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1996 Regulators' Forum

Fortnightly Magazine - November 15 1996

is: How far should legislatures go in enabling the restructuring process as opposed to prescribing outcomes? "[On some issues] political judgments need to be made. We've identified one with our legislature and that is how to treat the shortfall in property tax revenues that some communities may experience if generating plants located in those towns are devalued as a result of the shift to competition."

Q. Are industrial and residential consumers pressuring you to deregulate? How do the grassroots politics in your state differ from elsewhere; what defines your political climate?

A. "Yes, certainly. The principal pressure has been coming from industrial consumers. And there are, in fact, many residential consumers who question why we have to go forward with this restructuring process. There was a big political outcry earlier this year when our commission did approve a discount for one of our largest industrial customers, notwithstanding the fact that we made the commitment that the utility involved would not be able to collect the revenue shortfall from other customers."

The grassroots politics question is "a very difficult question, and one I'm almost a little reluctant to address. We are a high-cost state, but we're also a state where there's a sincere and deeply held concern about protecting and advancing environmental values. We've lost a significant amount of industrial load over the past 10 or 12 years and there's significant rate disparity between the utilities that operate in the state. All of those factors contribute to a very lively debate. . . . There's no clear consensus. But I would have to report a growing sense among those who are familiar with the issue that some type of reform is necessary."

Q. What are the pluses and minuses of U.S. Rep. Dan Schaefer's restructuring bill?

A. "Clearly the Congress is not in a position to move on the issue of restructuring this year, but I do think it has been useful to generate reaction to that bill. I think what's right about it is it identifies a critical issue that's affecting people from throughout the nation. And it is serving as a catalyst to spur forward the efforts of the states. What's wrong about it is although electric industry restructuring is an issue of national importance, that does not make it a per se federal issue."

Q. You've been involved in a coordinated restructuring process with neighboring states. Is this a model for others or could you have done it better and faster had you done it alone?

A. "In New England, there's no choice. We have to do it this way. We are six states that constitute a single market area, the New England Power Pool. Also, we are six states with, in many respects, a common political culture. . . . The kinds of markets that need to evolve have to reflect the physical, technological, and market realities.

"Transmission is a regional service, and I fully anticipate if this restructuring is to move forward successfully that what we'll see emerge is large, regional markets that cover several states. And it's

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