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Fortnightly Magazine - July 15 1995

a greater cost to consumers than if the utility had generated the power itself.

Conversely, Oklahoma's third cogeneration contract, in place since 1988, was just recently renewed. This cogeneration facility provides steam for the Pryor Industrial Park in Pryor, OK, and has a steamload of 90 percent. That is incredibly efficient. As a matter of fact, the Pryor QF is now the most efficient electricity generator in Oklahoma. In addition, the Pryor cogeneration facility does not raise costs to ratepayers through avoided costs.

Some argue that we do not need to repeal PURPA because the same decisions wouldn't be made today. After all, avoided costs are much lower today than in 1985. Well, avoided costs are lower today in Oklahoma primarily because the Fuel Use Act was repealed and we can once again consider natural gas as a baseload fuel choice. Not an insignificant change when you consider that our largest electric utility was completely gas fired until the mid-1970s and today 45 percent of its generating capacity is fired by coal (em a result of the Fuel Use Act. Hopefully, I won't be a member of the Corporation Commission when they try to calculate and pass through the Phase II Clean Air Act compliance costs to ratepayers.

What then is the appropriate role for the federal government? I would argue that Congress and the FERC should focus their efforts on creating a seamless transmission system that will allow electricity to flow freely from market to market without governmental or regulatory barriers. It should function, in theory, like the interstate transportation of natural gas. As a producer, I can sell my natural gas to virtually any end user in the country. My net proceeds will depend upon market forces, but as long as I have open access to the transportation system, I more or less control my own destiny.

If Congress is truly interested in opening up the electric industry to competitive market forces, then it must make sure that electric consumers in New York have access to generation capacity in Oklahoma or Maine or Minnesota.

Gradually, over time, it will become less important to regulators how the electricity is generated. Cost will most likely become the overriding factor. That is not to say that some regulators and segments of the market won't recognize and reward fuel choice on some basis other than price (e.g., "green" fuels). Those choices are most appropriately made by state regulators. If given the choice in 1978 or 1982 or 1985, I suspect that most Oklahomans would have opted to expand generation with Oklahoma natural gas rather than imported coal. That is just the sort of option states should have.

If a state legislature or regulatory body makes a bad decision, then they suffer the consequences, whether it be a downturn in their economy or defeat at the ballot box. If they make good decisions then they reap the benefits. Either way, states should not be held to an overly broad or overly restrictive federal standard that does not reflect operational or political realities.

Which leads us