State and federal regulators and the industries we regulate have donned life jackets. It's as if we are boating down the unexplored Grand Canyon with John Wesley Powell1 in 1869. We share a vague...
Electric Restructuring: NOt by FERC AloneVito Stagliano
The restructuring of electric utilities is fundamentally a matter of national policy (em not a regulatory issue. Regulators are ill-suited to make national policy because they are conditioned to act within the limits of authority specifically granted by legislation, rather than to seek a fresh statutory mandate in response to changed conditions. Policymakers must assess political, social, economic, technological, regional, and national factors to measure the need for reform. They must also decide what level of regulation is suitable.Regulators tend to justify action on the basis of legal precedent; too narrow a field to accommodate the probability that regulation itself may have contributed to the conditions that require reform. It is not coincidental, then, that each of the major reforms undertaken during the last two decades in the electric, natural gas, and petroleum sectors1 was crafted by policymakers in the Cabinet, usually without the involvement of regulators and often against their will.
The role of the FERC, in the practice and tradition of federal governance, is limited to that of policy implementer, not policymaker. Indeed, none of the statutes that grant regulatory authority over the electric power industry extends a policymaking role to the FERC: not the Federal Power Act; not PURPA; not EPAct. Those directly affected by the restructuring process should be concerned that the FERC currently finds itself the sole, uncontested agent in the field of federal electricity policy.
THE POLICY VACUUM
The reasons for this unprecedented condition are both mundane and regrettable. The Clinton Administration has abandoned the energy policy field almost entirely,2 content to focus its attention on social and trade policy and on government reinvention. Clinton's Department of Energy (DOE) has viewed the utility restructuring debate as essentially a matter for the states. The DOE's most visible initiative was a proposal by former assistant secretary Susan Tierney (em presented in response to California's retail wheeling plan (em to restructure utilities experimentally on the West Coast, while preserving the "social benefits" of regulatory support of renewable resources and energy conservation programs.
Congress, historically loath to delve into energy policy unless pressed by an activist administration, has paid scant attention to the restructuring issue. Among the reasons: the staff of the newly Republican oversight committees is unfamiliar with the complex field of electricity policy, and the Republican leadership's agenda is overburdened with other issues. Sen. Nickles's (R-OK) initiative on repeal of PURPA's mandatory purchase provision is the notable, but so far inconclusive, exception.
To be fair, however, Congress can be excused for believing that it has already declared its views on electric utility restructuring in Title VII of EPAct. That provision calls for (a) opening the power generation market to exempt wholesale generators, and (b) permitting conditional access to the transmission system.
EPAct is written in language that reflects the rigor of the legislative process, in which the achievement of a balance between the private and public interest is not an option but a requirement on access to transmission. It states that rates should permit recovery of all associated costs, taking into account any benefits accruing to