Energy Legal Blog

Former FERC Commissioners, Public Power and Customer Groups Clash over Competitive Electricity Markets

Developments in recent weeks have added fuel to the current debate over whether competitive wholesale electric markets have produced the promised benefits to customers.  On May 31, nine FERC alumnae — Chairs James Hoecker, Elizabeth Moler, and Pat Wood, and former Commissioners Vicky Bailey, Linda Breathitt, Nora Mead Brownell, Jerry Langdon, William Massey, and Donald Santa — circulated an open letter to policymakers lauding the achievements of competitive electricity markets and cautioning against proposals to turn back the clock.  The former Commissioners acknowledged that they knew it would "take time" for the full benefits of competition to be realized, and argued this has been especially true in states that imposed transitional conditions such as rate caps and because of the lack of transmission infrastructure development.  However, there have been substantial benefits from competition, including:  increased efficiency, lower costs (as evidenced by a study showing a purported $34 billion in savings to residential customers between 1997 and 2004), increased use of demand response, the facilitation of renewable resources, technological innovation, improved reliability, and satisfied customers (citing a recent letter to FERC from several large industrial consumers praising competition).  Responding to critics of competitive markets, the former Commissioners asserted that the "good old days" of pervasive cost-based regulation were not good for consumers, but rather produced high generation costs, low generator availability, declining infrastructure investment, and a resistance to technological innovation. 

Critics of current electricity markets answered the former Commissioners in a letter released on June 12, 2007.  The American Public Power Association (APPA) and the Electricity Consumers Resource Council (ELCON) purport to refute many of the former Commissioners’ claims.  They argue that "competition is in the eye of the beholder," and that just because they oppose the version of competition adopted by FERC and endorsed by the former Commissioners (presumably, a model centered around regional transmission organizations and organized spot markets) does not mean they oppose competition generally.  The problem, APPA and ELCON assert, is how competition has been implemented.  APPA and ELCON question the motives of the former Commissioners, many of whom APPA and ELCON contend work and schill for the "haves" in the electric industry, and criticize them for blaming high retail costs on misguided state regulators.  APPA and ELCON also question the study showing that consumers have saved $34 billion under competitive markets.  They also do not accept the common explanation that high electric costs have resulted entirely from higher natural gas and fuel costs, and argue that "satisfied" customers are few and far between.