The North American Electric Reliability Council (NERC) has completed a series of workshops on what it calls "electronic information systems" (EINs). The NERC workshops were held in response to the Federal Energy Regulatory Commission (FERC) "Mega-NOPR" of March 29, which contemplates opening the wholesale electric industry to competition.
T.R. Standish's letter ("NUGs Take the Cake," May 1, 1995) in response to our article ("How State Regulators Should Handle Retail Wheeling," Feb. 15, 1995) reflects the views of those who believe that the full benefits of competition in the electric power industry do not require retail competition. Mr. Standish, in fact, believes that retail competition is bad and not inevitable. We would like to address several of his points:
Reasonable people can certainly debate the inevitability of retail competition. But unlike Mr.
Philip R. Sharp, former 10-term congressman from Indiana, has been named director of the Institute of Politics at Harvard University's John F. Kennedy School of Government. Sharp assumes the position on July 1, succeeding Charles Royer, former mayor of Seattle, WA.
NICOR Inc. has elected Thomas L. Fisher, currently president and COO, to the additional position of CEO. Fisher will continue as president and CEO of Northern Illinois Gas Co., the company's largest subsidiary.
Charles W.
"It could have been worse."
"It says to the market, `It won't be so bad.' It will take longer now, so that's better for the utilities."
"It creates a new bureaucratic entity that will make regulatory choices."
"It's regulated deregulation. It's alarming if that's the prototype for the nation."
That's the word, respectively, from Barry Abramson at Prudential Securities, Edward J. Tirello, Jr. of NatWest Securities, Steven Fetter at Fitch Investors Service, and Dan Scotto of Bear Stearns.
In his article, "Entering the Appliance Repair Business" (Feb. 1, 1995), Gordon Canning paints a bleak picture for independent contractors seeking to prevent utilities from entering the appliance repair business. However, contrary to Mr. Canning's suggestion, at least one utility has been forced to withdraw from this business.
As the debate over restructuring the U.S. electricity industry moves forward, there comes a host of new theoretical models. Two proposals in particular serve well to frame the debate.
The winds of competition are blowing. Some find them chilling; others find them exhilarating. Deregulation calls on competitive markets to stand in for regulatory decisions, giving more choice to customers, reducing costs dramatically, and requiring new capabilities.
Competition is already transforming major portions of the electric industry.
Interesting times. Challenging times. Confusing times. The electricity industry and its regulators are now inextricably meshed in a tangle of interconnected reforms. With 50 states as laboratories, the process is accelerating. There is no going back. But which way is forward?
The old model of a closed system of vertically integrated electric utilities offering bundled service has been discarded in theory, and is being dismantled in practice.
The Federal Energy Regulatory Commission (FERC) Mega-NOPR1 covers four topics:
1) The FERC's jurisdictional powers to implement wholesale open access
2) The FERC's proposal for electric utilities to recover "legitimate and verifiable stranded costs" from departing wholesale customers (a small fraction of all stranded investment), and its belief that states should ensure recovery on retail bypass (the much larger share)
3) A range of measures to implement
In talking to electric utility managers from across the country we have found that most believe direct access will have major repercussions on all aspects of their business by the end of the decade. Not surprisingly, there is an emerging consensus that revenues will drop rapidly as supply options grow for retail customers.