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Letter to the Editor

Fortnightly Magazine - January 2004

Letters to the Editor

To the Editor:

"Frontlines" from the Nov. 1, 2003, addressed what Richard Stavros called "AEP's Gutsy Gambit." In the process of panning AEP's strategy, Mr. Stavros demonstrates no understanding or appreciation of the state law issues he purports to address in his essay. I am responding because, by unmistakable implication, Kentucky is one of the "certain state regulators" he repeatedly takes to task.

A major problem with Mr. Stavros' approach to the issue is his apparent complete acceptance of the arguments of Exelon Vice President Elizabeth Moler, who has pronounced that the actions of the Kentucky Public Service Commission and other state regulatory agencies "are directly and deliberately impeding federal policy over interstate transmission." Unfortunately, her analysis is replete with problems. For example, the essay at an early point focuses on section 205 of PURPA, which Moler believes authorizes FERC to "exempt utilities from state laws and regulations that purport to prohibit the voluntary coordination of electric utilities." Her position on that provision, however, has since been roundly criticized by several state parties. Among the many problems with her interpretation of that statute is the explicit provision in that same section 205 that prohibits FERC from overriding a state law that "is designed to protect public health, safety, or welfare." Those protections are precisely the reasons for the numerous state laws that require regulatory approval before utilities may join an RTO.

More globally, what Moler labels an impediment is simply a valid exercise of sovereign authority. Our Constitution, after all, recognizes and protects both federal and state authority. Kentucky and other states want to ensure that no one is pursuing RTO development just for its own sake; instead, we believe the ultimate goal should be to provide net benefits and enhanced reliability and safety for ratepayers. One of the key elements of our process in Kentucky is a cost/benefit analysis to determine if AEP membership in PJM will indeed offer net benefits to our citizens. Why would anyone oppose such a step? Why would any state want to approve utility membership in an RTO without such an analysis? Don't you bet Californians wish an accurate cost/benefit analysis had been conducted there before they jumped headlong into creation of their ISO? As Kentucky regulators, we intend to make sure that we have done a thorough analysis of these issues before approving such a significant change in the regulatory landscape.

Sweeping pronouncements of federal power are easy to make; careful, reasoned decision-making is harder.

It is important that FERC, the Fortnightly staff, and everyone else keep that simple point in mind as we all carefully work our way through these issues to reach the best results on behalf of our citizens.

Editor's Note: Mr. Huelsmann submitted his letter to the Fortnightly prior to Nov. 25, when FERC asserted authority under PURPA Sec. 205 to bypass contrary rulings from state PUCs and instead compel AEP to join the PJM RTO. For more, see p. 20

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