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Bridging the Regulatory Divide

Regional committees may improve collaboration between federal and state regulators.

Fortnightly Magazine - December 2005

In light of the extensive degree of restructuring and change in the energy industry during the last several years, and the increased degree of complexity such restructuring has created, the lines of demarcation between federal and state authority are not as bright as they once were.

Now, layered on top of ever-evolving industry restructuring and corresponding Federal Energy Regulatory Commission (FERC) rulemakings, we have the provisions of the Energy Policy Act of 2005 (EPACT), which greatly expand the legal authority of FERC and Department of Energy (DOE). These agencies’ new authorities will blur the lines further between traditional state regulatory authority and the domain of the federal government. The concept of “cooperative federalism,” which is supposed to embody the spirit of the Tenth Amendment, has become very difficult to define, and even more difficult to achieve.

Rather than continuing to focus on the tension between the goals and statutory responsibilities of state and federal regulators, the focus today should be on ways in which these officials can bridge that regulatory divide. Even if we can’t build the perfect bridge, considerable strides can be made toward working collaboratively as allies and partners. For the sake of customers, both residential and business, we must stay focused on achieving a reasonable “balance” between the long-respected rights of self-determination and retail ratepayer protection at the state level, and the broader national interests and concerns at the federal level.

From Contention to Communication

Although as a state commissioner I vehemently fought the original standard market design (SMD) proposal, I want to state that I absolutely do not question the sincerity of the objectives behind that proposed rulemaking, or the honorable intentions of the individuals who drafted and issued it. However, it did illustrate the very delicate balance that exists and that must be handled carefully between the legitimate economic interests of state officials, and the national goals and objectives of federal officials.

Interestingly enough, through the course of the SMD firestorm, many state and federal officials alike recognized the very real concerns—and, in fact, federal and state statutory authorities—on the other side of the divide. Black-and-white issues had to be accommodated, as did many gray areas where different but equally lawful authority for both state and federal regulators had to be reconciled.

This led to many conversations, meetings, and negotiating sessions between state and federal regulators, many of which I participated in, and which ultimately resulted in the crafting and release of a FERC white paper in April of 2003 (Docket No. RM01-12-000).

The white paper acknowledged several subject areas that were the pre-eminent authority of individual states to decide; listed goals that FERC still intended to pursue because of its beliefs regarding

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