News Analysis

Pennsylvania loses faith in FERC, looks for help from the Justice department.
Pennsylvania loses faith in FERC, looks for help from the Justice department.
Fortnightly Magazine - August 2002
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Pennsylvania loses faith in FERC, looks for help from the Justice department.

"A well functioning market on an average day works better than we regulators can do on our best day." Perhaps this quote, attributed to Pat Wood, chairman of the Federal Energy Regulatory Commission (FERC), best captures the prevailing view among transmission officials in the Northeast. But the feeling out West is decidedly different. So is the mood among state utility regulators.

Ask Marilyn Showalter, chairwoman of the Washington Utilities and Transportation Commission.

"We regulators," she notes, "may not be perfect. But on our worst day we don't do as much damage to consumers as a bad market." And Showalter, increasingly, is not alone in that opinion.

Speaking at a meeting of regulatory attorneys held in June in San Francisco, she applauded her state's decision to maintain a traditional approach to regulating energy utilities, and suggested that the folks in Washington, D.C. have got it wrong.

Consumers do not want choice, she argues. They want reliable power at a low price.

Yet she fears that Chairman Wood remains oblivious to that notion-and that FERC will move ahead with regional transmission organizations (RTOs) and a standard market design (SMD).

And many state regulators are losing faith, asking whether such a market is needed and whether benefits will ever trickle-down to consumers. Certainly, enough has occurred over the past year to give reason to be leery. Many now question what so far has been FERC's best argument-that California's power crisis stemmed from flaws in market design, and could be fixed with an RTO and SMD.

Cochran Keating, a senior attorney with the Florida Public Service Commission (PSC), reports that his state favors a "sit back and wait" approach.

As Keating explains, Florida offers no quarrel with the concept of RTOs. But late last year, in a case in which former FERC commissioners Jim Hoecker and Mike Naeve testified as witnesses, the PSC blocked the move to transfer grid assets from electric utilities to a free-standing transmission company (transco). The PSC found no evidence that a private transco would offer any more benefits to Florida ratepayers than could be had through an improved wholesale market run by an independent regional grid operator. "At this time," says the PSC, "it is impossible to predict exactly what the wholesale market will look like." ()

But now worries have surfaced even in Pennsylvania, a state often cited as a model for electricity competition.

This summer, the state's public utility commission (PUC) charged that PJM-the one regional grid touting its competitive model-may have left the door wide open for market abuse in its "ICAP" (installed capacity) auction.

Dennis J. Buckley, an energy analyst with PUC, admits that competition in Pennsylvania has suffered with a loss of market players. Buckley makes it clear that restructuring will not mean less regulation, at least not any time soon.

"We need a sheriff and deputies," he says, "with loaded pistols."

Back in Washington, the U.S. General Accounting Office chose not to take sides, but warned this summer that FERC must act quickly