The Energy Policy Act of 2005 ducks three crucial issues: volatile prices and fuel supplies; insufficient, erratic capital investment in generation and transmission; and energy commodity pricing. What should policymakers do now?

How will the Federal Energy Regulatory Commission answer Congress’ call for energy market transparency? Will it rest on its laurels, or move forward to restore confidence in wholesale energy markets?

Are the smart-metering provisions of EPACT 2005 a good thing? The answer, like most things in life, is, “It depends.” Looked at holistically, the opportunity is great. Viewed incrementally, it’s empty words on paper. It’s up to regulators and utilities to take the initiative.

Federal incentive payment of 1.8 cents/kWh for the generation of renewable energy—part of The Energy Policy Act of 2005—increases the economic attractiveness of many potential hydro sites, and, as a consequence, could revive the building of low-head dams.

The opposing challenges of higher gas prices and rising environmental concerns have put utility regulators in a difficult position: How can they bring rate stability while minimizing environmental impacts? At the same time, they are grappling with trends in consolidation, competition, transmission planning, and distribution service quality. Each state brings a different view of the changing utility landscape. For insight, Fortnightly brought together regulators from several states to discuss their plans and priorities for today and the future.

A major objective of the Energy Policy Act of 2005 (EPACT) is to counter the worsened conditions in the natural-gas market that began in 2000 and are expected to continue over the next several years—namely, tight natural-gas supplies and high, volatile gas prices caused by a distinct shift in the supply-demand balance. Any noticeable reductions in gas prices that might be effectuated by the act will have little impact on natural-gas prices for a number of years.

As a rare amendment to a venerable statute, EPACT05 § 312, New Natural Gas Storage Facilities, made headlines, adding an option for interstate, market-based storage rate making. It would encourage new storage facilities by permitting FERC to authorize market-based storage rates, even when the applicant is unable to demonstrate it lacks market power. After authorizing such rates, FERC periodically must review them.The problem with the new law is that it does not specify those review periods.

(November 2005) The results of annual survey of rates of return on equity authorized for major electric and natural-gas utilities—based on a sample of the retail rate cases conducted by state public utility commissions—show a vibrant and perhaps growing interest in traditional rate-of-return regulation.

The utility regulatory process is prone to controversy, given the inherently adversarial roles and varied viewpoints among the utilities, regulators, and other stakeholders. Oft-heard pleas of "why can't you just see this issue my way" or "can't we all just get along" underscore the deep-seated frustrations of utility leaders and regulators in trying to find a common ground for addressing crucial issues surrounding the formulation of business strategies, establishment of responsible financial goals, and setting of operational performance standards for the regulated gas and electric distribution utility segments of the energy industry.

The Financial Accounting Standards Board SFAS No.143 identifies an immediate need for state public utilities commissions to recognize a refundable regulatory liability for past charges to ratepayers for non-legal asset retirement costs. Although these prior charges resulted in billions of dollars of regulatory liabilities on utilities' generally accepted accounting principles financial statements, they are almost invisible on the regulatory financial statements of the utilities. Unless the state PUCs specifically recognize the liabilities, the utilities will have the opportunity to institute a rate-base "cleansing" by transferring ratepayer-fronted money into income.