transmission improvements and how such processes impact the consumers in the region it serves.

Among the CECA Transmission Infrastructure Forum's key recommendations are the following:

· Congress should mandate transmission reliability standards, either as stand-alone legislation or as part of comprehensive legislation;
· Congress must clarify the jurisdictional roles of FERC, the states and regions which will result in certainty for the "rules of the road" and thus increase investment in the transmission system;

· Regions should adopt default cost recovery and cost allocation mechanisms based on a durable regulatory framework so that certainty is established and rules are not changed mid-stream;
· States should establish performance-based regulatory incentives where the benefits are clearly demonstrated;
· FERC should continue to encourage effective regional transmission planning entities, where appropriate, while recognizing regional differences; and
· The Department of Energy and the Department of Homeland Security should expedite and coordinate national security transmission planning.

Participants in the CECA Transmission Infrastructure Forum included federal policymakers, members of state public utility commissions, and leaders from investor-owned utilities, rural electric cooperatives, municipally-owned utilities, independent transmission companies, independent power producers, state consumer advocates, state energy officials, state legislators, engineering firms, industrial consumers, national laboratories and academia. (A detailed participants list is attached.)

Included below are additional statements from a cross-section of members of the CECA Forum:

The Honorable Connie Hughes, Commissioner, New Jersey Board of Public Utilities and Chair, NARUC Ad Hoc Committee on Critical Infrastructure: "CECA has spearheaded an excellent forum with distinguished leaders to launch definitive goals and objectives for our country's electricity transmission system. I trust that the states, along with our federal and local colleagues and industry leaders who together worked diligently in this process, will continue to succeed in this effort for the betterment of our entire nation."

Charles A. Acquard, Executive Director, National Association of State Utility Consumer Advocates: "This report on the evolving bulk power transmission system refocuses the discussion on the primary purposes of the grid, to provide power more reliably and more economically for the benefit of consumers."

William Parks, Acting Director, Office of Electric Transmission and Distribution, U.S. Department of Energy: "It is heartening to see a broad consensus come out of the CECA Forum on the importance of Congress enacting mandatory reliability standards as well calling for effective regional planning, both crucial steps to modernizing and expanding our nation's electric delivery system."

John Anderson, Executive Director, Electricity Consumers Resource Council: "I believe this is the first such forum that attempted to look at the transmission system from the perspective of consumers. ELCON represents large industrial consumers. For our members, having an adequate, reliable and efficient transmission system is a very large concern. As this report clearly states, the voice of consumers, large and small, is a voice that should be part of the planning process when we look at the transmission grid. Directly or indirectly, consumers will pay for transmission expansions, upgrades, and additions. I hope that those who own and operate the transmission grid take the views of consumers into account when they make those decisions."

Michehl Gent, President and CEO of the North American Reliability Council: "CECA has taken a complex topic and developed a clear and thorough discussion of the issues. The Transmission Infrastructure Forum's recommendations calling for mandatory and enforceable reliability standards are fully consistent with and supportive of NERC's own efforts. I hope that the publication of this report will lead to the adoption of public policies that promote a reliable and robust transmission system that benefit all electricity users."

Alan H. Richardson, President and CEO, American Public Power Association: "This report should be a practical tool to help policy makers and others better understand the importance of transmission and the complex issues behind the scenes of keeping the grid running well and expanding it to meet society's growing needs. The nation's more than 2,000 not-for-profit, community-owned public power systems provide electricity to more than 14 percent of ultimate retail customers. They have a keen interest in properly functioning wholesale markets and a strong transmission system that ensures reliability and lower-cost electricity."

The Honorable Glenn English, President and CEO, National Rural Electric Cooperative Association: "This report will assist consumers, regulators and legislators to better understand the critical importance of a robust transmission grid so necessary for the reliable and economic delivery of power to our homes and industry, and the policy choices needed to ensure that outcome. Without such a grid, consumers and our nation's economy will not be able to access the potential benefits of wholesale competition."

David Owens, Executive Vice President, Edison Electric Institute "The CECA Transmission Forum provides a clear roadmap to providing customers reliable, affordable electricity. Legislation to reinforce reliability coupled with a clear, consistent, and durable regulatory framework which recognizes regional differences is essential to enhance the transmission system."

Jeff Scott, Chief Operating Officer of U.S. Transmission for National Grid: "Policymakers should heed CECA's recommendations and provide the regulatory certainty that will encourage much needed investment in the nation's transmission grid. Effective regional transmission planning policies, coupled with clear and consistent rules that govern how transmission improvements are funded, will ensure that reliability is maintained and reinforced in a way that delivers economic benefits to the nation's electricity consumers."

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CECA is the senior public interest energy policy organization in the United States. A leading national and international resource for policy information and analysis, CECA has three decades of experience building consensus among stakeholders and developing policy that serves the public interest.

Consumer Energy Council of America
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