News Releases
news coverage
News Media
PFF Highlights
News Release
October 6, 2003
CONTACT: David Fish
(202) 289-8928

Federal Regs. Would
Make Electricity Vulnerable

White House, Senate Right to Delay Regulations, Lenard Writes

WASHINGTON, D.C. - Regulations under consideration as part of Energy legislation being put in its final form now in Congress would make the nation’s electricity system more vulnerable to future blackouts – not less, as proponents have claimed. That is the view of economist and electricity policy expert Thomas M. Lenard, who agrees with the Senate and White House position on the Federal Energy Regulatory Commission’s Standard Market Design proposal – that it should, at least, be delayed.

“If adopted, SMD will make our electricity system more vulnerable to failure, because it is based on a fundamentally flawed premise – that the government is better equipped than the private sector to fix markets when they are broken,” Lenard writes in a recent opinion piece. “Congress should be extremely concerned about backing a proposal that can only be described as a risky regulatory experiment. If FERC goes forward with SMD, it will take years before the inevitable mistakes are corrected…the resulting confusion will yield a less – not a more – reliable electricity supply.”

Lenard, who has written widely on electricity policy, says attempts to ‘design’ a market for energy and put transmission assets under the control of non-profit regional organizations will result in major incentive and accountability problems. Moreover, a government-designed market will “have beneficiaries and vested interests who will be able to slow, and perhaps prevent entirely, the necessary fixes from being implemented.” In short, it would be more likely that decision-making under FERC’s plan “will be guided by political than by economic efficiency considerations.”

Lenard, who is senior fellow and vice president for research at the Foundation, filed comments with the Federal Energy Regulatory Commission on the agency’s so-called electricity white paper. Foundation President Raymond Gifford testified before the Senate Energy Committee during the panel’s deliberation on the energy bill.

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