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March 25, 1998

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Wednesday, March 25, 1998


Today Secretary Pena, National Economic Council Director Gene Sperling, and Council for Environmental Quality Director Katie McGinty introduce the Administration's Comprehensive Electricity Competition Plan that will save consumers $20 billion a year. The plan combines those economic savings with environmental benefits -- both saving the typical family of four over $230 per year and reducing greenhouse gas emissions.

The electricity sector is our nation's most capital intensive industry, holding assets with a book value in 1994 of close to $700 billion. Sales in 1996 were $212 billion. Economic forces are now forging a new era in electricity policy, where electricity prices will be determined primarily by the market rather than by regulation. Under this new system, often called "retail choice," consumers are allowed to choose their electricity supplier.

The Administration's Plan. The plan is built upon the principle that customers should be allowed to benefit from the ability to choose their own electricity supplier. It advances the legislative changes necessary to provide customer choice, enhance competition, and diversify generation sources. Key components of the plan include:

  • Retail Competition - Flexible Mandate. The flexible mandate would require that all consumers be able to choose their electricity supplier by January 1, 2003, but would permit States and unregulated utilities to opt-out of the competition mandate if they find that consumers would be better served by an alternative policy.
  • Environmental Provisions. The plan includes a range of provisions to protect the environment through cleaner air and reduced greenhouse gas emissions while saving consumers money.
  • Stranded Cost Principle. The plan supports the principle that utilities should be able to recover prudently incurred, legitimate, and verifiable retail stranded costs arising from the transition to competition if these costs cannot be mitigated.
  • Consumer Information. Uniform and easy to understand labeling similar to the Food and Drug Administration's nutritional labeling system will ease customer choice and facilitate the sale of environmentally responsible green power.
  • Strengthen Electric System Reliability. Reliability and competition can -- and must -- go hand in hand. To ensure reliability in the new market the plan proposes to build upon the industry's tradition of self-regulation by requiring key market participants to join an organization which would establish reliability standards and enforce those standards subject to the oversight of the Federal Energy Regulatory Commission.
  • Cost Savings for Consumers and the Government. The typical family of four is expected to save over $230 per year from this plan: $104 per year directly -- in lower electricity bills -- and another $128 per year indirectly -- in lower costs for goods and services that use electricity. Federal, State and local governments will also save close to $2 billion per year.

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