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April 8, 2002
CONTACT: David Fish
(202) 289-8928

Free-Market Experts Oppose
Enron/FERC Plan

Regional Transmission Organizations Criticized by Think Tanks

WASHINGTON, D.C. - A panel of free-market advocates who participated in a recent Progress & Freedom Foundation Congressional Seminar is united in its opposition to what was a main policy objective of Enron and still is at the Federal Energy Regulatory Commission, the creation of Regional Transmission Organizations. A new paper, “Electricity Deregulation After Enron,” contains the transcript. Participants included Jeffrey A. Eisenach and Thomas M. Lenard of the Foundation, Peter VanDoren of the Cato Institute and Fred Smith of the Competitive Enterprise Institute.

“Enron has been a very strong proponent of the RTO concept of requiring that transmission owners place their systems under the control of independent, nonprofit stakeholder boards that would act in the ‘public interest’,” Lenard said. “This, in fact, was the first item on the wish list that Ken Lay gave to the Vice President. Now, this is a very novel arrangement; when you think about it, really a quite crazy economic arrangement, very different from how we organize our economic affairs.”

“Enron’s position was essentially that the transmission grid should be turned into something like the Interstate Highway System, in effect nationalized,” he said.

Smith expressed similar sentiments. “The proposed Regional Transmission Organizations effectively would perpetuate the current regional monopolies and the current system of political rate regulation,” he said. “Regulatory rates are unlikely to encourage investment of any kind, but certainly investments of the entrepreneurial kind, the kind of investments that give us a chance to have a smart electricity grid…”

“The FERC decision is going to start a debate,” Smith continued. “In my opinion, FERC will lock us into an inadequate electrical system forever.” Eisenach also criticized the plan. “When you put a group of well-intended stakeholders in charge of hundreds of billions of dollars of assets, but with no profit motive to police them, it doesn’t always turn out well,” he said.

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.



The Progress & Freedom Foundation