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October 2, 2003
CONTACT: David Fish
(202) 289-8928

FERC Plan Not a Cure for Future Blackouts
Experts Urge Greater Reliance on Markets To Enhance Reliability

WASHINGTON, D.C. - A major roadblock in the way of final passage of an energy bill by Congress remains the Federal Energy Regulatory Commission’s proposal for extensive new regulation of the electricity transmission sector. Despite the FERC’s efforts to market its Standard Market Design plan as a ‘fix-it’ for future power blackouts, critics fear the proposal could make disruptions larger and more frequent. In anticipation of this key energy debate, The Progress & Freedom Foundation held a Congressional Seminar last month, featuring the views of Congressional, industry and academic experts. The transcript of that event was released today.

Featured panelists of the September 12 seminar included: Leonard Hyman, senior industry advisor, R.J. Rudden Associates, Inc.; Brian Mannix, senior research fellow, Mercatus Center, George Mason University; Mark Menezes, chief counsel, House Energy and Commerce Committee; and Anthony Schuster, retired Northern States Power executive. Thomas Lenard, senior fellow and vice president for research at the Foundation moderated. The following are excerpts from “Energy Deregulation After the Blackout.”

Commenting on the FERC proposal, Lenard called it “a very risky regulatory experiment.” Hyman observed: “No other country or region, with the exception of Ontario, has adopted the U.S. planned system.” He stressed the lack of investment capital “is not a financial problem. This is a regulatory problem, and I will emphasize that again and again.” Mannix was struck by “the number of times that FERC described unintended consequences” in other plans, “yet nowhere in the document could I find any acknowledgment that the FERC proposal might not work exactly as intended.” Menezes, who is lead House staff member on electricity matters, said, “…there are some things only Congress can do…only Congress can repeal the Holding Company Act, for example. If you want to increase investment right away, get rid of that thing,” he said. “The other thing is to clean up PURPA.” Schuster said “we need to incent the behaviors that we want to produce.” He suggested two initial steps: mitigate the adverse tax implications of the sale of transmission assets, and take steps to improve profitability in transmission.

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