NARUC president and EEI chairman release joint statement on industry concerns


CHICAGO, Nov. 13, 2002 -- David A. Svanda, president-elect of the National Association of Regulatory Utility Commissioners (NARUC) and a commissioner on the Michigan Public Service Commission, and Erroll B. Davis Jr., chairman of the Edison Electric Institute and chairman, president and CEO of Alliant Energy Corp., on Wednesday released the following joint statement during NARUC's annual convention:


"During the upcoming year, we will be leading our respective organizations in a time of unprecedented change and uncertainty in the nation's electric power industry. Accordingly, there is a need for representatives of the regulatory community, the industry and all other parties that have a stake in this industry to work together to meet the need of American consumers for safe, affordable, efficient and environmentally sound electric service.

"The electric power industry is now facing a financial crisis perhaps more acute than any in its modern history with the loss of billions of dollars in market capitalization among investor-owned electric companies. This financial distress is not occurring in isolation, but rather reflects broader market conditions and investor attitudes. Relying on the great strength and flexibility that U.S. capital markets provide, everyone affected by this critical industry must work together to rebuild consumer and investor confidence by creating more stable, transparent and efficient electricity markets.

"The current market turbulence presents a very real and tangible threat to the viability of the industry and the reliability of the nation's electrical system. In late 2002, all but a few electric power providers have found access to capital increasingly costly and enormously difficult to acquire. Investors and customers lack confidence in the financial health of energy providers. Bulk power markets are listless, liquidity has evaporated and the movement to retail competition remains in transition.

"Left uncorrected, these problems likely will further impede the financing and construction of critically needed energy and electricity infrastructure, particularly high-voltage transmission facilities and local distribution systems. Significantly, this is a crisis affecting not just companies and their shareholders-customers themselves and the U.S. economy are at risk if the industry cannot build out or even maintain its generation and delivery infrastructure.

"No one benefits if power companies are poised on the brink of insolvency; state regulators are concerned because weak retail electric companies are not in the best position to sustain reliable and affordable service or drive the economic recovery of this country.

"A potential path to create certainty lies in crafting a clear set of rules governing wholesale electricity markets. Properly designed and implemented, such a framework could send reassuring signals to investors and other stakeholders by providing a greater degree of regulatory certainty. A properly designed wholesale market could also help revitalize flagging energy markets and bring liquidity back to the sector.

"As leaders of our respective organizations, we agree that a Federal Energy Regulatory Commission wholesale market design should be forged only after the consideration of input from all appropriate stakeholders, and then on a measured timetable that will allow for a reasonable transition that also accommodates regional differences. Equally important, the Commission should fashion a rulemaking process that fosters a robust regional approach toward market design, planning and implementation.

"Likewise, the FERC's final rules should respect regional differences and should not impose a one-size-fits-all template across all regions of the U.S. Moreover, state regulators and policymakers must play a strong and visible role in both designing and implementing any new market design.

"Finally, the electric power industry and NARUC affirm the critical importance of strengthening and deepening their partnership in squarely addressing these-and other-challenges to the electric power sector. In cooperation with federal regulators and other stakeholders, the companies and state regulators have crucial roles to fulfill, and a close working relationship on both the financial and regulatory fronts is vital to sustaining well-functioning, robust electricity markets. Together we pledge our effort and energies to tirelessly pursue these objectives."

Source: Edison Electric Institute

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