By Lynda M. Lovejoy Chairwoman, N.M. Public Regulation Commission
National security concerns, intensified since 9-11, have renewed our national interest in reducing our dependence on foreign oil. But it is electricity — even more than oil — that is generating some of the hottest policy debates right now on Capitol Hill.
The outcome of these debates could affect the cost and reliability of electricity for generations.
What's at stake is how electricity prices are set, who manages transmission lines, and whether local ratepayers will continue to benefit from past investments in electricity.
Even though the New Mexico Legislature rejected retail electric competition this session, the issues are alive in Congress, and potential changes at the wholesale level threaten our nation's economy.
The Federal Energy Regulatory Commission basically is attempting to nationalize electricity management under the agency's control. This radical restructuring would generate more risk than electricity. States and local utilities that created the finest electricity system in the world would be stripped of meaningful authority.
There are several huge risks associated with FERC's power grab:
Applying a "one size fits all" national management policy directed from an agency in Washington, D.C., would be a disaster.
Local and regional electricity systems are extremely complex, and each is unique.
FERC didn't use the power it has to deal with the California energy crisis two years ago, so why give that agency more authority?
FERC's proposal would result in bigger bills for consumers. Right now, the price of electricity is based on cost. FERC wants to change this so prices would be based on a market-determined value rather than cost. A value-based price could fluctuate widely — doubling, tripling or worse as we saw two years ago — depending on real market variables in a best case and market manipulation in a worst case. In either scenario, consumers lose.
Finally, FERC wants to make it unlawful for local utilities to give their own customers premium access to transmission. But those customers' money was used to build transmission lines. FERC would require them to pay again.
As the fifth largest state, with fewer than 2 million people, New Mexico has a low population density. New Mexico is also a major energy producer and exporter.
Several merchant power plants were canceled or postponed in New Mexico in 2002 due to market uncertainty. That market uncertainty cannot be cured through the deployment of an untried design imposed on the states.
No comprehensive cost-benefit analysis has been done, but a preliminary FERC study predicted substantial shifts in how power is generated, marketed and priced within New Mexico and surrounding areas.
Consumers, business and political leaders across the country are rising up to challenge FERC. The Consumer Federation of America warns that the FERC proposal would lead to "fraud, market manipulation, rising prices, inefficient transaction costs and an increase in capital costs." Former Rep. Jack Kemp and more than 20 other prominent conservatives have criticized FERC's proposal. It would "result in the most radical and revolutionary regulatory reorganization of an industry in contemporary history," Kemp said.
Changes are needed to ensure that the Enrons of the world are checked and that there is an ability to efficiently transmit electricity from where it is generated to where it is needed. Yet, ironically, there is no meaningful accountability in FERC's proposal.
Now is not the time to conduct an experiment with the nation's electricity system. Electricity is an essential service that is critically important to the economy. With continued instability in the Middle East, a weak economy and much of the nation still recovering from California-style deregulation, we need stability in the electricity industry.
I urge the U.S. Senate Energy and Natural Resources Committee to curb the ambitions of the Federal Energy Regulatory Commission. I support federal legislation that would preserve state jurisdiction over electricity service to retail customers — including transmission, resource planning and rates — and that would ensure that local customers benefit from the facilities their money helped build.
Lynda M. Lovejoy is a member of the Alliance of State Leaders Protecting Electricity Consumers, www.protectpowerconsumers.org. The foregoing statement represents her opinion and not necessarily that of the Public Regulation Commission as a whole.
opinion 
...go to bookmarks
E-mail Story
Print Friendly
