FERC's Plan for Electric Competition

Fortnightly Magazine - July 15 1998
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WHY IS ELECTRICITY COMPETITION NOT WORKING? The principal reason is the failure of Order 888 to accommodate the economic and technological constraints of wholesale power markets.

Soon after Congress passed the Energy Policy Act of 1992, to give authority to the Federal Energy Regulatory Commission to compel electric utilities under its jurisdiction to wheel power for others, the FERC correctly recognized that piecemeal wheeling orders wouldn't work well without a tariff. A tariff would make the service quickly available to the user without the need for time-consuming negotiation.

But the devil is in the details. Instead, there is an important difference between electricity and natural gas. In electricity, had the only barrier to competition been the transmission lines connecting a wholesale load to a power producer, Order 888 might have proven as successful as Order 636 in gas. With electricity, however, the FERC failed to take into account a second barrier to entry. That barrier instead results from conflicts between economy and reliability. Despite Order 888, this barrier will prevent entry by small bulk power supply systems that might otherwise compete with established systems in selling the product distribution systems can use.

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