July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
Four Olive Branches
Where others see conflict, a Pennsylvania commissioner finds a peace offering,
not a grab for power.
The jurisdictional issues posed by Order 888 continue to breed tension between federal and state officials. Unfortunately, most of this tension too often elevates form over substance. This jurisdictional tension shifts the focus of decisionmaking from securing the benefits of competition to preserving regulatory turf.
In Order 888, the Federal Energy Regulatory Commission (FERC) extends four important olive branches to those states that want to introduce customer choice at the retail level. While these olive branches are not a fundamental concession by the FERC, state officials should pursue them before attacking Order 888 for its broad claims over jurisdiction.
Some of the most outspoken advocates of states' rights within the National Association of Regulatory Utility Commissioners (NARUC) would likely call my response overly generous to the FERC, as well as overly optimistic. My more zealous colleagues in state regulation would argue that what I describe as olive branches are brittle twigs at most (em no more than fig leaves to cover the preemptive heart that beats deep within the supposedly imperialist FERC.
Yet I am not a state official who is itching to fight the feds. I care not about FERC/state jurisdictional disputes for their own sake. I am not a state official who believes that an adequate response to this complex and crucial matter is to chant "state rights or no preemption." I care about the jurisdictional issues only because I want to bring the considerable benefits of electric generation competition to the families and businesses of Pennsylvania.
As a state commissioner who believes that the generation of electricity is not a natural monopoly and who, therefore, believes that the government should not be setting the price of electric generation, I support competition in electric generation in both wholesale and retail markets. Both wholesale and retail buyers of electric generation should enjoy a choice among suppliers of generation. Consequently, when I examine the FERC's final rules, I look first to their impact on competition. How do they help the states furnish real choice for retail customers?
Since the states and the federal government both lay claim to legitimate interests in the restructuring of the electric industry, many have called for something called "cooperative federalism" to delineate appropriate federal and state roles. The term "cooperative federalism" assumes that plain, old "federalism" will not do. Too often, federalism has meant that the federal government dictates to the states. Cooperative federalism would require a commitment by the federal government and by the states to collaborate as they restructure the electric industry to allow competition in generation.
For cooperative federalism to become reality, cooperation must flow in two directions. States cannot expect deference from the federal government if they act like protectionists intent on impeding interstate commerce. The federal government cannot expect teamwork from the states if it preempts state authority even when states act in a manner that promotes the interstate commerce of electricity and competition in generation.
Olive Branch #1. The FERC emphasizes in Order