Warns of "Quasi-nationalization" of Electricity Grid
WASHINGTON, D.C. - With the Federal Energy Regulatory Commission (FERC) poised to issue a cost-benefit analysis of its controversial electricity transmission plan as early as this week, a noted economist and energy expert is warning against “a quasi-nationalization “ of America’s electricity delivery system.
In remarks to be delivered to an international energy conference on Friday, Progress & Freedom Foundation Vice President for Research Thomas Lenard will assess the FERC's recent, increasingly regulatory approach toward transmission and wholesale generation. A main focus will be the new proposal to divide the nation into a small number of Regional Transmission Organizations and prescribe from Washington how they must operate. His presentation will be based on research contained in his new study, “RTOs, Market Power and the New Regulatory Agenda at the FERC.”
While he does not question the need for residual regulation of the transmission sector, Lenard’s study criticizes FERC for ignoring the “substantial success” of existing open-access policies, creating disincentives to invest in transmission and pursing without adequate study a mandated RTO framework that is “fundamentally flawed.”
“FERC’s current approach is to regulate its way to competition, but the actions it is taking are antithetical to that goal,” Lenard writes. “Instead, what is likely to emerge is a new regulatory regime, no better than the old one. If the agency won’t reverse course on its own, the Congress should step in and curtail its authority.”
At a National Press Club seminar last week, Lenard suggested a strong similarity between FERC transmission regulations and the policy desires of Enron executives.
“Enron has been a strong proponent of requiring transmission owners to place their systems under the control of Regional Transmission Organizations,” Lenard said. “In effect, Enron favored a quasi-nationalization of the transmission grid, along the lines of the interstate highway system.”
The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.