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There are sound economic reasons why policymakers should allow electric...
Question: Will your commission still be around in the year 2000? If so, what will it look like? Are you restructuring your commission with the same fervor you devote to electricity, gas, and telecommunications?Response by Nancy McCaffree, Chair, Montana Public Service Commission:
As a regulator I have had the opportunity to listen to economists, energy planners, and other professional soothsayers. I have come to the conclusion that the only certainty pertaining to future forecasts is that they will be wrong 100 percent of the time. Therefore, I am safe in making my own predictions, knowing that I will fare as well as any. Like many forecasters who want to narrow the odds (and presumably keep their jobs), I offer two different scenarios. There are simply too many variables that must be settled in the latter half of the 90's that will determine what regulation will look at in 2000.
I believe the Montana PSC will still be in business as the new millennium dawns. My first scenario follows conventional wisdom and predicts that our PSC will be around, but a mere shadow of its former self. Form will have followed function, and increased competition in the utility sector means the MPSC will oversee fewer companies and markets. Remaining regulated companies and markets will transform oversight from rate-base, rate-of-return regulation to some alternative regulatory model that includes price caps and pricing flexibility. Regulation will largely be centered around retail electric distribution companies and limited review of natural gas services. The MPSC will also act as arbiter in the endless spats that will take place in the telephone industry over interconnection and access rates.
Regulation will remain stronger in Montana than in many states because our sparse population and wide-open distances have prevented some markets from becoming robust. In some of the larger states in the east, regulation may just be a historic memory. The western states will control NARUC, because the rural states will be the survivors in the organization. NARUC staffers will abandon the Beltway, looking for Western jeans and boots, and hoping to make it to retirement.
On the other hand (I have been listening to too many economists, haven't I?), my other scenario, which goes against conventional wisdom, I happen to consider more plausible. I predict that regulation in Montana and across the country may in fact be stronger in 2000. As Mark Twain once observed about erroneous newspaper reports of his death, I believe reports of regulation's
impending death are much too premature. Remember when everyone said nuclear energy would be too cheap to meter? Recall the natural gas shortages of the 70's and predictions that there would be no gas left by 1995? Remember when everyone said the Ice Age was returning and the climate was getting colder? Remember the electrical shortages of the early 80's? Those who champion the impending extinction of regulation may very well be as correct as all these folks!
And I think that forecasts may be wrong for the same reason: Planners overestimated customer demands for electricity; they forgot about rate shock and