Federal Electric Regulation Follies

Article excerpt


While Enron is dead, the grip of its cold, dead hand on the nation's economy is not. The Federal Energy Regulatory Commission (FERC) is busily implementing a new scheme of increased regulatory intervention that was long sought by the now defunct company because it would benefit the company's business operations.

However, that poorly thought out plan, so typical of Enron's scheming, would seriously undermine the nation's electricity transmission system over time. Indeed, it has the potential of spreading the energy crisis suffered by California last summer across the country.

The regulation involves the interstate transmission lines that now transmit newly produced electrical energy across the country. That transmission grid enables producers to sell electricity in a national market.

In fact, about half of the nation's electrical output is sold on the wholesale market today, before it is ultimately sold to individual residential or business consumers. Power marketers that specialize only in buying and selling electricity in this market trade about 23 percent of the nation's power production.

The grid also enables nonutility producers to arise that can provide additional power for the national network. These sources now account for 20 percent of the nation's electrical power.

This national transmission grid increases the supply of electricity, which reduces prices. It also creates a very flexible energy supply system, where excess electricity in one part of the country can be transmitted quickly to cover a shortage elswhere.

But FERC is now intervening in this market with the idea of forcing all the current owners of these transmission lines to transfer them to four, nonprofit, regional transmission organizations (RTOs). The only business of these RTOs would be to operate the transmission lines in their respective regions.

FERC is seeking to completely separate the transmission lines from control by any electricity producer, so that the lines would be open to all producers on equal terms. FERC also wants to consolidate the grid into just four large regional organizations to avoid difficulties of getting many smaller transmission line owners to cooperate in a national network. …