ENERGY AND ENVIRONMENT

ELECTRIC UTILITY INDUSTRY RESTRUCTURING

WHEREAS, municipalities by law are endowed with the authority and charged with the responsibility to promote local growth and prosperity, while ensuring the delivery of essential services such as electricity; and

WHEREAS, each community has its own individual characteristics to consider in making decisions regarding electric rates and services, such as natural resources, geography, climate, and economic and social conditions; and

WHEREAS, many policy matters are more appropriately decided at the state and local level, particularly issues related to retail choice and recovery for the costs of uneconomic assets ("stranded investment") resulting from retail competition; and

WHEREAS, preservation of local authority gives citizens wide latitude to make decisions that best suit local needs and values, including the formation and operation of utilities; and

WHEREAS, federal law restricted generation options that resulted in current stranded costs; and

NOW, THEREFORE, BE IT RESOLVED that The U.S. Conference of Mayors opposes a federal mandate to implement retail competition in electricity by a date certain, and that that authority rests with state and local government; and

BE IT FURTHER RESOLVED that The U.S. Conference of Mayors urges federal lawmakers to ensure that any restructuring proposal includes provisions to preserve local authority to protect the public safety and welfare, provide for universal service and low income assistance, and protect the rights of consumers; and

BE IT FURTHER RESOLVED that The U.S. Conference of Mayors supports the following principles in all attempts to restructure the delivery of electricity:

• Reliability: the appropriate federal, state or local regulatory body or government entity must ensure that all consumers can depend on the long-term integrity, financial and technical capability, safety and reliability of the electric system and electricity service.

• Revenue Authority: 1) cities should continue to have the authority to issue franchises and/or taxes; and 2) no federal action should preempt or interfere with municipal revenue authority.

• Equitable Benefits: Fundamental changes to the electric utility industry must be applied to all customers and not be an advantage to large business interests at the expense of residential and rural customers, as well as small businesses.

• Social and Environmental Impacts: all market participants should contribute equitably to accomplish public policy objectives, such as support of energy efficiency and conservation, environmental programs, renewable energy sources, and alternative energy efforts. Generators should be held to environmental standards, ensuring that cheaper power does not carry a pollution penalty for the generating area.

• Municipal Utilities: any restructuring must maintain the existing powers of municipalities, including the concept of municipal utilities; must not abridge the existing authority of municipal utilities to operate; and must not abridge the ability of cities to form municipal utilities in the future.

• Rights-of-Way: local governments’ authority to manage their rights-of-way and to receive just compensation for the use thereof must be maintained.

• Stranded Investments: the determination of stranded investments should be made at the state and local level and be resolved in a way that keeps investors, ratepayers, and generators financially whole. Also, any change should honor past regulatory commitments by providing for the recovery of legitimate stranded costs through the appropriate federal, state or local authorities.

• Aggregation: Cities and/or consumers should have the opportunity to voluntarily aggregate on a local, regional or state-wide basis. All aggregators must be guided by the same rules and regulations as all other competitors to ensure equitable benefits to all consumers and no cost shifting or cost avoidance can occur to the detriment of residential and small business customers.

• Transition: there should be sufficient transition periods for local governments that are consistent with the magnitude of change to be achieved in order to allow for adaptation to new structures and to avoid disrupting services to the public; and

BE IT FURTHER RESOLVED that The U.S. Conference of Mayors urges the Federal Energy Regulatory Commission (FERC), Congress and the President to ensure that any restructuring of the electric utility industry includes appropriate protections against the establishment and abuse of market power, particularly for the protection of small business and residential consumers; and

BE IT FURTHER RESOLVED that while the U.S. Conference of Mayors agrees tax policies should not bias competition, we recognize the complexities and varying impacts of these issues, and that further study is required before taking action on this issue; and

BE IT FURTHER RESOLVED that the U.S. Conference of Mayors Task Force on Electric Utility Restructuring, as a result of its deliberations, does recognize the difficulty and complexity of determining a thoughtful and reflective policy statement at this time. The task force acknowledges that while the above statements do presently reflect our collective thinking, we recognize that there remains much work to be done before our task culminates. We therefore have resolved to meet again before the 1999 Washington D.C. meeting, as necessary, and to devote sufficient time to be able to engage in full and complete discussions of Electric Deregulation so that we may then be prepared to offer the Conference a revised and updated policy statement which shall be guided by, but not limited to, that recommended herein.