Federal power regulations undermine local reliability
Viewpoint: National industry deregulation ultimately fails public
By Mark Crisson: AUGUST 22, 2004: The News Tribune

  You might have read of the recent filing by Tacoma Power alleging a conspiracy among dozens of power marketers during the West Coast energy crisis (TNT, 8-9).
  Our suit is just the latest development in a growing body of evidence that the Federal Energy Regulatory Commission's experiment with deregulation and competition in the power industry is a failure.
  While Tacoma Power and other Northwest utilities suffered damages on the order of $1 billion due to market manipulation (for which FERC has refused to order refunds), the negative impacts of deregulated power markets are not restricted to our region.
  The mounting national casual-ty toll in the wake of FERC's attempts to create competitive power markets  is staggering: more than $9 billion in refund claims, $140 million in settlements, $800 million in bankruptcy costs and who knows how much in legal costs. And these numbers don't include the rate increases customers around the country are paying (or soon will be) for new "regional transmission organizations" and power cost increases from power market restructuring.
  What is FERC, and why is it persisting in pursuing this flawed strategy?
  FERC is a federal commission created by the Federal Power Act, which comprises five members charged with the responsibility for regulating, among other things, large segments of the electric utility industry. FERC's organic statutes charge it with regulating power rates in wholesale markets to assure they are "just and reasonable."
  FERC has clearly subordinated this goal to its new self-proclaimed mission of "competition." Instead of viewing competition as one possible way to benefit electric consumers, it is clear FERC considers competition an end in itself.
  FERC chairman Pat Wood and commissioner Nora Brownell were touted by Ken Lay as Enron's leading choices for appointment to FERC in letters that have recently surfaced. Both were appointed to FERC by President Bush in 2001.
  These two commissioners have insisted on trying to impose new policies throughout the nation in the name of competition that essentially breaks up the traditional utility structure, resulting in the means of production and distribution being the responsibility of separate utilities or other entities.
  This is unworkable or harmful to consumers in many regions, including the Northwest. Remarkably, in the aftermath of the West Coast energy crisis and the Enron bankruptcy and indictments, these commissioners are unrepentant and continue to preach the Enron gospel unabashedly.
  But isn't promoting competition in monopoly industries a good thing? Hasn't it produced at least some consumer benefits in other industries, such as airlines and natural gas?
  The problem is that electricity is not like other products or services. Professor Jaqueline Lane Weaver of the University of Houston Law School, in her paper "Can Energy Markets Be Trusted?" writes: "... In electricity, markets have met their match, because electricity cannot be stored, incumbents still hold substantial monopoly power, power markets operating in real time are so complex that regulators cannot assure that markets will operate effectively, and electricity is an essential good."
  Not surprisingly, she concludes energy markets cannot be trusted to benefit the consumer. Moreover, this country's electric system was not designed to accommodate real-time power markets; it was designed to promote and assure reliability. The catastrophic blackout in August 2003 suggests FERC's competition agenda is not promoting reliability and might in fact be undermining it.
  We have had some success during the last two years in raising the political profile of FERC and putting it on the defensive. An alliance of several state utility commissions and utilities from around the country (mainly the Northwest and Southeast) has served as an effective advocate of our interests.
  One of the co-chairs of this group is Marilyn Showalter, chairwoman of the Washington Utilities and Transportation Commission, who has emerged as an effective national leader advocating for consumer interests.
  The alliance effort is funded by public utilities throughout our region, including Tacoma. Power. While FERC has had limited success in forcing its vision upon the Northwest, the struggle to protect the interest of our consumers goes on.
  The answer to the current dilemma is to acknowledge the inherent shortcomings in power markets and move back to a vertically integrated, regulated utility model that -prevailed through the mid-1990s. While this approach is-n't perfect, it is a proven one that fostered the creation of the greatest power system in the world.
  It produced competitive power rates through vigilant regulatory oversight and reliable service through integrated resource planning. It could facilitate improved regional planning for transmission and new power plants. Most public power systems, like Tacoma Power, never abandoned this model. Private power systems that did change are now beginning to long for the good old days.
  Let's go back to the future and begin to repair the damage done to the industry and to consumers over the last five years.

Mark Crisson is the director of Tacoma Public Utilities.