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Perspective

Fortnightly Magazine - August 1997

their wares in the market. They are rapidly developing the capacity to link seamlessly to produce a unique response to each customer's unique requirements, coalescing into whatever array best responds to market needs.

In fact, Niagara Mohawk today has come before its regulators on bended knee, asking to give up its status as a regulated monopoly. Fundamentally, we understand we must open our franchise to competition to achieve the flexibility we need to grow the business.

If my view is correct, the grid as we know it today will face steadily stronger competition from distributed generation in the years to come. Many customers that we view today as "captive" will have economically viable options much sooner than many of us expect. In short, the transmission network today might remain the last bastion of electric utility monopoly. But we cannot expect that to last forever. Today's policies must be directed toward sustaining its viability for the longest possible time. Forward-looking policy must deliver to customers the greatest possible value from existing transmission assets and provide economic incentive for building additional capacity where it is economically justified.

Developing a Policy

If the changes taking place in our industry are driven not by regulation but by fundamental technological change, we can postulate several principles that should guide the development of transmission policy over the long term.

First, we must recognize that in the long term regulation of the transmission system must be directed toward ensuring nondiscriminatory system access and reliability, not electricity price control.

The disaggregation of vertically integrated electric utilities in Canada and the U.S., combined with the growth of distributed generation, will rapidly make the historic role of regulation in protecting consumers from monopolistic pricing irrelevant. I believe this transition will occur in the next decade.

In the short term, prudent measures are required to address "bottleneck" situations and the potential they create for price-gouging. If policy adequately protects market access, however, then economic forces will support the development of alternatives that will ultimately eliminate the most serious bottlenecks.

Second, we should strive for a system driven first and foremost by economic value-added, without regard to the origin of generation. Those of us who straddle the St. Lawrence and the Great Lakes know well that our competition for load is global. If Niagara Mohawk's distribution company of the future can best meet its customers' needs in cooperation with kilowatts from Canada, it must be free to do so. If a Canadian customer's least-cost option is power from the other side of the Niagara, it must have that option.

Third, the system must be simple, transparent and straightforward. We have at our disposal information technology that allows us to complete the most complex commercial and physical transactions in nanoseconds. Our policy should bring all of this capability to bear with the goal of delivering the greatest possible value that can be derived from transmission assets.

We cannot afford to allow tunnel-building instincts to control the valuable transmission assets that are truly the lifeblood of North America's economy. t

Albert J. Budney Jr. became president