Frontlines

Deck: 
The legal battle of the century is ready to begin.
Fortnightly Magazine - January 2004
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Frontlines

The legal battle of the century is ready to begin.

Tantamount to a declaration of war with state regulators was the order from the Federal Energy Regulatory Commission (FERC) late last year, over the objections of Kentucky and Virginia, that AEP must join the PJM grid to meet conditions of its 2000 merger with Central and Southwest Corp.

At the center of the issue is whether FERC has authority to pre-empt the states on development of regional transmission organizations. (For a full outline of the relevant legal arguments, see our "Commission Watch" column, p. 20).

While state and federal regulators have debated this question ad nauseam for the last two years, FERC's order makes it a real legal battle in which both states and the feds now risk their pride, turf, and reputations.

Most legal experts say the final arbiter of state or federal pre-eminence may end up being the Supreme Court, as the loser will certainly appeal again and again.

So, one might ask, what is to happen to U.S. energy markets if the Supremes make FERC God of the Grid? Can markets develop without some check and balance from states? Conversely, if Congress counters and legislates states as the rulers of RTO development in their region, how can you have RTO markets without federal coordination?

Moreover, what happens if the justices strike down this action as unconstitutional?

Would Congress have the momentum to rewrite the law to sidestep any such ruling, assuming there is one?

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