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THE WHITE HOUSE AT WORK
Wednesday, March 25, 1998
A PLAN FOR COMPREHENSIVE ELECTRICITY COMPETITION
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
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
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.