FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
Open-Access NOPR Rocks Industry
costs. Commissioner William L. Massey found the position too narrow. He said the FERC should step in when a state commission will not address the issue, not merely when it lacks authority.
Commenting on the NOPR, the Edison Electric Institute (EEI) pointed to an earlier filing it made to the FERC on the issue of stranded costs. That filing included a paper written by three economists (Alfred Kahn, William Baumol, and Paul Joskow), The Challenge for Federal and State Regulators: Transition from Regulation to Efficient Competition in Electric Power. The authors' premise is that the goal of a transition from a regulated to a competitive industry is to promote an environment that will provide the lowest total cost of providing electricity to society as a whole, rather than reducing costs to some customers while raising them for others. The economists believe that during the transition, every consumer must be responsible for, and pay an appropriate share of, costs incurred in its service under traditional regulation. t
Lori A. Burkhart is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.
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