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A State Legislator Looks at Retail Wheeling

As FERC moves forward, most state legislators have remained content to sit back and wait for others to act. Part of this reticence stems from politics—the difficulty of changing course, invading someone else's turf, or tackling a new subject outside one's area of expertise. Legislators view problems differently than do regulators.

Fortnightly Magazine - July 1 1996

With the start of the 1996 legislative year at least 30 states were studying some aspect of electric competition. These studies have spanned a wide range of activities: from a simple generic docket opened by a regulatory agency, to actual pilot programs involving certain customers, or the creation of new  market structures, such as a competitive power pool.

Most discussions have focused on pricing, stranded investment, and easing restrictions against market entry. However, many other issues must be addressed before policymakers can hope to achieve an equitable result for all customers, regardless of size or geography. In fact, experience (drawn from telecommunications and natural gas) teaches us that residential and small commercial customers often lag behind other customer classes in achieving benefits from competition or gaining access to rates that reflect the true cost of service.

As the Federal Energy Regulatory Commission (FERC) has moved forward, most state legislators have remained content to sit back and wait for others to act. Part of this reticence stems from politics—the difficulty of changing course, invading someone else's turf, or tackling a new subject outside one's area of expertise. Legislators view problems differently than do regulators.

The Legislator's Perspective

Legislators, more than regulators, often seek simple, expedient solutions. Many factors (election campaigns, political rhetoric, and partisan, regional, or philosophical differences plus a frequent lack of expertise in new technology or economic drivers)  all combine to produce legislative inertia and a reluctance to become involved.

Different viewpoints also arise between legislators and electric industry executives.

The energy executive will generally focus his or her attention on a range of commercial priorities:

  • (a) retaining existing markets,
  • (b) expanding into other service territories,
  • (c) escaping universal service requirements to concentrate on high-profit customers,
  • (d) maximizing stock-market share value and rate of return on investment, and
  • (e) protecting the company's public image.

The legislator sees a different set of imperatives:

  • (a) protecting affordable universal service,
  • (b) increasing opportunities across the state for economic development,
  • (c) protecting constituent jobs (energy company employees),
  • (d) protecting the local utility company's investments in the community (tax base, franchise fees, charitable contributions, and so on), and
  • (e) projecting a strong image to the electorate.

These different perspectives can lead to conflict between corporate and elected officials, obscuring shared interests and marring what is essentially a symbiotic relationship. Nevertheless, both parties share the capability to organize multimedia campaigns to influence each other and the general public. Shared interests and perspectives can and must be nurtured

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