Competition in the Electric Industry Emerging Issues, Opportunities, and Risks for Facility Operators (1996) / Chapter Skim
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Additional Considerations in the Electric Competition Debate
Additional Considerations in the Electric Competition Debate
Pages 76-83
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From page 76... ...
Competition Does Not Come Quickly The history of the regulatory reform in the telecommunications industry provides some useful insights into the speed, or lack thereof, at which competition comes to regulated industries. In 1959, the Federal Communications Commission inadvertently opened the door to longdistance competition when it gave firms the authority to set up private microwave systems to serve their internal needs.
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From page 77... ...
We therefore cannot expect that competition in electricity will be achieved overnight. It is by no means simply a technical problem to which people in some government office can work out details with the automatic assent of the utilities, independent power producers, industrial users, consumers, environmentalists, and regulators.
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From page 78... ...
Such a move would allow the firm to reduce competition from these independent power producers, raise the price it charges for its own generated electricity, and thus capture indirectly the profits it can generate because it is the only transmission provider in town. From my experience in antitrust matters, ~ believe that there is nothing wrong in general with firms, integrating into other businesses and favoring their own affiliates.
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From page 79... ...
~ wonder whether the recent FERC order imposes rules separating the operations of generation and transmission that are as stringent as those the Telecommunications Act imposes between local power distributors and their telephone or cable television operations. A second issue is that, if purely functional unbundling of transmission and generation would really be effective, why should the nation not go all the way and order a divestiture?
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From page 80... ...
Mergers The Justice Department and Federal Trade Commission traditionally do not care whether a proposed merger is a good idea from the standpoint of the merging companies. ~ can see why FERC or a state regulator might want to oversee investment decisions by regulated companies, but the antitrust authorities are not equipped to second-guess capital market .
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From page 81... ...
There are certainly some fairly strong arguments for assigning an obligation to the government to provide for stranded cost recovery. The government certainly had some influence over policy developments in this area, and also may have forced utilities to incur costs that they might not have otherwise incurred had they been free to take the risk of future competition into account.
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From page 82... ...
Other commentators have suggested that a failure to ensure stranded cost recovery is akin to an unconstitutional "taking" of property. While that issue, too, is usually couched as a matter of fairness, some research ~ have done with colleagues at Resources for the Future suggests that we might want to compensate parties with political clout specifically to persuade them not to oppose policy changes that would lead to a more efficient marketplace.
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From page 83... ...
load management, transmission pricing, and environmental protection, to name a few. ~ hope that these and other discussions will lead to the collective knowledge and wisdom to let us avoid the mistakes of the past and move expeditiously to a competitive and vibrant electricity industry.
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