Some will stray from ethical behavior. But markets must be regulated to maintain confidence.
Hold the Champagne?
There is much to celebrate in the Energy Policy Act of 2005, but what will federal regulators do?
It has been a most anti-climactic affair. After so many years of disappointments over failure to pass comprehensive energy legislation, many in Washington and in the utility industry had all but given up on Congress.
But sure enough, when we least expected it, the politicians finally were able to pull a multi-billion white rabbit out of their hat—enacting a comprehensive national energy law (Energy Policy Act of 2005, or EPAct) that will usher in extraordinary changes in the industry.
However, just how the new law really will affect the industry is the question of the hour, with many provisions of the law left to the interpretation of regulators.
That's why many utility CEOs and financial experts are urging caution. Instead of throwing lavish parties to celebrate legislation that promotes billions in direct investment in energy infrastructure, they are waiting. Waiting to see what the Federal Energy Regulatory Commission (FERC) does with its new, unprecedented authority over the industry. And waiting to see how state regulators react to the expanded federal authority. "The market is still the driving factor behind transactions and investment decisions. The Energy Act removes some obstacles that have stood in the way of economically sound transactions. … Regulators still could interpret the new law in a manner which inhibits its usefulness," concludes a report written by the law firm of LeBoeuf, Lamb, Greene & MacRae.
Indeed, many are echoing the sentiment that the success of the EPAct of 2005 will depend in great part on FERC's implementation of laws, which must occur in some cases in as little as 90 days. This has not been lost on the man that will have to lead FERC into a new era of oversight.
"Clearly, this new law establishes significant new responsibilities for the commission, and I am determined to address all of the mandates within the time frames provided by Congress," FERC Chairman Joseph T. Kelliher said.
Some time frames not only are quite tight but varied. In the next four months, FERC must issue rules and define how it will carry out its merger authority with respect to the repealed Public Utility Holding Company Act of 1935.
Kelliher outlined other FERC deadlines. "Congress has directed the commission to finalize within 180 days new rules establishing an enforceable framework of mandatory power-grid reliability rules. … The commission must adopt rules regarding permit applications for transmission facilities and long-term transmission rights, and providing incentive-based rates to promote transmission investment. … The commission [is] to issue rules addressing access to utility holding company books and records," he said.
And that's just the tip of the iceberg. FERC and other agencies are tasked with a significant number of special studies that are under a deadline. Public Utilities Fortnightly in its October issue will offer detailed analysis of EPAct of 2005 and regulators' interpretations of the law.
Ding Dong, PUHCA's Dead
Public Utilities Fortnightly is one of the few