WASHINGTON - July 30 - Nearly one year after the August 14, 2003 blackout, government and industry have failed to resolve the critical problems that caused the blackout and that threaten the future reliability and affordability of electricity, according to a report released today by consumer advocates. The report by the state Public Interest Research Groups (PIRGs)—"Toward a Consumer-Oriented Electric System: Assuring Affordability, Reliability, Accountability and Balance After a Decade of Restructuring"—documents the challenges facing the electric system in the wake of restructuring and proposes a series of principles and policies for resolving these problems for the benefit of consumers.

"Our findings show that restructuring has not only failed to deliver for consumers, but has left us more vulnerable both to outages like the August 14 blackout and to higher electricity costs in the years to come," said Tony Dutzik, a policy analyst with the National Association of State PIRGs and the primary author of the paper.

Key findings of the paper include:

- Electric restructuring has not lived up to its promises to deliver reliable electricity at lower cost through competition. While electricity prices for residential consumers have gone down over the past decade, the decline has been largely due to lower fuel costs and mandatory rate caps, rather than competition and retail choice.

- The reliability of the electric system has suffered. The average annual number of major transmission system disturbances has approximately doubled since the onset of restructuring in the early 1990s.

- Things are likely to get worse before they get better. Higher fossil fuel prices, the lifting of the transitional "restructuring" rate caps in many states, cuts in energy efficiency programs and the looming costs of deferred maintenance are likely to hit consumers hard in the near future.

"We must move toward a smarter, more efficient and a more accountable electric system," said Rob Sargent of the National Association of State PIRGs.

"Otherwise, rising fuel costs, the impending demise of rate caps in deregulated states, and the specter of having to pay for tens of billions of dollars of new transmission lines all amount to a potential 'perfect storm' that could sink electricity consumers."

The report concludes that we must manage the electric system by putting consumers and the public interest first and lays out a series of policy prescriptions for federal, state and local officials that can restore a much-needed sense of direction to the industry, among them:

- States should end their experiments in retail deregulation and return to a more vigorous and intelligent regulatory system that uses new tools to achieve least-cost outcomes for consumers.

- Decision-makers should restore public accountability to the electric industry with adoption of mandatory and enforceable reliability standards as an immediate and necessary first step. Increasing state regulatory authority over the industry must also be a priority.

- State and federal regulators must restore the practice of thoughtful planning to ease today's reliability problems and to map out the electric system of the future.

- Government and the electric industry must remove barriers to energy efficiency, renewable power and clean distributed generation in order to reduce strain on the grid and to hedge against fuel price volatility.

Congress and the Bush administration have failed to act on widely supported, common sense fixes to the problems associated with last summer's blackout. In particular, proponents of the controversial energy bill before Congress have held mandatory reliability standards hostage.

"Instead of focusing on protecting consumers and increasing reliability, the Bush administration and congressional leadership are promoting an energy bill that leaves us at risk for future Enron-type utility scandals and more blackouts," said Anna Aurilio, legislative director of U.S. PIRG, the national lobbying office for the state PIRGs.

Peter Bradford, former chair of the New York Public Service Commission and former president of the National Association of Regulatory Utility Commissioners (NARUC), joined the report authors in releasing the report. He affirmed the importance of restoring accountability and ensuring that residential customers get fairer treatment in the regulatory process.

"If energy policymakers and regulators learn anything from the restructuring experience to date, it should be that cost containment and public benefits should be locked into laws and regulations every bit as firmly as the gains for the energy industries and the larger customers," said Bradford.

State energy advocates from Ohio and New York, states hit hard by last summer's blackout, joined the authors of the report.

"With FirstEnergy's customers still experiencing blackouts, it's clear that Ohio's electric system still has reliability problems. To make matters worse, FirstEnergy continues to push for business as usual while also demanding more money from hardworking Ohioans," said Erin Bowser of Ohio PIRG.

"In addition to the very real consequences from last year's black out, New Yorkers are also unfairly paying for deregulation on a daily basis," said Jason K. Babbie, NYPIRG's Policy Analyst. "New York has the nation's largest gap between residential and industrial rates, and to ad insult to financial injury the price difference has actually gotten worse over the last decade."

The consumer advocates also released a related analysis by Synapse Energy Economics that found that shifting the nation's electricity system to a more "balanced" portfolio emphasizing energy efficiency, renewable energy and distributed generation would save an estimated $36 billion annually by 2025 while reducing the environmental and public health impacts of electricity generation.

"The United States relies on a growing fleet of central station power plants," said Synapse Energy Economics President Bruce Biewald. "By investing instead in renewable generation and energy efficiency, we can create a balanced electric power system that costs less and pollutes less."

The reports can be accessed at www.newenergyfuture.com.

###