The States

The economy has put state commissioners and regulated utilities in precarious positions. Seven state chairmen explain how they’re applying fair rate treatment.

As federal policy makers push for GHG regulation and transparent markets, the California experience shows what works and what doesn’t work.

When Congress repealed the Holding Company Act, it gave states greater authority to regulate utilities. New Jersey picked up the baton and enacted rules to protect ratepayers.

As energy issues take center stage in the policy debate, state attorneys general increasingly are using their political influence and legal authority to affect a wide range of areas—from greenhouse-gas emissions to siting and development of infrastructure projects. Working constructively with state AGs can help utilities avoid becoming targets of investigation and litigation.

So far, states have taken the lead in carbon-control strategies. These state actions, however, could lead to constitutional conflicts—as recent court battles demonstrate. Only the U.S. Congress can regulate interstate trade, so states must step carefully in controlling carbon leakage.

In 2006, the California legislature and governor positioned energy conservation and efficiency as the cornerstone of the state’s Global Warming Solutions Act. The Act mandates a 2020 statewide limit on greenhouse gas (GHG) emissions to 1990 levels. Compliance will be nothing short of Herculean: California will have to reduce per capita energy usage in a manner that accommodates continued brisk population growth and protects the state’s economy from economic dislocations and recessionary pressures.

Deregulation is being tested by a series of crises, from a devastating hurricane to the Wall Street meltdown. Regulators and companies are applying the lessons learned to strengthen the Texas market’s framework.

A 2007 law essentially prohibits California utilities from signing long-term contracts for power, including those from out of state, unless they emit less than 1,000 pounds of CO₂/MWh of electricity produced. While the law does not specifically bar coal-fired generation, the limit is set low enough to rule out all coal-power plants. A modern, highly efficient natural gas-fired plant barely would qualify. These measures, plus the new carbon-cap law going into effect by 2012, have sent utilities—large and small, private as well as municipal or city-owned—into a frenzy as they scramble to find alternatives to coal to meet their future demand.

(December 2006) Charles A. King, California ISO: “Kicked Off and On Schedule” reasonably captures many of the implementation issues and stakeholder concerns surrounding the California Independent System Operator Market Redesign and Technology Upgrade program. However, I was somewhat disappointed that the article offered few details about the benefits MRTU will provide.