Perspective

Commission policies need to recognize customer obligations and state commission decisions.

Even the best of intentions can create unintended consequences. The Federal Energy Regulatory Commission (FERC) has acted aggressively and appropriately during the past few years to stimulate competitive wholesale electricity markets.

Now the commission is beginning a comprehensive reassessment of its four-part analysis to determine whether applicants for market-based rate authority have market power-the ability to profitably raise prices in these competitive markets.

As FERC examines its policies to address the potential for the exercise of market power, it must recognize the potential impact the policies could have, as a side effect, on the ability of electric utilities and state public utility commissions to serve their regulated customers. FERC's actions here could take away many of the options both groups need to make the best decisions to provide their customers with a reliable and affordable supply of electricity.

Conflicts Arise

This past April the commission substantially revised its interim generation market power test for market-based rate applications. FERC also announced that in June it would begin holding hearings and technical conferences to examine the generation market power issue and three other aspects of the market power question-limiting transmission access, building barriers to entering a market, and the potential for creating preferential deals with affiliates.