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Fortnightly Magazine - June 15 1996

with a competitive power pool ("Market Exchange"), independent system operator (ISO), Contracts for Differences, and physical bilateral contracts. Moreover, it instructed the state's electric utilities to file plans (at both the PSC and the FERC) by October 1 on seven key points:

s running the pool and the ISO

s transmission pricing

s how to "distinguish" transmission from distribution (the bright line still lives)

s "load pockets" (must-run generation)

s licensing or certification for energy service companies (ESCOs)

s whether to shift the duty to serve to ESCOs

s how to handle metering and billing.

The PSC added, "We strongly encourage divestiture, particularly of generation assets, but do not require it immediately."

A Silver Lining

All this may prove interesting for New York legislator Sheldon Silver, a democrat from the Lower East Side who now holds the post of Speaker of the New York Assembly. I heard him speak back in April, at a meeting on electric utility indentures accounting at the New York offices of Bear Stearns & Co. Silver warned the PSCto stay out of the way and leave it to the state legislature to restructure the electric utility business: "PASNY (Power Authority of the State of New York) has proposed that it should acquire all transmission assets. But the PSC has no jurisdiction to effect such a plan, or to mandate such a plan."

As Silver notes, New York legislators have devised their own plan, known as Competition Plus, which includes two different bills. The two bills would set a timetable for electric competition and customer choice, with continued regulation of transmission and distribution. One bill (Silver describes his plan as "a work in progress") would ensure full customer choice by 2000, split generation from transmission in 2003, and divest electric from gas assets by 2005. A second bill would force PASNY to refocus on its original mission (hydro development) by selling all its nonhydro facilities. The plan would set up funds ("The Energy 2000 Fund") to promote energy efficiency and bridge the competitive transition. The plan would "ensure that contractual obligations among utilities and independent power producers are fulfilled to the benefit of all."

"Regulation by the PSCwon't get us there," says Silver. It's time for the legislature to lead the way.

"The PSC is designed to implement policy. But the statutes don't contemplate competition. The PSC doesn't have authority to restructure the industry. It doesn't have that mandate."



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