U.S.D.A. Study Raises Questions about Electric Deregulation


WASHINGTON - Electric utility deregulation could cause 19 states to have higher electricity costs, especially rural customers in those states, an internal study by the U.S. Department of Agriculture concludes.

The study, which runs counter to the Clinton administration claims that deregulation will save consumers in every state billions of dollars annually, recently was made public by the National Journal, which reported its findings.

The states that would be adversely impacted by deregulation are Alabama, Colorado, Idaho, Indiana, Kentucky, Mississippi, Montana, Nebraska, Oregon, South Carolina, South Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin and Wyoming, the study said.

Despite the new controversy over the pros and cons, Rep. Joe Barton, a Texas Republican who heads the House Commerce Subcommittee on Energy and Power, plans to begin work tomorrow on a bill mandating electric utility deregulation for all 50 states.

"I haven't studied the study, so I'm not qualified to dispute the findings of it," Barton, said. "I don't automatically accept that a state that has low-cost power is going to see their costs go up.

"I'm going to give it my very best shot to come up with a very good bill, this year, to send to the Senate," he added.

Barton's Senate counterpart, Alaska Republican Sen. Frank Murkowski, suggested the bill had little chance of passing Congress regardless of what happens in the House.

"Many members of Congress, including myself, oppose federal mandates on the states," said Murkowski, who chairs the Senate's Energy and Natural Resources Committee. "Our rationale for that is pretty simple -- I don't think the federal mandate is going to go anywhere, because the votes, the base of support, isn't there."

There doesn't appear to be much support from the 19 states mentioned in the USDA study. All have moderate- to low-cost electricity, and none have acted on deregulation legislation. Last month the governors of four of the 19 states - Nebraska, South Dakota, Tennessee and Washington - joined three other governors who sent a letter imploring Energy Secretary Bill Richardson to move slowly as the federal government works to deregulate the $208 billion electric industry.

The governors of Florida, Puerto Rico and Alaska also signed the letter.

The USDA electric deregulation study was prepared by the office of chief economist Keith Collins. USDA officials commonly investigate matters of financial significance to rural America, spokesmen said. They downplayed the findings reported by the National Journal, insisting that the study is a work in progress.

"What (the National Journal) got was a summary of the report where it was at the point in time," spokesman Claiborn Crain said. "It's dangerous at any time to start making conclusions about a study that is not finished and has not gone through the vetting process."

Crain didn't know when the report, dated January 1999, would be completed.

Meanwhile, an Energy Department official was critical of the Agriculture study. "The last thing I want to do is get into a spat between Energy and Agriculture, but we do disagree," said DOE spokesman Tom Welch. "We stand by our analysis that the administration's electric competition plan will save consumers $20 billion a year, and that includes consumers in every state in the nation. We believe the assumptions in the USDA study are questionable and not consistent with the administration's model.

Those wary of electric deregulation have long maintained that rural customers, in far-flung, difficult to serve areas, would be less attractive to power companies than large businesses and residential customers tightly grouped in urban areas.

"I think the most specific harm might be an increased rate, with electricity becoming unaffordable to rural consumers," said Patrick Lavigne, of the National Rural Electric Cooperative Association. Rural electric cooperatives are consumer-owned electric utilities that provide electricity at cost, primarily to rural customers.

Lavigne's association has 875 members serving 32 million people in 46 states.

The biggest beneficiaries of electric deregulation, according to the USDA study, would be California, Florida, New York, Illinois, and Texas. Of those states, only California has implemented deregulation.


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