If you attended any energy conference in the past year, even one on natural gas, I am confident that at least one panel was devoted to the restructuring of the electric industry.
Since the federal Court of Appeals decision in the Calvert Cliffs case over 25 years ago, no power plant may be built without a thorough socioeconomic impact statement. Yet, schemes to alter the entire supply system of a state - or even the nation - are currently proposed with only cursory attention to socioeconomic consequences. Despite heated rhetoric, little discussion focuses on how the people in a given service area will be affected by deregulation and its handmaidens - retail wheeling and stranded investment.Nowhere is this lack of attention more apparent than in the two most recognized depictions of restructuring - the Notice of Proposed Rulemaking (Mega-NOPR) on stranded investment and open-access transmission, from the Federal Energy Regulatory Commission (FERC), and the final restructuring order issued about five months ago by the California Public Utilities Commission (CPUC).
Despite its magnum opus character, the FERC document offers no meaningful assessment of the potential impact of this grand scheme on real people. Indeed, it was like pulling teeth to get the FERC even to recognize that air-quality consequences should be assessed in a systematic fashion. Similarly, the CPUC Order, despite a seemingly endless name-dropping of groups representing minorities and the environment, includes no coherent statement on socioeconomic impacts whatsoever.
Electricity is the life blood for both rural and urban components of industrial society. Economic productivity, public safety, health, and social cohesion all depend upon reliable electricity. In fact, far from having failed, utility regulation has proved a marked success. A regulated electric utility industry has stood at the heart of over two generations of unprecedented socioeconomic progress in this country. Moreover, reliability should mark the sine qua non of any proposed policy to restructure the electric utility industry:
"[M]arkets will not take care of reliability. . . . [W]e are dealing with the laws of physics. Whatever economists may wish, the government may legislate, or FERC may mandate, Kirchhoffs' laws are not going to change. . . . An electric power system is not a gas pipeline, telephone system, airline, or trucking company."1
Electric utility system planners, working closely with regulatory agencies, have built the reliable system we currently enjoy on the assumption of cooperation, not competition. What are the long-term consequences of a different set of assumptions for both generation and transmission? Who will do system planning in an unbundled environment? Who will be obligated to serve whom?
Cost-shifting lends an elitist cast to retail wheeling proposals. If some customers pay less under a retail wheeling regime, other customers - probably those with less political power - may pay more.2
This elitism runs rampant in the CPUC order, where the phase-in gives installed meters to customers with 500-kilowatt (Kw) demand before restructuring even begins (1998), but delays meters until 2002 for customers with demands under 100 Kw. Such a phase-in is fine with the largest users, who will all have open access by 1998. But the more jaded observer will note that this "women and children last" approach ensures that large users get a big piece of a pie that