Fortnightly Magazine - January 2006

NERC up until now has been, in its own words, “a self regulatory organization, relying on reciprocity, peer pressure, and the mutual self-interest of all those involved in the electric system.” Nevertheless, can this tradition of kind, gentle, and voluntary consensus-building stand NERC in good stead as it seeks to transform itself in to a steel-fisted czar that would enforce mandatory standards?

Jim Lundrigan, New Haven, Conn.: After reading Gordon van Welie’s article (“New England: A Critical Look at Competition,”) I couldn’t help but think back to California in 2000. Van Welie, who is president and CEO of ISO New England, is trying to feed the citizens of New England the same brand of malarkey that the California ISO fed the California Public Utilities Commission in 2000 when wholesale and retail prices in California were perfectly linked and nearly succeeded in bankrupting the wealthiest state in the country.

John S. Ferguson, Richardson, Texas: The article of Michael J. Majoros Jr. (“Rate-Base Cleansings: Rolling Over Ratepayers,”) attracted my attention, because I perceive it to propose a solution—PUCs’ need to recognize refundable regulatory liabilities—for a problem that does not exist.

When President Eisenhower was growing up in Kansas, he saw America’s byways and back roads develop to meet point-to-point needs, eventually forming a loosely connected national interstate highway network. The U.S. electric transmission system has similar roots, and it needs a similar vision to meet the needs of the 21st century.

How does one determine the value of power contracts under early termination? Given the vagaries of the contracts themselves, the process is neither clear nor standard, and often results in protracted and costly litigation. Did the counterparty have the right to terminate in the first place?