United States

United States

Facing a free market

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The United States electric industry is undergoing a shake-up in the wake of the Energy Policy Act of 1992. Like most important legislation, the law's true impact will take time to figure out. EPAct wisely opens access to electric transmission. The legislation demolishes the toll gate which used to keep low-cost independent energy providers from wholesaling power on a regional basis. The federal Energy Regulatory Commission can now ensure that "wheeling" prices are no longer prohibitive. Other sections of the Act also promote competition and most observers agree that the electric utility industry will never be the same.

But the current created by EPAct is unsettling; after all, mixing uncertainty into utility corporate culture is like mixing oil and water. Small wonder most utility executives are paralysed as they watch their stock prices sink and their customers squirm.

One interest group has beaten hardest on the EPAct drum so far. Large industrial customers assert that the new law allows them to buy power from whomever they like at rock bottom prices. In 1993, efforts were made in five state capitals to instigate retail wheeling; but only one, a measure to assist a single Nevada business, which clearly understood the dual meaning of "juice," prevailed. This year has already brought a different scenario. Last month's announcement that California will open its grid and allow retail wheeling has shaken the energy community as much as the Northridge Quake shook LA. As Michael Foley of the National Association of Regulatory Utility Commissioners told the New York Times, "many state commissions will look at this decision and probably follow in some form." The most fundamental question is what this next instalment in utility deregulation will mean to the residential and commercial ratepayers who are left behind.

When the Rhode Island Public Utilities Commission examined Hydro-Quebec's proposal to sell retail power to industrial customers in America's smallest state, its conclusion was staggering. If dollars now flowing to Rhode Island's electric utilities were used to purchase cheap Canadian power, other customers' bills would increase by $26 million annually -- a rate shock, according to Public Utilities Commission staff, of 40 percent!

Right now American industries are blackmailing their utilities and getting lower rates. Utilities fear that if they do not give their biggest consumers price breaks, manufacturers, chemical processors, mines, even hospitals and universities will buy electricity elsewhere.

The debate over "retail wheeling" which has just escalated is, what Gigi Coe, Director of Strategic Planning for the California Public Utilities Commission, calls a "binary choice." The future is too complex, she argues, to be hijacked by a single interest. The debate should revolve around redefining the "social compact" American consumers have with utilities.

We need policy makers who remember the special characteristics of electric service. Environmental externalities accompany electric generation but aren't associated with gas or telecommunications. This alone should be enough to shame retail apologists, not to mention the consumer backlash if the industrialists succeed in passing more of their share of imbedded utility costs to commercial and residential ratepayers.

What the current debate needs most is a reality check. When the price of generation is the sole criteria, wind energy, and the contribution it makes to a sustainable future, will be ignored. And while consumers would be wise to rearrange the terms of our social compact with utilities and encourage them to operate more like real businesses, we can't allow electric service to be defined as just another commodity.

The American Wind Energy Association is asking a lot of pointed questions, while environmental and consumer advocates are actively opposing retail wheeling. All of us who care about the future, and wind energy's place it, should demand that deregulation doesn't lead to "unregulation." The last thing we can afford is to wake up and find that so-called "free market forces" have rolled the public interest.

Robert Kahn is a public relations consultant working out of Seattle and Sacramento and the Northwest representative of the American Wind Energy Association. The views expressed are his own and do not necessarily reflect those of AWEA or Windpower Monthly

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