Two Cato analysts suggest a return to the past-vertical integration, but now with no state regulators.
The defeat of the energy bill in...
proposed a compromise Energy Policy Act of 2003. The House approved the bill (246-180), but it was filibustered in the Senate. A subsequent motion for cloture was rejected (57-43), and the legislation was dead for 2003.
In response to objections to the $31 billion cost of the compromise bill, Sen. Domenici recently introduced the Energy Policy Act of 2004 (S. 2095), which pares $17 billion from the conference committee proposal. The Domenici bill at press time was on the Senate floor, and an amendment to include a federal green-power quota in the Energy Policy Act of 2004 is anticipated.
Federalism and Electric Power
A federal RPS would require that a specified percentage of electric power sold by electric utilities into retail markets be derived from renewable resources. A federal RPS is predicated, therefore, on the assumption that the federal government regulates retail markets for electric power.
Congress could, of course, authorize the Federal Energy Regulatory Commission (FERC) to regulate wholesale as well as retail electric power sales and services. However, in the Federal Power Act of 1935, the organic statute for federal regulation of electric utilities, Congress authorized FERC to regulate just wholesale electric power. The regulation of retail electric power was left to the states and to the state public service commissions.
The regulation of retail sales and services also was left to the states under PURPA, Title I, which established numerous retail policies for electric utilities. The policies were intended to promote the conservation of electric power and the efficient use of generation facilities and fuels.
The retail policies were not imposed on electric utilities. Indeed, PURPA left the adoption and implementation of the retail policies to state public service commissions, which could choose to adopt or reject each standard. The statute guaranteed that nothing therein precluded the adoption of state policies different from the retail policies of PURPA.
In this regard, PURPA reinforces the traditional jurisdictional divide between federal regulation of wholesale sales and services and state regulation of retail sales and services. This jurisdictional formula has worked well for almost 70 years. There is no compelling need now for Congress to interfere with the traditional state prerogative to regulate the retail rates and services of public utilities.
The experiment with green-power quotas began with state legislatures and state public service commissions. The experiment should continue not on the federal level but on the state level. Congress should not impose a federal RPS. Instead, PURPA should be amended to include an RPS among the retail policies that can be adopted or rejected by state public service commission.
Leave the green-power quotas to the states.
- To date, Arizona, California, Connecticut, Hawaii, Illinois, Iowa, Maine, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Texas, and Wisconsin all have an RPS.
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