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For Release — Thursday, September 4, 2003

COUNCIL URGES CONGRESSIONAL DELEGATION TO SUPPORT ENERGY BILL
WITH RELIABILITY STANDARDS, INCENTIVES TO INVEST IN TRANSMISSION

ALBANY—The Business Council has asked members of New York's Congressional delegation to support comprehensive energy legislation that would require new uniform standards for reliability, encourage investment in upgraded transmission systems, and create new federal authority to site transmission facilities when state siting processes falter.

"The August 14 blackout has shed new light on the need for stronger steps to ensure that New York and the nation have enough electricity and the transmission systems to carry it where it's needed," Business Council President Daniel B. Walsh said in a Sept. 3 letter to all members of Congress representing New York State. "The fallout from this event makes it clear that Congress must act decisively to address these needs for the entire nation."

The House and the Senate have passed separate energy bills. Efforts to reconcile the two into a single bill are expected this month.

Walsh's letter outlined five key provisions that New York's business community wants Congress to include in its final legislation. These elements are needed "to improve the nation's transmission capacity and to keep its power systems reliable," Walsh wrote. Each of these ideas is already reflected in either the House or Senate bills, or both.

Mandatory reliability rules and standards. The North American Electric Reliability Council (NERC) already develops standards, guidelines, and criteria for keep transmission of electricity secure and reliable. But compliance with these standards is voluntary. The Business Council believes that a group charged with oversight of electricity reliability should be created, with oversight from the Federal Energy Regulatory Commission (FERC). The new entity should develop and enforce reliability rules and standards that are mandatory for all electricity companies and market participants.

Accelerated depreciation for electricity transmission assets. The nation's tax code treats transmission assets less favorably than other key infrastructure and technologies. Congress should reduce, from 20 to 15 years, the accelerated depreciation period for electric transmission assets. Other major capital assets are treated in this way. Congress should also ensure that companies that sell transmission assets into a FERC-approved regional transmission organization (RTO) or independent transmission company (ITC) suffer no tax penalties.

Transmission pricing incentives to encourage investments. FERC and the states should adopt innovative transmission pricing incentives, including higher rates of return, to encourage essential investments in transmission infrastructure. FERC is already taking steps to try to increase the rate of return, but the profits FERC permits from transmission-facility investments still lag what companies can earn on other capital investments.

New 'backstop' transmission authority for FERC. FERC has strong federal authority to site natural gas pipelines. But individual states now have sole jurisdiction over where to build new transmission lines. This dispersed authority often creates delays in the building of transmission infrastructure. FERC should be given backstop transmission siting authority to help site transmission lines in "interstate congestion areas" designated by the Department of Energy (DOE) whenever states have been unable to agree or move forward.

Reformed permitting for transmission on federal lands. Two key reforms would simplify and improve the siting process by which proposed transmission facilities on federal lands are considered. First, the U.S. Department of Energy should be designated the lead agency to coordinate and set deadlines for the federal environmental and permitting process. Second, to further facilitate siting, deadlines for the designation of transmission corridors across federal lands should be established.

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