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Fortnightly Magazine - June 15 1997

in NorAm offered two somewhat dubious arguments:

s First, special exemptions for marketers might undermine the entire regulatory program.

s Second, marketer status is unrelated to the exercise of jurisdiction under section 203.

As the Commission explained, all jurisdictional public utilities, not merely power marketers, remain subject to a myriad of regulatory controls. Carried to its logical conclusion, said the FERC, any argument that such controls make section 203 review unnecessary "would mean the Commission could not assert jurisdiction over dispositions of most public utility facilities, since we have oversight of, and place conditions on, virtually all utilities that engage in jurisdictional sales (em traditional and non-traditional utilities (such as power marketers) alike."

In any event, the Commission added airily, the question is irrelevant. "The fact that we have oversight of, and may impose conditions on the sale of, power marketers such as NorAm is unrelated to the issue of the Commission's jurisdiction over the disposition of NorAm's jurisdictional facilities."

Neither of these justifications seems satisfactory nor convincing. The first point suffers from the fallacy of reductio ad absurdum. In essence, the Commission argued that if it distinguished between "virtual

utilities," such as power marketers, and full-blown, vertically integrated utilities, its entire regulatory scheme could collapse. That reasoning is nonsense. Power marketers already enjoy many administrative exemptions from the FERC's regulations. No one has noticed a crumbling away of the Commission's regulatory program for traditional public utilities as a result. What the FERC's reasoning misses, of course, is that waivers exist to be granted. The exercise of discretion marks the essence of government.

The FERC's final point, that the unique status of power marketers is "unrelated to the issue" of an exemption from review under section 203, is simply an ipse dixit. It is "unrelated" only because the FERC chooses to ignore the relationship.

The NorAm order is plainly too broad. Perhaps its overbreadth was due to the Commission's effort to break new ground in dealing with the implications of quasi-utilities and virtual utilities. Given the pace of new developments in the electric industry and the size of its docket, the FERC certainly enjoys little time for patient reflection.

Nevertheless, the Commission should revisit the issue of requiring section 203 review of mergers involving corporate families that include no utilities except power marketers. It should examine whether an additional round of government review really serves the public interest simply because an enterprise trades in electric energy as a commodity. If FERC does so, it may well conclude that this is an instance in which "light-handed" regulation can serve the public interest. t

Isaac D. Benkin is a partner in the Washington, D.C. office of Winthrop, Stimson, Putnam & Roberts. He is a former administrative law judge at the Federal Energy Regulatory Commission.

1Docket No. EL97-15-000, 79 FERC ¶61,107.

2Docket No. EC97-23-000, 79 FERC ¶61,109 (consolidated with CHI Power Marketing, Inc., Docket No. EC97-26-000).

3Docket No. EL97-25-000, 79 FERC ¶61,108.

4Cent. Vermont Pub. Serv. Corp., 39 FERC ¶61,295 (1987).

5Missouri Basin Mun. Pwr. Agency, 53 FERC ¶61,368 (1990), reh. den., 55 FERC ¶61,464