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Fortnightly Magazine - August 1996

and residential customers with energy options; and they know that downsizing and restructuring on the part of their major business customers requires them to downsize and restructure to meet their customers' lower cost requirements.

How will a "federally coordinated policy" of "radical restructuring" provide additional benefits to Virginia electric customers? Who at the federal level will ensure that Virginia's residential and business customers continue to receive low-cost power rather than power sold in the open market to the highest bidder? Who at the federal level will ensure that customers in Virginia continue to receive the level of reliability they have enjoyed for decades?

These are not rhetorical questions. They must be answered with real names, not economic concepts. We have to introduce prospective businesses to real people. Businessmen contract with real people. Businessmen rightfully expect that real people will ensure around-the-clock reliable electric service. They have businesses to run (em not theories to test.

By now, the economists reading this Op/Ed are choking in disgust. They know that federal deregulation of the electric industry will benefit the country. What they don't know is whether federal deregulation will benefit my region. Why, for example, would APCo continue to sell low-cost power to Virginia businesses if it could sell power in the open market for one cent more per kilowatt-hour (Kwh)? APCo sells approximately 6,666,141,000 Kwh annually to large business customers in Virginia. An open-market price just one cent higher would give APCo

additional annual revenues of over $66 million and, perhaps, reduce cost for businesses in other states. But it would increase cost for Virginia businesses.

I do not intend to knock competition, especially not on the pages of PUBLIC UTILITIES FORTNIGHTLY. I have read Adam Smith's treatise on the "invisible hand." I understand the theory of competition. I have taught economics. But if we have a choice between deregulation under a "federal coordinated policy" or "piecemeal" state-by-state policies (as Professor Navarro calls them), I choose the latter. As former Treasury Secretary William Simon wrote in the Wall Street Journal in 1977, "The more the government tinkers with the markets, the worse things get." I don't know for certain, but I would bet that the government "tinkering" Simon referenced was federal "tinkering." Regardless, regulators at state public utility commissions are capable of addressing the needs of the business and residential customers in their respective states. They can balance the interests of all the citizens in their region, and they can do it without radical federal restructuring.

I don't dispute that a "federal coordinated policy" may be necessary to lower Professor Navarro's electric rates. But I am willing to bet that such a policy will not improve my standard of living in Virginia. Any takers? t

Edward Flippen is a partner in the Richmond, VA, law firm of Mays & Valentine. He has lectured on public utilities at the University of Virginia School of Law, on economic regulation at the T.C. Williams School of Law at the University of Richmond, and on trade regulation at the Graduate School of Business at the College of