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Perspective

Fortnightly Magazine - February 15 1995

of two or more RTGs. In any case, an RTC with regional transmission ownership can combine transmission systems to obtain greater economies of scale and better coordinate operations. Open access to transmission and regional power dispatch through the Poolco and RTG are the keys to true wholesale competition in the electric generation market.

The distribution company would also be re-regulated. Such companies construct, operate, and maintain the distribution wires. Re-regulation would involve some form of price cap and performance standards to ensure reliability. Distribution line companies (Linecos) would be required to deliver power from whomever the customer chooses.

Competitive Entities

The competitive entities in our model future serve the generation, customer service, and energy merchant functions. Companies that generate electricity (Gencos) will operate and maintain new or existing power plants. They will bid into the short-term power pool for least-cost dispatch, and contract directly with buyers. The Poolco will need to encompass enough different generation owners that no one owner has excessive market power. Utilities with uneconomic assets are not very comfortable with deregulation of generation, but the overall benefits for consumers and the majority of producers outweigh the disadvantages it poses for the few. State PUCs will struggle with this issue. Wisconsin Electric believes uneconomic assets should, as much as possible, be addressed as they are by other businesses (em through writedowns and amortization of excess costs, or through an access charge on the distribution lines. State PUCs can best resolve the stranded investment issue. Wisconsin Electric does not support federal mandates to spread the burden across the industry through transmission wire access fees that do not recognize state-to-state differences.

Customer service companies (Retailcos) will buy electricity from brokers, the spot market, or Gencos, and sell it to customers along with value-added services. While we expect many residential and small commercial customers will continue to want the full-service style of today's electric utility, those who want choices (em such as real-time pricing of electricity (em will find a Retailco that anticipates and meets their needs. The obligation to serve will continue.

Energy merchants will market and broker services for the generation and customer-service companies, as well as for municipal utilities and large customers. They also may broker other forms of energy and arrange transport services by matching buyers and sellers of longer-term power supply.

State/Federal Roles

In our vision of the future, the Federal Energy Regulatory Commission (FERC) would regulate the generation pool and transmission functions through an RTG to ensure open access, comparable pricing, comparable service, and adequate cost recovery. Although the FERC would function as a "court of final appeal" to address disputes not resolved by the RTGs, it will have to defer to the RTGs in order to maintain a truly competitive environment.

The state PUCs would regulate the distribution function for reasonable price, reliability, public safety, and customer satisfaction. We may need to change the Federal Power Act to clarify the jurisdictional boundaries, but the industry still will need strong state regulation after restructuring. Regulation will concentrate on quality, reliability, and other benchmarks of customer service as