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PUCs at 2000 - Question OneState Commissioners

Fortnightly Magazine - November 15 1995

process of major change. This has been forced by technological development, the markets, and decisions of Congress, the courts, and various regulatory agencies. The divestiture of the Bell operating companies by AT&T to settle an antitrust case, the FERC's Order 636 for gas utilities, and the pending FERC Notice of Proposed Rulemaking for electric utilities have imposed, or will impose, on the regulated industries the requirement to disaggregate and unbundle their various service functions to allow competitors to enter markets that were previously monopolies. While this may foster the development of a competitive market, total deregulation of fixed-facility utility services will require a lengthy transition period.

While regulators must change their approach, and in many cases their attitudes, about regulation, I anticipate that there will still be some traditional regulatory functions to perform. We must continue to provide assurance that core customers that have little opportunity or incentive to "shop around" for utility services can still obtain services and are protected from injury during the transition. We must ensure that service quality remains at adequate levels and that new entrants into the markets are treated fairly by the dominant players already entrenched and providing services.

In the electric business, for instance, the transmission and distribution functions will quite likely remain regulated, but it will be necessary to unbundle service rates to separate the competitive from the regulated services. Transmission services will also need to be unbundled from distribution services to keep retail business distinct from wholesale transactions. This will impose upon regulators the requirement to ensure opportunity for full and fair competition in generation markets, and to prevent the monopoly transmission and distribution services of regulated utilities from becoming bottlenecks that impede the free flow of energy between suppliers of energy and their customers.

Even while PUCs adapt to the new environment by initiating alternatives to rate-of-return regulation, concerns are rising that make the "new" industries difficult to regulate. The disaggregation of functions, some of which are unregulated, combined with utility diversification into other unregulated and nonrelated businesses, complicated the regulatory process. PUCs are still expected to prevent unreasonable cross-subsidization of new and competitive services by the core group of captive customers of the utility.

I believe our task will still exist in 2000, but it will look much different than it does today, as will the entire utility industry. [End of Mueller response]

Response by Cody L. Graves, Chairman, Oklahoma Corporation Commission:

Will there be an Oklahoma Corporation Commission in the year 2000? Absolutely! Will it perform the exact same function as today? I hope not. As industries change, government policies must change. We cannot apply outdated regulatory policies to industries that may not have existed 10 years ago. Does that mean that there will be no need for regulatory oversight in the future. No, not at all. There will always be a need for regulatory oversight. The better question is what kind of oversight will be required in the future. Old fashioned rate-of-return regulation will become less important in the future. As regulators, we will no longer be required to