Competition Serves Energy Consumers
Nov 04 - Seattle Post - Intelligencer
As John Adams said, "Facts are stubborn things."
The facts illustrate that competition in electricity markets benefits
customers. The Energy Department found competition at wholesale made possible by
the Federal Energy Regulatory Commission's policies generates $13 billion in
annual economic benefits nationally. Billions more in customer savings are
possible through further pro-competitive policies.
It is understandable that California's high-profile fiasco has become the
poster child for those arguing against electricity competition. But this myopic
view ignores other, successful market restructurings elsewhere. PJM
Interconnection, for instance, has built a quiet record of competition in the
public interest, with solid efficiency gains in generation and investment in
transmission producing lower costs for customers.
It's clear that the FERC in 2000 could and should have done more to stem
runaway prices in California's electricity market, which spread to the Pacific
Northwest to terrible effect. A FERC majority for an order finally stemming the
crisis didn't occur until Pat Wood III and I arrived in June 2001. It is
historical revisionism to suggest that political contributions to the Bush
campaign accounted for actions by a FERC appointed by former President Clinton.
The facts are that electricity price pressure in the Northwest was growing
prior to the energy crisis, and prices likely would have increased in the region
whether or not California had ever adopted its abysmal market design.
Revelations of market manipulation don't change the fact that a regional drought
limited hydroelectric supplies, forcing a reliance on more expensive natural
gas-fired generation. And even without the drought, the region was confronted
with billions in costs for salmon and other species preservation efforts, as
rapid economic and population growth pushed the limits of the hydropower system.
It's been convenient for some to point to unscrupulous energy traders and
suggest their actions were the sole cause of the crisis. But as the final report
of the FERC staff's Western market investigation notes, "Significant supply
shortfalls and a fatally flawed market design were the root causes" of the
crisis, and the manipulation identified would not have been successful without
the underlying supply and market structure problems.
The courts will have the final say on the appropriateness of FERC's response
to the energy crisis. But the indisputable fact is that Washington's attorney
general and other top officials in the region argued for the record against FERC
ordering refunds for power sales in the Pacific Northwest.
FERC has dedicated significant resources to understanding the causes of the
energy crisis and instituting market mechanisms and institutions that will help
make sure such an economic disaster never occurs again. But first we must agree
that the existing grid structure didn't insulate the Northwest from California's
festering debacle, and continuing the status quo most certainly will not ward
off a repeat.
Wholesale power customers tell us they face multiple transmission rate "pancaking,"
queues for long-term service and generation interconnection, inadequate
transmission capacity and increasing grid congestion, and multiple and
uncoordinated providers of transmission service that contributes to transmission
capacity being unused when customers need it. And while the Northwest has a long
history of regional transmission planning, creating a new regional transmission
organization will only improve the status quo, not take away from it.
Karier suggests that the proposed Grid West regional transmission
organization would create "a new, multi-state monopoly." That's good
rhetoric, but it doesn't square with the facts. Regional transmission
organizations are designed to end monopoly control of the transmission system
and assure fair and non-discriminatory access to energy markets by many sellers
and buyers.
Whether a regional transmission organization is ultimately instituted in the
region is up to the industry and regulators in the region. We at FERC believe it
is an important step forward in assuring that the Northwest continues to have
electricity competition work in the best interests of the public. Continuing the
status quo risks a repeat of market problems and inadequate power supplies. The
problems are inescapable; the Pacific Northwest must be focused realistically on
solutions.
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To read the original column, go to http://www.seattlepi.com/opinion/196721_ferc26.html