- The Washington Times - Tuesday, September 16, 2003

One of the most debated portions of the energy bill currently in conference is the electricity title. While both the House- and Senate-passed versions of the bill correctly contain language imposing mandatory quality standards on transmission, speeding approval of the construction of power lines on federal lands and repealing the Public Utility Holding Company Act (PUHCA), disputes continue to swirl around the regulation of transmission lines.

The debate has broken along regional, rather than traditional, partisan lines. On one side are legislators from Midwestern and Northeastern states, who support the proposals of the Federal Energy Regulatory Commission (FERC) to unify the transmission system and its regulatory standards by bringing utilities into Regional Transmission Organizations (RTOs). Utility companies would be forced to join the RTOs, which would enforce electricity reliability standards under the supervision of FERC.

However, representatives of Western and Southern states, where energy is comparatively cheap, fear that such RTOs would lead to higher power prices and reductions in state sovereignty. Power producers in such states claim that their vertically integrated monopolies, with companies controlling electricity from transmission to delivery, provide consumers with low costs and high reliability. They argue that FERC should not require them to join RTOs for years, or even decades.

However, that delay could cost Midwestern and Northeastern power producers dearly. Representatives from those states argue that they need the certainty of federal legislation to make infrastructure investments. Moreover, some of them, such as Michigan and Ohio, have already passed laws requiring power companies to join RTOs.

A compromise must be found, since as last month’s blackout demonstrated, provisions that will upgrade the electricity grid are an essential part of a comprehensive energy bill. We suggest that a compromise be made along the same regional boundaries that already exist. Specifically, this means allowing those states that wish to follow FERC’s RTO designs to do so, but permitting those states in the West and South to delay doing so, so long as such provisions do not contravene the interstate commerce clause.

This is not a perfect approach. The legislative language will have to be carefully drafted to avoid potential constitutional problems. In addition, it also raises the question of how to fairly treat those power suppliers that have interests in opposed regions. However, our soundings of the interested parties suggest that it may be a workable one nonetheless. Electricity provisions should not be allowed to stand in the way of a comprehensive energy bill, especially since there seems to be room for compromise.

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