I appreciate this opportunity to be here today at The Heritage
Foundation. The Heritage Foundation has consistently and
courageously fought for what is right in America. It employs
thinkers who probe beyond political correctness, who dare to
challenge the status quo, who often turn Washington wisdom on its
This reputation for intellectual integrity and intelligent
problem solving makes Heritage the place where Members of the
Congress turn when they want fresh ideas that will help move the
United States in the right direction. And it is this reputation
that brings me here today.
Today, I aim to take on some sacred cows. Today, in the best
Heritage tradition, I want to turn Washington wisdom on its ear.
Today, here at The Heritage Foundation, I want to unveil my
proposal to give consumers the ability to restructure the electric
We all know that the electric power industry is the last
surviving monopoly in the United States. But the experiment in
government-mandated monopoly production and pricing has ended; it
has failed to measure up in each major industry in which it
existed. The time has come to bring the electric generation
business into the modern economic age, and that means bringing it
into a competitive, open, free-market structure.
The free-market vision I have in mind for this currently
regulated monopoly is based on the most important, time-tested
principles in our economy: customer choice, innovation, and
Bringing electricity into the competitive world will unleash new
products, greater efficiencies, business synergies, and
entrepreneurial success stories. It will create new industries, new
entrepreneurs, and new jobs. And, if done correctly, it will lower
the cost of electricity to all consumers. Anyone who thinks it
won't happen needs to look at the evidence. Other industries that
have undergone major competitive restructuring provide ample
There is a significant history in those industries, including
railroads, trucking--which is one in which I take a great deal of
pride--airlines, natural gas, and telecommunications. As Jerry
Ellig's recent research shows, in each of these industries, prices
paid by customers fell at least 4 percent to 15 percent within the
first two years. Within 10 years, prices were at least 25 percent
lower and sometimes close to 50 percent lower.
Firms in these industries have reduced their costs, lowered
prices, introduced new services, reconfigured old services to
better accommodate consumer preferences, and deployed new
technologies and practices. These positive outcomes offer greater
benefits to all classes of consumers. The same will be true for
Lower electricity costs will have profound effects across the
entire economic spectrum because everybody uses electricity. Lower
electric bills for the military, post office, and other major
government entities will save taxpayers billions of dollars.
American businesses, both large and small, will see one of their
highest operating costs significantly reduced, instantly making
them more competitive in international markets. Think about the
impact for schools, hospitals, nursing homes, and supermarkets. In
a competitive market they will pay less for their electricity
because they will have the right to choose their electric service
For example, according to the National School Board Association
(NSBA), 74 percent of schools are housed in buildings more than 25
years old. Most of these buildings are equipped with antiquated
heating and cooling systems. The NSBA estimates that individual
schools could save as much as 35 percent on their electricity bills
if they were given the opportunity to shop around for the best
rates. With most schools paying tens of thousands of dollars a year
for electricity, the savings to be realized are huge and could be
used to pay for more teachers, better facilities, and new
And if restructuring is done correctly, individual consumers
could save up to a third or more on their monthly utility bills or
several hundred dollars annually. That is equivalent to one of the
largest tax cuts in U.S. history--and it is a large, progressive
tax cut that benefits everyone.
What exactly is the right way? That is the question that a lot
of people are asking. The right way--the only way--is to allow open
and competitive markets to operate.
The free market separates winners from losers--something that
makes a lot of people inside the Beltway very uncomfortable. One
thing history has taught us: In a free market, consumers are
winners and monopolies are losers. That is something I am more than
Another question attracting much attention is whether or not
Congress should require the states to provide for customer choice.
An entire cottage industry has sprung up around this issue,
claiming that congressional action is unnecessary and intrusive.
You will find no more committed opponent of federalism than myself,
but this is a phony argument. In fact, the reverse is true. A case
could be made that current utility franchises are an undue burden
on interstate commerce.
The electric grid is an interconnected, interstate network that
does not stop at the state line. Opening this interstate business
to competition is unquestionably the job of the federal government.
On this point, the Constitution and the Supreme Court are quite
clear. The Constitution grants Congress the authority to regulate
commerce among the states, and limits the power of states to
discriminate against interstate commerce. On numerous occasions,
the Supreme Court has upheld the right of Congress to act with
respect to intrastate economic activity where it has concluded that
the activity substantially affects interstate commerce.
In writing the majority opinion in U.S. v. Lopez,
which overturned the Gun-Free School Zones Act, Chief Justice
Rehnquist, cited what he called the watershed case on Commerce
Clause jurisprudence: NLRB v. Jones & Laughlin
Steel. Rehnquist wrote, "The Court held that intra-state
activities that have such a close and substantial relation to
interstate commerce that their control is essential or appropriate
to protect that commerce from burdens and obstructions are within
Congress' power to regulate." Clearly, the electricity industry is
such an activity.
To those conservatives who are using the specter of federalism
to slow the drive to a competitive electricity market, I have a
word of warning. Conservatives have always believed in free men and
free markets, and the electricity industry is no different.
Remember that intellectual honesty always triumphs over political
expediency. Be careful not to tread on individual rights while
carrying the banner of states' rights.
Because there is such a clear and compelling need for Congress
to take action, I am re introducing legislation today that will
open the electricity market nationwide--with an absolute minimum of
Very simply, my bill gives each person the right to purchase
electricity from any electric service provider--period. This would
immediately shift the balance of power away from the monopolies and
to the individual, where it rightly belongs. But in order for that
power of choice to produce competitive prices, a couple of other
things must happen. Some existing barriers to competition need to
be removed so that choices multiply. To ensure that all consumers
have access to the electric service provider of their choice, my
bill would open access to transmission and distribution
And, to ensure that individual consumers as well as commercial
consumers reap the benefits of competitively priced electricity, my
bill would ban any exit fees or other levies on customers who
freely and legally exercise their right to choose an electric
My bill provides a framework for an open and competitive
national market. The states and consumers will determine the shape
and character of the market.
Now, as most of you who know me and have worked with me in the
past are aware, I like to tackle problems head on. That is why I am
not shy about taking on the issue of so-called stranded costs. I
believe it is important to debunk the myths surrounding the notion
that utilities are somehow "owed" the costs of all of their
investments, irrespective of whether those investments have proven
to be economically prudent choices.
First, building and owning electric capacity does not create
stranded costs; only owning capacity that costs more than the
market price creates stranded costs. Only proven regulatory
obligations that forced utilities to make uneconomic decisions have
any merit as actually being stranded.
Second, there is no basis in law to support the existence of a
"regulatory compact" that constitutes a binding and enforceable
contract. Nor were utility franchises ever considered to be
Consequently, I believe it is essential to protect families and
small businesses from becoming the economic scapegoats for billions
of dollars in questionable investment decisions. In order for
smaller residential and commercial ratepayers to benefit, there
must be an unburdened, open market. Stranded cost charges are
anti-competitive and they reduce potential ratepayer savings on a
Some in the environmental community may be disappointed to see
that I haven't included any proscriptive environmental provisions
in my bill. But I believe a fully competitive electricity market
will help the environment. Competitive markets will encourage new
plants, enhance energy efficiency and foster new technologies. As
new, cleaner technologies reshape the industry, increased
efficiency will lead to reductions in emissions. For now, I think
we need to let the markets work.
In addition, I am confident that an open market will lead to
innovative and successful marketing of green power. Pilot projects
in several states have been extremely successful. Marketers selling
green power will emerge all over the country. The laws of supply
and demand will secure the future of green power more surely than
any government mandate.
In the end, it comes down to the power to choose. Can Congress
muster the political will to do the right thing?
An open electricity market is inevitable. There is nothing that
anyone can do to stop it. But some multibillion-dollar utilities
are doing their level best to shoot competition in the back. Their
battle cry is "states' rights." They know that if the states act as
50 individual entities, it will be many years before they are
forced to face a truly competitive market. Under that scenario,
American families and businesses will pay hundreds of billions of
dollars in artificially high rates.
Those of you who know me know that I don't mince words. As the
guy who has to count votes in the House, I'm here to tell you that
we have a lot of work to do. Those of you fighting for customer
choice need to aggressively join the battle. We are facing a
determined and formidable opponent, and the window of opportunity
in this Congress is not getting wider.
Nevertheless, I'm optimistic that the105th Congress will act on
a bill guaranteeing customer choice. We have two major
assets--Commerce Committee Chairman Tom Bliley and Energy and Power
Subcommittee Chairman Dan Schaefer. They have been tireless
advocates of customer choice and competition. Do not underestimate
their commitment to this issue or their legislative skills.
Most important, we have the truth on our side. When families and
businesses around the country learn what they stand to gain, they
will demand a choice, and Washington will respond.
And that, ultimately, is the real challenge. This battle is not
going to be won inside the Beltway. The true test will be whether
or not we are successful in carrying our message to people of this
country. America's families and businesses deserve the kind of
choice that a truly competitive market in electricity will