When I wrote this column on July 11, Rep. Dan Schaefer (R-CO) had just concluded a news conference to announce his "Electric Consumers' Power to Choose Act of 1996." Reams of testimony were pouring in, demanding to be read. Faxes arrived nonstop all afternoon with offers from experts to provide comments, quotes, or some unique spin on the day's events. My desk became nearly submerged.
Only two days before, I had survived the filing deadline for the pro forma transmission tariffs at the Federal Energy Regulatory Commission (FERC). That wasn't too bad. After all, nearly two-thirds of the transmission-owning electric utilities had already filed open-access tariffs by April 24, when the FERC released Order 888. But come the next Monday, July 15, reply comments would fall due at the FERC in the California Power Exchange docket. Somewhere in between would come a host of petitions for rehearing or clarification of FERC Order 888. And if that wasn't enough, August promised the first round of written comments in the FERC's new rulemaking on its proposed capacity reservation tariff (CRT). By the way, the FERC predicted a paperwork burden of 250 hours per utility for the CRT rulemaking, or 41,500 hours of work for all the 166 utilities (give or take a few) that own, operate, or control electric transmission facilities. (At $300 an hour, that's over $12 million worth of comments.)
All in all, these past few weeks have seemed very much like a triple witching hour on Wall Street. Each new deadline brings something else to read, whether by courier pouch or FedEx envelope. The summer will have to wait. The blizzard of paper knows no season.
Taming the Beast
In terms of sheer volume of paper, the worst offender of the summer turned out to be the Report on Horizontal Market Power, prepared in FERC Docket No. ER96-1663-000 on behalf of Southern California Edison Co. and San Diego Gas and Electric Co. by Professor Paul L. Joskow (M.I.T.) and Rodney Frame (National Economic Research Associates), with assistance from Dr. William Hieronymus (Putnam, Hayes & Bartlett).
I had wanted to get my hands on that report after the American Public Power Association sent me several sets of comments criticizing its conclusions and suggesting that the FERC should treat the proposed California Power Exchange more or less as a work in progress (em an "experiment subject to continuing review" (em rather than a real solution for organizing a competitive market for bulk power. So, when I couldn't find the report on the Internet, I called Edison's Washington, DC, liaison office to ask for a copy.
When it finally landed on my desk, the report was so big I promptly took it into the mail room to weigh it. (Two pounds, nine ounces!) On the cover was a note from my good friend Gloria Quinn from Edison's corporate communications department: "Bruce, I think you were right not to download this beast."
And a beast it is. Consider this excerpt, presumably written by Professor Joskow:
"If we had data for all of the relevant demand elasticities, cross elasticities, production costs, transportation costs, information costs, the distribution of information, market structure, and the nature of the competitive interactions between suppliers in a market, we could specify an associated market model and determine directly the extent of market power, and how it is affected by changes in transmission institutions, trading institutions, market structure, input costs, [and] technological change, etc."
Is that what Schaefer means by "the power to choose"?
I recall how the California Public Utilities Commission (CPUC) began its "Blue Book" hearings on electric restructuring back in 1994 with talk of empowered consumers and a new regulatory "vision." The state's economy was said to be reeling. The CPUC set out on a mission to lower the retail price of electricity. How different it all seems today, now that the CPUC has chosen to effect reforms by establishing a centralized energy market (the Power Exchange) and an independent system operator to run the transmission network. In reading the various reports, comments, and filings submitted in the FERC docket, it's almost impossible now not to get lost in the discussion of "workable" competition, relevant markets, and the ever-present Herfindahl-Hirschman Index. One comes away with the feeling that the goal of the exercise is not to help consumers, but to protect assets.
After I read Joskow's report on horizontal market power, I talked with Douglas Green, one of the attorneys at Steptoe and Johnson (Washington, DC) representing Edison before the FERC. I asked him whether there were any unspoken linkages between issues at the CPUC and the FERC. Did the FERC feel pressured to approve the CPUC plan, given all the effort invested by the CPUC in its Blue Book hearings and PoolCo policy choice? Moreover, would FERC approval be seen as tacit acceptance of the CPUC's policy on stranded costs and the proposed competitive transition charge? Here is what Green said:
"At the FERC, the California PUC is a neutral party. It hasn't presented any particular view. And the PUC in its own decision stressed the need for 'cooperative federalism,' and expressed an interest to show deference to FERC in its area, and vice versa. I don't see any reason why that won't work smoothly."
Green continued: "I think the FERC would like to be able to help meet the schedule, which calls for the Power Exchange to begin on January 1, 1998, and that is certainly a feasible schedule if we can stay on the course that we are on now."
In other words, what we have is a policy of "mutual deference." The CPUC needs the FERC's cooperation to set up the power pool. But the FERC could use some state support for its stranded-cost policy and its controversial stance in Order 888 to assert jurisdiction over the "retail transmission component" of unbundled retail wheeling service.
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