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Jurisdictional Gridlock: A Pathway Out of Darkness

Fortnightly Magazine - January 1 1996

service territory to FERC jurisdiction, while placing "wheeling in" transactions (i.e., final sales between an end user and an ultimate customer) under state jurisdiction. So as not to frustrate the FERC's comparability policy, the states would defer to the FERC on technical pricing issues to promote a national

policy of nondiscrimination. The commerce clause, rather than a wholesale taking of all retail transmission jurisdiction, would be available to the FERC to enforce the policy against an uncooperative state.

Ohio's proposed jurisdictional model and system of deference would simply recognize what is already embodied in the FPA (em i.e., concurrent jurisdiction over these assets. When the FPA was enacted, Congress recognized this point by calling for a federal-state joint board (em a point that Congress sought to reiterate to the FERC in passing the savings clause of the EPAct, which reserved jurisdiction to the states over "retail market areas." Such a transactional bright line and approach would be far preferable to the wasted time and resources that will be visited upon both the FERC and state staffs if they adopt the pure functional test embodied in the Mega-NOPR and apply it to the literally hundreds of thousands of power lines across the nation.

The FERC's proposed jurisdictional model poses additional problems with regard to Regional Transmission Groups (RTGs). Much is made in the NOPR of relying upon the RTGs to solve many regional pricing issues. And the FERC has encouraged state PUC involvement in RTG activities. I welcome the FERC approach of looking at transmission grid operations and planning by region. However, I urge some caution and consideration for some of the problems that could result. For one, although the FERC has sought state involvement in its RTG order, presumably to police the RTG to make sure the public interest is protected, the Mega-NOPR basically allows the states no legal role in transmission. How seriously will state PUC concerns be addressed if RTG members now perceive that the states have no jurisdiction? And given the reduced role of state PUCs in the FERC model, how do we prevent RTGs from becoming massive price-fixing organizations eligible for state or federal antitrust

exemption? This problem is acute in regions such as mine, where there simply aren't many independent power producers because of the availability of low-cost utility fossil generation. The deference shown to the FERC should reflect the degree to which the RTG membership, legally and practically, includes all players and stakeholder interests, and the degree to which states are empowered to ensure that the public interest is protected.

Finally, what is the future of bundled transmission and service at the state level? This question is subject to serious debate. On the one hand, the FERC's exercise of jurisdiction over unbundled retail transactions could immobilize the states (em no one knows all the implications of ceding this vital part of state jurisdiction to the federal government. On the other hand, it will be unacceptable for states to do nothing, because the FERC's comparability policy could put upward pressure on bundled rates. State regulators have seen