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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

and developed. The public debate must be removed from the media arena and brought back to the negotiating table, where constructive dialogue can develop.

Happily, both institutions (em industry and politics (em share at least one common objective. That objective is improving the satisfaction of customers and voters (who are one and the same). Starting from that common interest, utility executives and state legislators ought to be able to achieve at least some of their mutual objectives.

Thus, as one who has served both in the state legislature and for a major investor-owned electric utility, I offer some ideas to kindle discussion between industry and elected officials. This article describes a legislative initiative I introduced to encourage competition in retail electric service. While it focuses on Kansas, the article describes issues that transcend state boundaries.

Two Major Concerns

The national debate over electric deregulation has tended to follow the same general patterns established by the telecommunications, natural gas, airline, and trucking industries. Two major concerns have emerged:

  • Increasing ease of entry to encourage competition
  • Reducing prices to secure the benefits of competition.

Both objectives are laudable and, in an era of multibillion dollar  utility company mergers and acquisitions, should be very achievable. Yet, as we have seen, customers suffer the consequences when good intentions go bad. Attractively marketed airline  companies occasionally go out of business and strand travelers; long-distance telecommunications carriers close suddenly and leave callers without service. These common carrier services are not as essential as electric utility service, so we as legislators must be even more concerned about protecting our citizens from potentially destructive competition, while permitting the benefits of market innovation and competition to filter down to customers and service providers.

We have also seen "cream skimming" or "cherry picking" occur, where the best customers, usually large industrials, profit from competition, leaving smaller-volume customers to struggle with the high overhead costs associated with maintaining the "traditional" supplier. As legislators, we must be concerned about ensuring our constituents' health and well-being. Universal, affordable electric service is a vital component.

H.B. 2623, the bill that I introduced in the Kansas legislature, reflects several simple, basic truths. Reliable, affordable electric service should be available to all Kansans. Existing electric suppliers and their shareholders and members (em including municipal taxpayers and members of rural cooperatives (em should not be punished financially by changes in the regulatory environment. Moreover, competition should offer the potential for price reductions while maintaining acceptable  service quality and meeting customer needs for service growth. Finally, the regulatory role of the Kansas Corporation Commission (KCC) should be maintained as it relates to protecting electric customers, even as deregulation and competition move forward.

Nothing in the bill I have introduced will stop competition and change in the electric industry. However, while the interests and concerns of Kansas may differ from those of other states, identifying those interests and concerns should be among the highest priorities.

A Modest Initiative

H.B. 2623, the bill I have introduced, would address the unique interests and concerns of Kansas through a half-dozen key features:

  • 1) Geographic