Federal power regulations undermine local
Viewpoint: National industry deregulation ultimately fails
By Mark Crisson: AUGUST 22, 2004: The News
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
What is FERC, and why is it persisting in pursuing this
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.
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.
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?
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
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.
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.
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.