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On April 15, 1999, Secretary of Energy Bill Richardson forwarded the Administration's proposed Comprehensive Electricity Competition Act (CECA) to the U.S. Congress. The purpose of the CECA is to provide a framework for the restructuring of the U.S. electricity industry. Although electricity restructuring has proceeded steadily over the past 5 years, legislative and regulatory activities have occurred mainly at the State level and at the Federal Energy Regulatory Commission (FERC), which has taken steps to open access to transmission lines that are owned primarily by large electric utilities. The U.S. Department of Energy (DOE) believes that national legislation is necessary because electricity regularly flows across State lines and is vital to the overall health of the U.S. economy. The major provisions of the CECA are intended to:

• Clarify that States have the authority to order retail competition; that FERC has the authority to require public utilities to provide open access transmission services and permit recovery of stranded costs; that FERC's jurisdiction over transmission services is extended to include municipal and other publicly owned utilities and cooperatives, and that Federal Power Authorities and Administrations have the right to recover stranded costs where necessary.

• Give FERC the authority to require the establishment and operation of independent regional system operators to resolve market power problems.

• Establish a Federal Public Benefits Fund that supports low-income customer programs, energy conservation and energy efficiency programs, consumer education, and the development of emerging electricity generation technologies.

• Create a grant program available to rural and remote customers.

• Establish a Federal Renewable Portfolio Standard (RPS) to guarantee that a minimum level of renewable generation is developed in the United States.

• Allow "net metering" (the sale of electricity by a consumer to a supplier) by consumers having small, on-site renewable energy generating facilities.

• Provide a tax credit for certain high-efficiency combined heat and power systems placed in service between 2000 and 2002. In addition, the tax depreciation period for these facilities is shortened, and nationwide interconnection standards for them are to be developed.

• Provide consumers with the information they need to choose an electricity supplier and allow them to join together (aggregate) when bargaining for power.

Following CECA's transmittal to Congress, DOE issued its Supporting Analysis for the Comprehensive Electricity Competition Act (hereafter referred to as the Supporting Analysis) in May 1999.⁽¹⁾ That document analyzed the proposed legislation in terms of its impact on electricity prices, demand, capacity, generation, and the environment. It also addressed the issues of stranded costs and the impacts of restructuring on rural America. In preparing the report, DOE's Office of Policy used POEMS (the Policy Office Electricity Modeling System) to project the impacts of the CECA on electricity markets through 2015 in comparison with a case in which electricity was assumed to be fully regulated.

On June 24, 1999, Secretary Richardson requested that the Energy Information Administration (EIA) incorporate the parameters and assumptions from DOE's analysis into the National Energy Modeling System (NEMS) and compare its results with those produced by POEMS.⁽²⁾ POEMS and NEMS are similar modeling systems. Both represent the supply and demand for energy in the United States. The models have different electricity sector modules, but in other respects they are the same. The request was made by the Secretary "to provide further evidence regarding the benefits of competition under the Administration's plan." The Secretary also requested that the resulting report include a comparison of the POEMS and NEMS electricity modules.

As requested by the Secretary, this report compares the results of NEMS and POEMS using the assumptions from the Supporting Analysis together with more detailed assumptions provided by DOE's Office of Policy.⁽³⁾ The report also provides a discussion of the differences between NEMS and POEMS. This report is a comparison of projected market results in NEMS and POEMS when both use the same assumptions. It does not evaluate the assumptions used in developing the Supporting Analysis. As discussed in the Supporting Analysis, many of the activities being undertaken by the States and FERC would continue with or without CECA. Therefore, this analysis does not address the impacts of CECA alone.

The structure of the report is as follows: Chapter 2 discusses the assumptions from DOE's Supporting Analysis that were incorporated into NEMS; Chapter 3 compares NEMS and POEMS; and Chapter 4 compares the results from NEMS with those from POEMS. The appendixes provide regional tables, more detailed assumption information, discussion of the algorithmic changes made to the NEMS electricity module since it was used to prepare the projections reported in EIA's Annual Energy Outlook 1999, and copies of the letters requesting the study and providing supplemental assumption information.⁽⁴⁾