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<title>Etch-A-Sketch Energy Legislation</title>
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<p align="left"><font face="Arial"><strong><small>About The Author:<br>
<br>
</small></strong><span lang="X-NONE" style="color: black"><font size="2">
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.</font></span></font></p>
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<td width="75%" valign="top"><img src="../images/feldman.gif" alt="Washington Viewpoint by Roger Feldman" border="0" WIDTH="375" HEIGHT="75"><p><b><u>February 1999</u><br>
</b></p>
<b><font FACE="Palatino" SIZE="5"><p></font><font face="Arial" size="6">ETCH-A-SKETCH
ENERGY LEGISLATION</font></b></p>
<p><strong>by Roger Feldman -- Bingham, Dana and Gould, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
02/99</em>)</font></p>
<font FACE="Palatino" SIZE="2"><p ALIGN="JUSTIFY"></font> </p>
<u><font FACE="Palatino" SIZE="1"><p ALIGN="JUSTIFY"></font></u><font face="Arial"><strong>Etch-a-Sketch
of Legislative Fantasy<br>
</strong>Remember Etch-a-Sketchs. You drew on a blank pad covered with a cellophane like
substance. Tired of the picture, you lifted up the cellophane and – if you
hadn’t used your pen like a chisel – you magically had a clean pad to draw on
all over again. Dilbert actually convinced his boss it was a computer.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Now Congressman Barton, taking the reins of the
Congressional committee responsible for kicking off this year’s round of electric
deregulation effort, has advised us that he is following the etch a sketch paradigm: no
carryovers from the past, all newly drawn rules directed by the mind of reason and the
spirit of bipartisanship. Be still my heart.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Funny thing about etch a sketch though: those
earlier "erased" pictures never really fully faded away completely – less
so the more often the same patterns were repeated. And that’s the feeling you get as
you listen to Barton tick off his preliminary stands on the issues which his proposed
legislation will address.</font></p>
<u><p ALIGN="JUSTIFY"></u><strong><font face="Arial">The Barton Sketch</font></strong></p>
<ul>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>Date certain for deregulation. </u>Some
skepticism, but may accede since it is strongly held view of last year’s dereg
warriors.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>PUHCA/PURPA Repeal. </u>Absolutely better on a
stand alone basis, but will try to embrace in comprehensive legislation first.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>Power Marketing Agencies</u>. Privatization:
The "right" thing, but not necessarily the politically feasible one.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>Grandfathering of existing state restructuring
laws</u>. States’ rights’ bias inclines him in that direction, but thinks states
have already made egregious errors that he would like to correct. Pragmatic bent suggests
that he will forego the opportunity.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>FERC Role</u>. Would like to minimize.
Concerned that it will become a force for re-regulation (a per se violation of natural
law, (per, I guess), either Genesis or Revelations).</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>ISO vs. Transcos</u>. Inclined to support
institution that can play honest broker role and serve as an independent referee, because
it is not directly involved. (Still pondering this conclusion because of inherent natural
superiority of profit motivation in any institution. (See, I guess, Deuteronomy.)</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>Stranded Cost Recovery</u> – Full utility
(and IPP) recovery of stranded costs. (Definition, on tablets, to follow.)</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial"><u>Renewables</u>. No mandate for market –
distorting renewable/ green portfolio requirements. (Such support should come through tax
incentive package.) Political fine tuning to follow.</font></p>
</li>
</ul>
<p ALIGN="JUSTIFY"><font face="Arial">By this own statement, not originally a proponent of
comprehensive legislation, Congressman Barton, who has an impressive track record as a
legislative engineer on other fronts, has now taken on the energy bill at his
leadership’s direction.</font></p>
<u><p ALIGN="JUSTIFY"></u><font face="Arial"><strong>Fading Lines on the Tablet<br>
</strong>Hope he notes a few of the old "erased" lines on the etch a sketch pad,
that diligent observers of the needs of competitive power have tried to draw over the
years; like the following:</font></p>
<ul>
<li><p ALIGN="JUSTIFY"><font face="Arial">Forced fixed date homogenization on a Federally
legislated set of principles ignores the evolutionary and differentiated state of U.S.
power markets. Absence of existing state law grandfathering should compound the delay in
proposal acceptance.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">In an imperfect market, PUHCA/PURPA repeal needs
to be accompanied by competition protective steps.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">PMAs are more likely to evolve than go away.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">A weak FERC assures a market with insufficient
guidance and with regulatory abuses: ultimately it may be more orderly, but at a price of
consumer vulnerability.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">It also compounds the potential affiliate abuse of
transcos that profit motivation can get out of hand.</font></p>
</li>
</ul>
<u><p ALIGN="JUSTIFY"></u><strong><font face="Arial">Watermarks</font></strong></p>
<p ALIGN="JUSTIFY"><font face="Arial">Equally important, one hopes – and, based on
Congressman Barton’s evident savvy, expects – is that he recognizes that in a
fundamental sense, he is writing not on an etch a sketch, nor on a piece of old fashioned <i>tabula
rasa</i>, but on a piece of historical parchment, with engrained watermarks, reflecting
the great shifts in American energy history in the last decade:</font></p>
<ul>
<li><p ALIGN="JUSTIFY"><font face="Arial">From steam to gas turbine generation;</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">From sequential information processing to network
market systems which incorporate regulators;</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">From regional to national markets;</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">From competing energy source to converged sale of
all energy</font></p>
</li>
</ul>
<p ALIGN="JUSTIFY"><font face="Arial">The implication is clear: with such a large and
central part of the national economy at stake, the overriding perspective must be
assurance that historic trends are flexibly and realistically served even if particular
corporate interests are not fully served – and even if traditional party shibboleths
are not afforded traditional genuflection.</font></p>
<u><p ALIGN="JUSTIFY"></u><strong><font face="Arial">Conclusion</font></strong></p>
<p ALIGN="JUSTIFY"><font face="Arial">Viewed from that perspective, etch a sketch
legislation is not an expression of objectivity but of national hubris that whatever
Americans do damn well will work (a philosophy which has not always worked that well in
energy policy before, if the truth be told). One can only hope that as our national capito
l regains its sanity, it brings to the energy debate more of the sense that the
nation’s bedrock is at stake than at times has characterized its approach to the
debate of national governance.</font></p>
<p><font face="Arial">Etch-a-sketch is for kids; slogans and ideologies are for comic
books – we are in the age where realistic futures simulation is possible. All we
should leave to the market is sophisticated smoothing of the near term uncertainties that
remain after clear cut and enforceable rules are established. Dilbert, give the man an
Apple.</font></p>
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text-align:left"><font face="Arial" size="2">
<span lang="X-NONE" style="color: black">ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.</span></font></p>
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