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Frontlines

Enron holds court on electric restructuring, exposing deep industry divisions and the polarization of views.
Fortnightly Magazine - November 1 2001

the two in the wake of the California crisis.

For example, these federal vs. state tensions could be heard in reactions to the FERC chairman's remarks: "I don't want to federalize. I don't want state-by-state. I want a regional approach."

This prompted one PUC commissioner to respond, "I think state commissions are on the front lines. There is no such thing as regional PUCs. I see regional RTOs as economically dangerous."

Notwithstanding, some attendees, such as a Delaware PUC representative, voiced his favor of regionalization. "Many states are not opposed to regionalization, but they want to be at the table. There would be less doubt if there were a rational discussion."

Building Competitive Power Markets: Wasted Years?

The polarization of industry opinion, which some blame as delaying progress on energy restructuring, led some Enron participants to openly voice their disillusionment, and to even question whether they have been wasting their time.

Dr. Larry Ruff, an independent energy consultant who has designed several electric markets inside and outside the United States, wondered out loud whether his youth had been wasted on designing competitive markets for power. Surely, many executives in the audience felt as Ruff did: so many years of hearing promises of comprehensive energy legislation, competitive markets, and lower prices, followed by only partial regulatory and legislative action, in many respects-and partial successes.

Maybe, due to this general feeling of malaise, participants predicted that US electric retail competition would continue at a snail's pace, and that places like California would be more heavily regulated and less market orientated than other states in the future.

But not all was dissension in the court of Enron. Lay's view on the need to continue to improve wholesale markets was met with considerable support from FERC commissioners, congressional policy makers and business people, who generally supported the RTO concept as a catalyst to achieving true electric competition.

Yet, while many in Congress support greater powers for FERC in meeting this objective, the RTO process and national energy legislation still face many hurdles.

At press time, passage of comprehensive energy legislation seemed to be stalling for yet another year. Congressmen attending the conference were not optimistic that passage would occur.

Also, FERC Chairman Wood and the commission itself face the challenge of coordinating with the industry on its RTO vision. At the meeting, Chairman Wood hoped RTO development would be free of legal arguments, challenges or infighting. In fact, he said he wants energy executives at the table, not their lawyers, so as to speed the process of RTO development.

But as an attorney himself, the FERC Chairman must be painfully aware that FERC will only be as successful as its policies and its grounding in law. Otherwise, the industry's legal establishment will have full right in challenging him.

In addition, as fixing wholesale markets continues to be one of the industry's top concerns, as voiced at the meeting, FERC is once again being asked to move the industry further along the competition paradigm, placing the institution and the industry, in effect, at the crossroads of US