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Biting Pat Wood's Hand

FERC finds the states have teeth, too.

Fortnightly Magazine - May 15 2002

State utility regulators sometimes can seem more like wolves than sheep -a sure sign that a single vision of utility competition may never emerge.

FERC Chairman Pat Wood ought to be commended for trying to extend a hand of cooperation to state PUCs. But certainly he must by now understand that the nature of the state regulator, as the nature of the wolf, is unchangeable.

It must have felt like a deep bite when the Virginia State Corporation Commission blocked efforts by an electric utility, Dominion Virginia Power, to transfer ownership for its power plants to a subsidiary of its corporate parent, Dominion Resources. The chief reason, according to the state commission, was that it would transfer jurisdiction over "critical matters" from Virginia to the FERC.

And it must have stung the FERC Chairman to see that the proposed PUC proscription in the last six months has been to halt any type of divestiture or oppose an ownership structure that would strip PUCs' authority and enhance the FERC's.

Of course, it's no surprise that the California PUC has developed an adversarial relationship with FERC after the price spikes. But this time they are trying to stop Pacific Gas & Electric Co. from running to FERC to approve billions in bond issues and reorganization into four separate companies-a plan that California Attorney General Bill Lockyear claims is flat-out barred by state law.

In fact, the PUC is making a run at controlling the fate of PG&E by asserting its jurisdiction to enforce its own orders, including power to enforce conditions imposed on non-utility entities, such as holding companies.

In the same fashion as Virginia and California, PUCs from Florida and Louisiana have insisted that transfer of control of transmission assets to a for-profit transmission entity is not in the public interest. Instead, they want an RTO based on an ISO model, which coincidentally would continue to preserve their oversight.

Even an independent such as WestConnect RTO has backed off from the FERC, weighing in with the PUCs on RTO policies. In response to FERC's economic assessment of RTO policy, WestConnect "shares the concern expressed by many of the state commissions representatives that certain benefits, including increased generator heat efficiency and accelerated development of demand response programs, most likely will not take place as a direct result of RTO formation ... in most instances, those efficiencies would develop regardless. "

It doesn't appear that FERC's newly formed division of state relations has made states any more trusting of federal intentions. Perhaps Chairman Wood needed to see the wolf in regulators, so that he could realize that leadership at FERC means that he can no longer run with the PUC packs.