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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

ask: What is there within the 600-page plus SMD rules that will accomplish the full task of enhancing our respective economies, creating equity, assuring reliability, and lowering rates in our region? The answer, in the Southeast, is "nothing."

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

This debate should not be just about who is right or whether FERC is usurping state authority. In my judgment, the debate should be grounded primarily in economics. Does the FERC proposal make sense for all parts of the country? … In my opinion, the high-cost electric states will benefit at the expense of the low-cost states. And large consumers could benefit at the expense of residential consumers. I am guilty of "just saying no" to all these economic inequities… In fact, although I don't believe SMD will solve high-cost problems long-term in any state, I do believe those states should have the option to participate in SMD if that is their desire.

We will gladly share our electric surpluses with others, but there is no justifiable excuse for FERC to take by edict what we do not freely give. To take by force that which is inherently an economic asset of any given state is fundamentally wrong. Through arbitrary, capricious, and discriminatory rulemaking, FERC is attempting to become the ultimate player to "game the system." That's not right, that's not fair, and that's not what our founding fathers had in mind when they wrote our Constitution.

What is the future of electric restructuring in Alabama?

I am a firm believer that a competitively based wholesale market is in the best interest of all electric customers in the United States … I believe that, as markets develop, we will begin to see a naturally resulting definition for our economic region, and evolving electricity market. As the wholesale market matures we will begin to understand better what retail restructuring could mean for our state, and then we can act prudently and in the best interest of all our citizens.

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

The tragic events of September 11 have obviously changed the world in which we live and have brought a renewed awareness of security issues… Specific actions taken in response to September 11 include: increasing security measures at generating plants; identifying and strengthening critical facilities across the state; and enhanced training of personnel. As a consequence, we do feel comfortable that our facilities are safe and secure. Our current policy is to mirror the national security provisions for securing all regulated industries seeking ways to contribute to Alabama's overall welfare.

In a post-Enron world, what issues are you dealing with regarding corporate responsibility and governance?

According to what I have read, Enron's trading strategies were designed to take advantage of flaws in California market design. As everyone knows, California has suffered through rolling-blackouts, price spikes, economic decline, and the financial crippling of traditional utilities. When the California market was restructured, they certainly never envisioned these problems. This is one of

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