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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>May 1999</u><br>
</b></p>
<b><font FACE="Palatino" SIZE="5"><p></font><font face="Arial" size="6">CECA '99 - Luck of
the CAW</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:
05/99</em>)</font></p>
<p><font FACE="Palatino" SIZE="2"> </p>
<p ALIGN="JUSTIFY"></font><font face="Arial">To the sound of one hand clapping, the
Administration has launched its second edition of the Comprehensive Electricity
Competition Act ("CECA"). It is most usefully reviewed under three headings:</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">1. What is now "received learning", if not
yet law, (i.e. "Conventionally Accepted Wisdom").</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">2. Where the disconnects are in the proposed new
electric order (What sticks in the CAW).</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">3. What new business opportunities may be created
(Where the wild things are)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">First, C<i>AW</i>. Retail competition is good and
shall happen (but it should look like the states are voluntarily doing it.) No more PURPA
(but savings clauses for past projects and books access, respectively). FERC should have
the power to police all aspects of reliability and transmission, (even if it takes
oxymorons like "interstate retail transmission" to do it). Public power should
survive, (but power marketing agencies and munis should be more or less swept under FERC
wing, and public power can’t use tax exempt for future generation facilities used in
competition).</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Second, Stuck in the CAW. The power commodity is at
least regional and in some respects national in nature. State jurisdiction over it
doesn’t fit well at all. Unfortunately with the size of the emerging players, neither
do traditional Federal laws protect against anticompetitive potential. One solution (the
Administration’s): call in new Federal traffic cops (FTC for consumer matters; FERC
for mergers; a new Electric Reliability Organization as well as, selectively the
Department of Agriculture and Interior and even the Department of Energy! at least for
model codes and consumer information. Enhance FERC authority over ISO operation and
approval of needed interstate compacts. Savings clause the Anti-trust law. None dare call
it re-regulation (or even lawyers relief).</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Competition doesn’t necessarily protect and
even (gasp) may endanger the environment, energy conservation, rural areas and those less
able to pay. (Read: Administration constituencies which once had a great deal to with the
hoary National Energy Policy Act of 1977 and still vote). One solution (the
Administration’s): mandates for "white hat activities (Federal Renewable
Portfolio Standard; special appropriations and grants for rural areas, Indian tribes and
southeast Alaska; reinforcement for the Nitrogen Oxides Cap and Trading Program;
restructuring of the authority of power marketing agencies.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">In a different kind of disconnect, some important
topics went unmentioned in CECA. Their treatment may be (or may have been intended to be)
implicit in the proposed statutory language. Important examples include: the treatment of
private transcos in an ISO-mandated world; the increased oversight (if any?) of power
marketer arrangements and operations; and the regulatory treatment of states or munis
which "opt out" of the firm retail choice date of January 1, 2003 on the grounds
that they would be served better by consumers.</font></p>
<u><i><p ALIGN="JUSTIFY"></i></u><big><strong><font face="Arial">Luck of the CAW</font></strong></big></p>
<p ALIGN="JUSTIFY"><font face="Arial">By now, everyone has figured out (or at least
expended considerable sums on consultants and lawyers trying to figure out for them) the
basic winner-loser outlines of electric power deregulation. But every comprehensive energy
bill has sleepers (unintended or not), which open new commercial opportunities either
independently or within the larger umbrella of existing energy companies. Within the
Administration’s bill, to which section references are made below, here are some
guesses as to what they might be. Don’t look for them, however, just yet, in the Help
Wanted or Venture Capital Reports – but they may be worth luminating on. They are the
Luck of the CAW.</font></p>
<ul>
<li><p ALIGN="JUSTIFY"><font face="Arial">Aggregation (Section 103) – Greater statutory
institutionalization may facilitate growth, in connection with other retail access
provisions.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">Consumer Protection (Title II) – Information
dissemination/advertising on electricity will be informed by the telecom experience, and
may be broader and more sophisticated.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">Renewables (Section 402) – The credit-trading
arrangements linked to the mandatory Portfolio Standard would provide the basis for an
on-going industry.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">Combined Heat and Power Systems/Distributed Power
(Sections 403,405, 1003,1004) – The "non-PURPA" package of rights and tax
credits, while not including any mandatory purchase requirements, could facilitate
survival of dispersed generation in the new mega-competitive environment.</font></p>
</li>
<li><p ALIGN="JUSTIFY"><font face="Arial">Mergers and Acquisitions (Title V) – By
extending FERC jurisdiction to cover holding companies and generation only companies, and
authorizing (on State petition) market power remedies at the State as well as the
wholesale level, the opportunities for sponsors of a broader range of transactions will be
enhanced.</font></p>
</li>
</ul>
<p ALIGN="JUSTIFY"><font face="Arial">CECA will not be the final comprehensive energy
bill. Its CAW will be crammed with exceptions and caveats, or even left gaping at the
beliest of status quo proponents. Its appetite may be caged by restructions or starved for
lack of benefits.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">But by planting a flag for comprehensiveness and
revealing the voids in the CAW, it should make possible new enterprises besides
mega-conglomeration and power marketing in the electric power industry. Always something
to CAW about.</font></p>
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<p class="MsoBodyText" align="left" style="margin-bottom:0in;margin-bottom:.0001pt;
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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