U.S. Requires Competition in the Sale of Electricity
Following in the footsteps of California regulators, the Federal Energy Regulatory Commission ordered major changes Wednesday in the way electricity is sold at the wholesale level and said the new rules should save consumers $3.8 billion to $5.4 billion a year.
The electric rates for millions of people will be affected, according to the commission. “This is the most significant policy issue decided among this set of commissioners,” Commissioner Vicky Bailey said.
The new rules, which go into effect 60 days after they are published in the Federal Register, will require public electric utilities to open their transmission lines to competitors and to share information about available transmission capacity.
“We are taking an aggressive step toward greater competition in the marketplace,” said Commissioner William Massey, who voted for the changes even though he disagreed with some of the provisions.
The transmission service that utilities offer to others must be the same as they provide for themselves, including the pricing. The order also provides for full recovery by the utility of “stranded costs,” which are expenses that could go unrecovered if power customers use the new open access to move to another supplier.
The decision by the federal commission comes as debate continues in California over deregulation of the state’s $20-billion electric power industry. Seeking to reduce the state’s electricity rates, which are among the nation’s highest, proposed changes would transform the industry from a regulated monopoly of giant utilities to a market-driven business of big and small producers of electric power.
The federal rule “appears to be very consistent with the principles of restructuring that California has entered into at this point,” said Clarence Brown, media relations manager at Southern California Edison Co.
Three of the state’s largest electric utilities--Edison, Pacific Gas & Electric and San Diego Gas & Electric--plan to submit a joint proposal Monday on how to implement the new federal rule. “We like it,” said Bill Reed, vice president of regulatory affairs at San Diego Gas & Electric. “It fits into what we are already doing in California.”
The federal commissioners addressed predictions that the increased opportunities for selling power will also increase air pollution by power plants.
“The final rule will not cause a black cloud of ozone to descend on the Northeast,” Massey said.
And they said the rule is not designed to dilute the authority of state power regulators. “In every case, we will lean toward state decisions,” said Bailey, pointing out that more than 40 pages of the rule are dedicated to the issue of state-federal regulations.
The new regulations will not require public utilities to sell off assets, but they will be required to separate their transmission and power-marketing functions.
