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Regulators' Forum: A Fight Over Market Design

FERC's attempt to standardize markets have some state regulators up in arms.
Fortnightly Magazine - November 15 2002

the reasons that I am so concerned with current federal efforts to change the regulatory landscape that has served my state well for many years…

As the facts surrounding the Enron debacle continue to surface, our commission has become increasingly disappointed in the behavior of leading companies in corporate America… Fortunately in Alabama we employ a regulatory process through which we continuously scrutinize the books and records of the major companies we regulate. We continue to hold high regard for the corporate hierarchy in all our jurisdictional companies, and have seen no reasons to alter that opinion. Still, vigilance is a virtue.

What is the issue of most concern to Alabama?

We are very concerned with federal initiatives to experiment with approaches that appear to expose the consumers in our state to unnecessary risks and cost increases…

Some claim that there are only a noisy few state commissioners who question FERC's policies. In fact, the current FERC agenda is under scrutiny by a diverse contingent of observers, including newspaper editorialists who have questioned FERC ties to Enron, governors from at least two sections of the country who have questioned FERC's agenda as an economic impediment, and congressmen and senators who have questioned FERC's authority to restructure the industry and arbitrarily preempt state authority. All these people have voiced serious doubts that FERC is representing positions that will lower electric rates across America-and that is troubling. Even more troubling to me is the unrefuted implication, direct or inferred, that the major beneficiaries of the FERC SMD proposal will be the Enron-type companies. Perhaps most troubling of all is the incredibly poor timing of such a risky experiment with our nation's most vital industry. SMD could exacerbate the uncertainties of a skeptical stock market, a tenuous economy, and the serious homeland security challenges we face today… My question to FERC is: Why are you pursuing this agenda, and what's the hurry?

Front Runner

New England: Best-Practice Model

An interview with Paul B. Vasington, Chairman, Massachusetts Dept. of Telecommunications & Energy

Is FERC's proposed SMD perceived as beneficial or detrimental to Massachusetts?

We think it's a good thing, but that largely what FERC is doing is really making the rest of the country look like Massachusetts and New England are going to look in a few months… We're looking at beginning implementation in the first quarter of 2003, and we read the FERC's SMD as really being based on that same model-so it's really playing catch up with what we are doing.

What exceptions to SMD should be made for your region?

What I'd like to see is FERC looking at SMD as a skeleton, with the bones being nondiscriminatory access to the transmission system, a market monitoring system, locational marginal pricing, and congestion revenue rights. And we have all those bones in our market coming forward. But there are other areas where we have made more progress, and I think FERC should allow us to continue to make that progress and not make us move backwards. Those areas, for example, are in governance, resource