Keep
California Energy Crisis in Perspective:
The
Feds Understand that Energy Deregulation Works Well
If Done Right
Unless
Enron's latest indiscretion is grabbing headlines or
we're actually suffering through blackouts, most of
us don't think about electricity. We simply flip a switch
and expect the lights to come on.
Despite
our inattention to an industry vital to our everyday
lives and economy, this is a crucial time in the future
of the energy business - and not just for California
or a few energy companies. Issues surrounding how electricity
will be used, how it will be moved and how consumers
will benefit are now being decided.
The
Federal Energy Regulatory Commission (FERC) is pursuing
a highly needed plan to standardize U.S. energy markets
and make them work more efficiently. FERC is in charge
of "deregulated" wholesale power markets;
in truth, markets are still regulated. In spite of some
criticisms, mostly stemming from California's electricity
fiasco, there are many safeguards in place for consumers
because of FERC oversight.
FERC
Chairman Pat H. Wood III wasn't in charge of the commission
during Enron's heyday, but he has recently taken immense
steps to prevent another "Enron" by increasing
scrutiny of market manipulation. Energy companies and
traders obviously took advantage of California's poorly
designed attempt at deregulation and FERC has acknowledged
it could have done more to help the state. But consumers
need to understand that deregulation is not synonymous
with crime and most energy companies aren't evil villains.
FERC's
goal in its proposed "Standard Market Design"
is to make our regional electricity systems more efficient
and reliable - and better able to move electricity from
power plants to homes and businesses. It's about time.
The delivery of electricity to end-users is trapped
in archaic technology and surrounded by unrealized gains
in technology, energy efficiency and reduced environmental
emissions.
Those
who say the old ways of operating utilities were not
so bad - lumping costs into regulated rates and making
consumers pay for bad decisions and waste - don't have
facts on their side.
An
analysis by Washington, D.C.-based Boston Pacific Co.
indicates electricity prices have steadily declined
since the emergence of competitive power markets. It
found that all customer categories paid an average of
35 percent less in real prices for electricity during
1985-2000 than under old forms of regulation.
In
Pennsylvania and Texas, retail consumers are the beneficiaries
of successful competition among retail energy providers.
Now in its sixth year of electric deregulation, Pennsylvania
cites $4 billion in cumulative residential savings.
Texas,
completing its first full year of residential deregulation,
expects an initial savings of nearly $1 billion this
year alone under its "price-to-beat" system.
Texas
and Pennsylvania deregulated and managed to avoid California's
problems - further proof that the Golden State's problems
had more to do with its poorly designed plan than with
deregulation.
FERC's
push for standardized markets would encourage energy
companies to build new plants and utilize the latest
technologies that will make it possible to distribute
electricity over greater distances at cheaper prices.
Right
now, the U.S. has an aging inventory of high-cost, nuclear
and traditional base-load power plants, which are gradually
being retired. We also have a transmission grid that
is not suited to the kind of electricity sales that
are now technically possible and can benefit consumers
by reducing costs.
As
several Western states experienced firsthand, the supply
"bubble" will eventually burst, and we, as
a nation, will be playing catch-up. When that occurs,
our policymakers will want, and need, healthy wholesale
energy markets with competitive providers able to build
new power plants. Most states are experiencing budget
problems and can't afford to foot the bill for new plants.
FERC's
plan isn't perfect - nothing is. But it's a good start,
and one that understands how important electricity deregulation
is in helping America avoid a national power squeeze.
by
Lynne Kiesling
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