I. Title of the Best Practice

II. Overview of the Best Practice

A. General Description
The United States is moving toward a new era in the electric sector, where electricity production will be driven by market forces. Electricity restructuring would allow competition to replace regulation as the primary mechanism to determine the price of electricity at the generation plant. Retail customers would be allowed to choose their own electricity supplier, and utilities would be required to open their distribution and transmission wires to all qualified sellers.

Already, 24 four states in the U.S. have restructured their electricity markets. The U.S. Government is considering legislation to encourage other states to move forward. The Administration has proposed legislation at the Federal level, the Comprehensive Electricity Competition Act (CECA), to facilitate retail competition. States have historically been responsible for regulating retail electricity markets in the U.S. The CECA is designed to strike a balance between the need for federal policy to support competition and the tradition of state determination of retail electricity policy.

B. Special Characteristics of the Best Practice
Highlights of the Comprehensive Electricity Competition Act (CECA): The U.S. CECA reflects many of the elements essential to successful policies, or best practices. It encourages states to implement retail competition and pursue environmental programs while providing them with considerable flexibility to meet their unique, local needs. The policy builds upon a long trend of deregulation in the U.S., and relies on market forces to improve efficiency, thereby delivering environmental benefits.

The CECA would require states to implement retail choice by 2003, but would give states considerable flexibility to address their unique needs. States would also be allowed to opt out of the requirement if they determine consumers in their state would be better served by an alternative system to the current monopoly system. It also avoids a rigid, standardized approach to retail competition that could lead to increased costs in some states.

The CECA contains a number of specific provisions that promote investments in energy efficiency, renewable energy, distributed power and combined heat and power technologies.

Public Benefits Fund: A public benefits fund of up to US$3 billion would be established to provide matching funds to states to fund low-income assistance, consumer education, energy efficiency programs, and development and demonstration of emerging technologies. The federal public benefits fund would both encourage and support renewable and energy efficiency programs at the state level, and would build upon state experience in energy and demand-side management programs. States would have the flexibility to decide whether to seek funds and could allocate funds among public purposes in a manner that addresses unique state or local needs. State preferences would set the level and mix of eligible programs to be pursued.

Renewable Portfolio Standard: A Federal Renewable Portfolio Standard would be adopted to guarantee that a minimum level of additional renewable generation is developed in the U.S. All electricity sellers would be required to cover a percentage of their electricity sales with generation from non-hydroelectric renewable technologies such as wind, solar, geothermal, or biomass generation. The level of the Renewable Portfolio Standard would initially be set close to the current level of qualified renewable generation in the U.S. and would rise to 7.5% of electricity sales by 2010.

The Renewable Portfolio Standard requirement would be implemented through a system of tradable renewable electricity credits. Retail electricity sellers could meet the requirement by generating renewable electricity themselves, or by purchasing renewable electricity credits from other generators. The trading program would ensure that the Renewable Portfolio Standard requirement is met at least-cost by allowing renewable energy systems to be installed in areas of the country where they are most cost-effective.

Consumer Information: All electricity suppliers would be required to disclose in a uniform, easy to read label, basic information on prices; terms and conditions of service; fuel sources used; and generation emissions characteristics. Consumers need reliable information to make informed choices regarding their power purchases. Information disclosure requirements coupled with other policies to lower the cost of renewable energy could lead to significant penetration of low-carbon technologies in the electric sector.

Distributed Power and Combined Heat and Power: Both distributed power and combined heat and power (CHP) can provide substantial environmental benefits through the introduction of cleaner, more efficient technology. The CECA includes a number of provisions to encourage penetration of small-scale power generation -- distributed generation -- and efficient systems. These proposals include tax credits for CHP, changes in depreciation schedules, and removal of regulatory barriers that are hampering increased deployment of distributed power and CHP technologies. Regulatory barriers include the environmental permitting process, and inconsistent standards for connecting new generators to the transmission grid. Under CECA, the federal government would assist states in streamlining permitting procedures for these technologies and clarify air permitting rules, thereby reducing administrative costs for CHP and distributed power projects. CECA would also establish uniform safety and power quality standards for interconnection to the transmission and distribution system.

C. Reasons for Inclusion as a Best Practice
Improves the efficiency of the electric power sector and protects the environment, while providing states with considerable flexibility to meet their unique, local needs.

Recognizes local experience and expertise by building upon state restructuring plans that have been implemented to date.

Avoids a rigid, standardized approach to competition that could lead to increased costs.

III. Categorizing the Best Practice

1. Classification(s) (Indicate main classification(s) only.)
( X ) Regulatory Approach (Policy approaches-- regulations, incentives, etc.)
( ) Practical Action (Action undertaken independently by a social actor)
( ) Social Network Mechanism (Cooperative structure)

2. Social Actor(s) Involved (Indicate main social actor(s) only.)
( X ) Citizens
( X ) Central government
( X ) Local government
( X ) Business

3. Sector(s) (Indicate main sector(s) only.)
( X ) Energy -- electric utilities
( ) Household
( ) Transportation
( ) Industrial Enterprises
( ) Other (Non-Industrial) Business
( ) Agriculture/ Land Use/ Forestry
( ) Other (Please specify)

4. Target Greenhouse Gas(es)
( ) CO2
( ) CH4
( ) N2O
( ) HFC
( ) PFC
( ) SF6
( X ) Other No specific greenhouse gas is targeted. Electricity restructuring focuses on energy efficiency improvements, savings for electricity customers and promotion of renewable energy. However, greenhouse gas reductions are a significant by-product of those activities.

IV. List of References

http://home.doe.gov/policy/ceca.htm

V. Please indicate a person to contact for more information about this Best Practice.

Contact:	Howard K. Gruenspecht
Title:	Director, Office of Economic, Electricity, and Natural Gas Analysis
Organization:	U.S. Department of Energy, Energy Information Administration
Email:	gruenspecht.howard@hq.doe.gov
Tel:	202-586-5337
Fax:	202-586-5391
Address:	1000 Independence Avenue SW, Washington, DC 20585 USA