November 15, 2007

Centralized markets are failing consumers

By Alan H. Richardson

During my 30-year career at the American Public Power Association (APPA), I’ve had a front-row seat for most of the major events in our industry’s recent history. So it disturbs me when my view of our history is 180 degrees out of phase with how others perceive it. Such was the case with the preamble to the Federal Energy Regulatory Commission’s (FERC’s) June 2007 notice of proposed rulemaking (NOPR) to improve the operation of centralized wholesale power markets run by regional transmission organizations (RTOs).

 

I find the commission’s view of history clouded by “competition-colored” glasses. In an apparent effort to buttress its policies promoting centralized spot markets, the commission misstates history—in particular the U.S. Congress’s rationale for passing the Public Utility Regulatory Policies Act of 1978 (Purpa). In the world according to FERC, the enactment of Purpa was the first hug in Congress’s 30-year embrace of competition as national policy for bulk power markets.

Today, Congress attaches fanciful names to legislation in an attempt to convey the bill’s purpose: No Child Left Behind, for example. In the 1970s, sponsors were much more direct. Bills generally contained a statement of congressional purpose. In Purpa’s case, it was “conservation of energy supplied by electric utilities; the optimization of the efficiency of use of facilities and resources by electric utilities; and equitable rates to electric consumers.” That was in keeping with the Carter administration’s national energy policy, which emphasized energy conservation and efficiency in response to the Arab oil embargo of 1973-1974.

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