THE WHITE HOUSE

Office of the Press Secretary

                      THE CLINTON ADMINISTRATION'S
               COMPREHENSIVE ELECTRICITY COMPETITION PLAN

                            March 25, 1998

|---------------------------------------------------------------------| | | | The Clinton Administration's Comprehensive Electricity Competition | | Plan will save consumers $20 billion a year. And it combines those | | economic savings with environmental benefits -- both saving the | | typical family of four over $230 per year and reducing greenhouse | | gas emissions. Retail competition will strengthen incentives to | | improve efficiency, and reduce the two-thirds waste of energy | | currently associated with fossil-fuel generation of electricity -- | | thereby cutting greenhouse gas emissions, saving money, reducing | | pollution, and conserving fuel. | |---------------------------------------------------------------------|

The importance of the electricity sector. 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. And the industry has a significant impact on the environment.

Retail competition. Economic forces are 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 supplier. Electricity policy is moving in this direction because subjecting utilities to competition will lead to increased efficiency in the industry and thus benefit the economy and the environment. Competition will spark innovation in the American economy, creating new industries, jobs, products and services.

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:

1. 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. This approach strikes a balance between the need to spur competition and the importance of preserving State flexibility and authority.
2. Environmental Provisions. 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. These include a $3 billion Public Benefits Fund, to support conservation and energy efficiency measures, research and development into clean and efficient technology, and deployment of renewable energy technologies; a Renewable Portfolio Standard, to require that at least 5.5 percent of electricity sales be generated from non-hydroelectric renewable sources, subject to a cost cap; trading authority for nitrogen oxide emissions to facilitate cost-effective, market driven pollution reductions; and consumer information requirements to ensure that consumers can choose to purchase power from cleaner sources. We estimate that the plan will reduce greenhouse gas emissions by an estimated 25 million to 40 million metric tons in 2010. The Administration will monitor emissions by coordinating data received from utilities by the various agencies and such data will be provided in annual reports to the President, and will work with the Congress to ensure that any unanticipated consequences are addressed quickly and in keeping with the Administration's climate change policies.
3. Stranded Cost Principle. We support 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. States would continue to determine stranded cost recovery under State law.
4. 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. The Department of Energy would develop a system for requiring all electricity sellers to disclose the price and environmental attributes of their power supply.
5. Strengthen Electric System Reliability. Reliability and competition can -- and must -- go hand in hand. To ensure reliability in the new market we propose 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 Regulatory Commission.
6. 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.