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Regulators Forum: Taming the Utility Frontier

Policymakers are setting sights on new challenges facing utilities.

Fortnightly Magazine - November 2006

to other states. We will get to a point, however, where the states have assurance they will get fair treatment.

Fortnightly: How is the Frontier Line effort proceeding, from your perspective? What lessons have you learned from this effort so far?

Freudenthal: A project like this takes a long time. Cooperation among states and the federal government, as well as the utilities in the footprint, are key to success. But it strikes me that the core issue is you can build the line if you have some assurance the power will be properly priced in California, to support long-term investment in the infrastructure.

Wyoming’s desire is a necessary but not sufficient condition to get the Frontier Line completed. It will require similar efforts in other states. Utah and Nevada have been good about it, but California users have to decide if they are willing to pay for the power. If they don’t, we’ll just keep selling them natural gas at a high price. We’re in an enviable position in Wyoming: We have lots of gas we can sell, but in the long run with clean-coal technology we can give them a better price for electricity.

Right now I don’t think the federal government is really playing its role in helping finance the risk component of these first few clean-coal plants. The federal government talks about FutureGen and gasification above 4,000 feet, but when you scratch below the surface there is no commitment. To some degree, that accounts for the private sector’s position. Namely, a lot of people are talking and negotiating, but nobody is signing contracts.

Fortnightly: What role should state governments take in addressing the challenges of national energy security and climate change?

Freudenthal: The states say they want green power, but they have to integrate it into their rate structure. This second step has not happened yet. New technology is the future of coal-fired electric generation. We have lots of natural gas in Wyoming, but relying on natural gas is not a rational policy for the nation. We should have a mix of resources.

Climate change gets difficult in a public-policy sense. It has been identified as an issue but the proposed solutions are way ahead of the technology. We need to follow the old carpenter’s rule about measuring twice and cutting once. We need to take a deep breath, figure out the real problem, and get some technology in place that addresses that problem, rather than reacting to the latest newspaper article.

Illinois: Competitive Journey

Erin M. O’Connell-Diaz, Commissioner, Illinois Commerce Commission

Fortnightly: How is the Illinois Commerce Commission (ICC) working to alleviate price pressures for Illinois ratepayers? What lessons have been learned from Commonwealth Edison’s recent supply auction?

O’Connell-Diaz: Of course nobody likes rate increases, but when costs go up there will be a rate hike. The commission and Illinois in general have been very measured in the way they approach the issue of electricity prices.

We believe the supply auction went very well. Competition was robust and the numbers that came out of it were a good