Federal Electricity Proposal Risky for Consumers

Consumer Groups Call FERC's Standard Market Design Premature And Overreaching

FOR IMMEDIATE RELEASE
November 14, 2002
Contact:
Mark Cooper, (301) 384-2204

WASHINGTON - The Consumer Federation of America (CFA) and Consumers Union (CU) today expressed their opposition to the Federal Energy Regulatory Commission (FERC)'s proposed Standard Electricity Market Design (SMD), saying that it is not in the public interest. The SMD is FERC's attempt to standardize the structure and operation of the wholesale electricity market nationwide. FERC proposed SMD in response to the meltdown in the western electricity market in 2000 and 2001, which was caused, in part, by FERC's failure to properly oversee companies operating in that market.

In comments submitted today responding to FERC's Notice of Proposed Rulemaking on an SMD, CFA and CU stated that the proposal violates the Federal Power Act's requirement that electricity rates be just and reasonable and would not protect consumers from the type of manipulative behavior engaged in by energy traders such as Enron during 2000 and 2001.

In fact, a report prepared for a November 12th hearing of the Senate Committee on Governmental Affairs actually concluded that the FERC "lacked the will and resources to oversee Enron and other politically-powerful energy companies as U.S. electricity markets deregulated in the mid-1990s." The comments filed today argue that little has changed at FERC since that would make consumers feel more protected under the further deregulation proposed by FERC's SMD.

In their comments, CFA and CU state, "Electricity markets around the country are in turmoil and consumers' electricity service is becoming more costly and risky. Rather than bring stability to markets, this proposal will introduce more costs and more risks for consumers."

Copies of the comments can be obtained on Consumers Union's web site at www.consumersunion.org/pdfs/111402ferc.pdf, and on the Consumer Federation of America's web site at http://www.consumerfed.org/pdfs/FERCsmdcomments.pdf.

Consumers Union, publisher of Consumer Reports magazine, is an independent nonprofit testing, educational and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition and other consumer concerns. Since 1936, our mission has been to test products, inform the public and protect consumers

CFA is a non-profit association of more than 300 organizations that, since 1968, has sought to advance the consumer interest through advocacy and education