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Perspective

Fortnightly Magazine - March 15 1995

years) will raise worldwide average temperatures from 1.5 to 4 degrees Centigrade (em a level of change not seen in thousands of years (em with potentially catastrophic effects on the global economy and ecosystems.

From the global perspective, U.S. domestic energy policy serves as a poor example for developing countries poised to contribute substantially to the environmental crisis. The United States leads the world with per capita emissions of 19.5 metric tons of CO2 per year. The developing nations of India (0.8 tons/ yr) and China (2.2 tons/yr), with populations already four to five times larger, are rapidly increasing their per capita energy use.

The consumer record is no different. High prices, in fact, supply the impetus for restructuring. The utility industry's response to competition has been to offer lower rates to industrial customers, although many already receive discounts. These special deals insulate utilities from competition, while burdening smaller ratepayers with additional costs. Discriminatory retail wheeling proposals aimed at large customers fail to address the fundamental problems plaguing the industry, while shifting many costs and risks to smaller customers. If policymakers are intent upon "direct access," they must ensure that all customer classes have truly competitive options, particularly those lacking market power.

Robust markets can rein in the hefty profits available from generation, cutting prices, and leveling the playing field between supply- and demand-side resources. For example, competitive pressures have already forced the premature shutdown of a number of nuclear plants, most recently the three plants canceled by the Tennessee Valley Authority. Other companies, such as Centerior Energy, have written down costly generating assets. In some service territories, where ratepayers now pay not only for DSM program costs but also for the utility's lost revenues and shareholder incentives, funds should be available for efficiency improvements and actual energy savings.

But while open markets can keep business accountable, they offer no panacea. No restructuring plan will succeed without addressing the complexities of environmental protection and social goals. Markets may run efficiently, but will never fully recognize environmental costs or guarantee that people living around or below the poverty line (em now more than 15 percent of the population (em will enjoy basic access to essential service. Over the years, regulators have turned to utilities to provide critical environmental and social goals, including universal service, low-income bill assistance, low-income weatherization, and conservation and renewable energy. With competition on the horizon, each of these goals lies at risk.

Some restructuring ideas now circulating would address these concerns. The California consumer group TURN (Toward Utility Rate Normalization) proposes to set up "consumer-owned" utilities. Counties, cities, and towns would aggregate loads and buy power from a competitive generation market. Massachusetts State Sen. Mark Montigny has proposed legislation to create "consumer service districts." His idea would allow local jurisdictions to take bids for their local franchise systems (em essentially a form of franchise competition.

Another plan, developed by Michael Arny, director of the Consortium for Integrated Resource Planning at the University of Wisconsin, would spin off a new group of retail energy service companies, armed with full access