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Fortnightly Magazine - May 1 1995

Washington energy lawyer I know said recently, "Just about every gas company these days is getting into selling electricity, to keep up their load factors." My East Coast electric lawyer sums it up this way: "Marketers will make regulation superfluous. Even in the PJM in the winter of 1994, there was power for sale if the price was high enough." He adds, "We're looking at 2.5 cents per kilowatt-hour to sell in the electric wholesale market."

Now there's an unfunded mandate.

Weekend Reading

On a recent weekend I faced this choice: (a) tune in to the NCAA "Final Four" basketball playoffs, or (b) spend a relaxing evening at home reading the complete, unabridged "Giga NOPR" on open-access electric transmission and stranded investment, issued by the Federal Energy Regulatory Commission (FERC) on March 29. Foolishly, I tried to do both.

As I rooted and read, I noticed that the FERC thinks it can solve the riddle of CAJUN ELECTRIC. For wholesale stranded investment, which clearly falls under federal jurisdiction, the FERC will again propose to recover costs with a transmission charge, arguing that it will have finally made transmission truly competitive, so that no prejudice will lie in tying generating costs to transmission-only rates. It will again leave retail stranded costs to the states, but will assume default powers if the states drop the ball. The FERC is trading on its success on the gas side, where it has ably juggled take-or-pay costs between discrete wholesale and retail businesses.

But on the electric side, I don't get it. Will somebody please tell me the difference between wholesale and retail electrons? All politics is local. All electricity is retail. That's the gist of comments filed by Public Service Electric and Gas Co., as paraphrased by the FERC in its Giga NOPR, p. 228:


"[D]ue to the vertical integration of electric utilities, the distinction between wholesale and retail stranded costs is merely a matter of cost allocation. . . . [U]tilities generally do not have specific generating facilities in place to serve strictly wholesale customers . . . . [They] include wholesale customer loads into their planning models as if they were retail customers.

As one former FERC commissioner has said, "Gas is a commodity, electricity is a phenomenon."

I wonder how much of the FERC's work stems from off-the-record meetings, such as the sessions held periodically for energy lawyers and regulators by the American Bar Association's Coordinating Committee on Energy Law, which operates out of the ABA's Washington, DC, office at 1800 M Street, NW.

In May 1994, for instance, the Committee sponsored an off-the-record session in Washington that included Daniel Fessler (California PUC), Robert Gee (Texas PUC), Susan Clark (Florida PSC), Craig Glazer (then of the Ohio PUC), Duncan Kincheloe (Missouri PSC), and FERC commissioners William Massey and James Hoecker. This group then retired behind closed doors to debate the future of the electric utility industry.

Later, I'm told, the commissioners declared that the meeting "was just outstanding." They said it offered a "unique opportunity" to work out their differences. An energy