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Deregulating Retail Energy Services: First and Subsequent Steps

Fortnightly Magazine - May 1 1996

programs: universal service, low-income programs, efficiency incentives, renewable energy promotions, and environmental programs. States would also need such authority to collect a competitive transition charge for any stranded investment states choose to authorize.

Outage Information. Second, the FERC should require that all generators using the transmission system or connected to the transmission grid report publicly to the Commission on any planned or forced generation outage (full and partial), as such information will likely become more difficult to obtain with a fully competitive generating sector. This information will be critical to maintaining system reliability and allocating the costs.

Transmission Planning. Third, the FERC should require all transmission owners to belong to a regional transmission organization (ISO or RTG), which would develop an open process for transmission planning and siting. This approach would help identify and execute the best environmental alternatives in regional transmission planning and sitting, without infringing on state jurisdiction.

(The transmission system operates like a big, complicated, and fascinating machine, but engineers rarely disagree once all system information is placed on the table. Environmental advocates should be allowed to join the process.)

Postage Stamp Rates. Fourth, since complex tariffs create barriers to power-supply transactions, the FERC should order regional postage-stamp tariffs with a bidding mechanism to allocate constrained interfaces to their highest economic use.

Regional Tariffs. Fifth, the FERC should mandate a single consistent and effective transmission tariff for each ISO/RTG, one that integrates network access and flexible point-to-point services.

(The single, utility-specific pro forma tariffs proposed in the FERC's Notice of Proposed Rulemaking on open-access transmission rely on an arbitrary construct (em i.e., utility transmission ownership within circumscribed territories (em that will not prove meaningful in a regional access regime.)

Winners and Losers

Some groups will wind up supporting the idea of a competitive market for retail energy services. Others won't.

"Soft" Energy Advocates. How many advocates for environmental, efficiency, and renewable energy agendas would like to see more emission reductions or greater reliance on renewables? Most of them. These groups will likely embrace the RESCO Restructuring Plan, because it unleashes a potent new mechanism for achieving their goals (em customer choice.

Large Customers. How many large customers that sell products to the public will want to create

an anti-environment public image for themselves by denying all responsibility for environmental improvement? Probably not very many.

Small Customers. How many small customers could get used to having lower electricity costs and control over the services they receive? Most of them. Arguing against consumer choice makes as little sense as advocating that everyone must buy the same brand and model of car or the same brand of beer. Once choice places small customers and small customer advocates in the driver's seat, and once they start steering benefits their way, they will not want to go back.

Electric Utilities. What is a utility away from its home service territory? A RESCO. Utilities that are interested in competing outside their current

service territory are likely to migrate to supporting the RESCO Plan because away from home they will have the same interest in a