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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

adequacy, and transmission planning.

What do you think of FERC's increased assertion of jurisdiction over transmission in the SMD?

I don't think they are going too far. It's largely academic for us because we did unbundling and restructuring four years ago. So jurisdiction over transmission services here in Massachusetts already transferred to FERC… That being said I do think it's a good thing because I think it reflects the reality that transmission is a matter of interstate commerce.

What is the future of electric restructuring in your state?

Electric restructuring has been in place for four years now in Massachusetts, and the restructuring itself has been a great success. All of the distribution companies in Massachusetts are now wires-only businesses-they are not in the generation business… [And a lot of ] clean, efficient, new combined-cycle units have come online. We got a better reserve margin looking forward than we have had in the last 15 or 20 years.

In a post-September 11 world, how is your commission handling utility security issues?

Security issues are a big concern these days. We've really beefed up our oversight in this area. We have fairly regular meetings with all the utility companies to review their security plans… [T]here is a large liquid natural gas (LNG) facility in inner Boston Harbor, and the city of Boston has been very concerned about the safety of the tankers coming into the harbor and crossing under a major bridge. That has been a major issue we are working through.

In a post-Enron world, what issues are you dealing with?

Actually, this is an area where there really hasn't been as much impact as you would think. If you look at Enron and WorldCom in particular, those two companies are not in the camp of the traditionally regulated utilities in most states-although Enron owned a utility in Oregon. But for the most part they are on the deregulated market side and we haven't really had a lot of oversight of WorldCom, or MCI before them, and not of Enron in the retail market. I think the lesson here is that the traditional utilities have always been subject to a heightened level of scrutiny. Their books are reviewed much more than happens with the Securities and Exchange Commission, so there hasn't been much of an impact there.

What issue is of the most concern to Massachusetts?

On the macro level our concern is to focus on consumer benefits as the end result, with competition being the best means to that end. There tends to be an argument out there that competition is an end in itself and you should be pursing that no matter what, even if it means higher prices for customers. We don't view that as the appropriate focus. We think you should focus on consumer benefits as the end result.

Another area where we have had a lot of focus is service quality in the electric industry in particular. That is both for infrastructure and customer service. We have had a lot of merger activity and we saw a