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EDITORIAL
Give the States Room to Innovate
T he steaming cauldron of en-
ergy policy has never been
on such a boil:
-state utility commissions are
slowly coming to grips with such
nontrivial issues as least-cost plan-
ning and incentive ratemaking;
-the Federal Energy Regula-
tory Commission has raised im-
portant competitive issues and
seems ready to tackle pivotal
transmission issues in some man-
ner;
-a prominent Senator is about
to hold hearings on legislation to
relax the Public Utility Holding
Company Act, with results to in-
dustry structure as unknown as
they may be profound;
-even the long somnolent
Department of Energy has seized
the brass ring and responsibly
decided to develop a national
energy strategy (are we talking
economic planning here?);
-and now the Administration
has cast the wild card known as
the Clean Air bill into the deck,
creating new forms of wealth and
anguish among utilities, as it casts
its spell over supply and environ-
mental markets.
I t’s enough to leave one grasp-
ing for a new set of bifocals,
for Shirley MacLaine or the
Bhagwan to make it all clearer.
Our suggestion pro bono publico
this month for all these brave
souls whose job it is to make
sense of all this is to take care to
preserve the diversity of our na-
tional power system.
We are all familiar with indus-
try pluralism: investor- and con-
sumer-owned utilities of many
stripes and shape, and now inde-
pendents and affiliates.
W e are perhaps not as
mindful of the richness
in diversity we enjoy among the
several states and the many ap-
proaches they have essayed to re-
orient utility practice toward
greater efficiency.
The New York Times recently ob-
served that while once environ-
mental policies used to issue from
Washington to be imposed on
states who often resisted, today
the initiative has swung; now it is
the states who originate the pro-
gressive ideas and Washington
that follows. This may be as true
in energy planning as it is with
the environment.
It is the states which have pion-
eered in experimenting with com-
petitive markets and how various
bidding systems can improve per-
formance and reduce costs. And
it is the states, not FERC, which
have broken ground in the least-
cost planning area, addressing
not only costs but such tricky is-
sues as the role of demand-side re-
sources, fuel mix, and dis-
patchability.
It is familiar to observe that the
‘bright line” of regulation is be-
coming a bit indistinct. Now we
see situations like the one that has
bubbled over from the Wisconsin
Psc’s least-cost planning efforts
to FERC and the Wisconsin courts.
The Wisconsin IX, it seems,
has gone so far as to recognize the
centrality of transmission to its
least-cost planning goals and to
encourage interutility planning
on an open-access, actual cost
basis. Wisconsin’s transmission
“haves” have taken great um-
brage at the ESC’s latest planning
order, so much so that they have
asked FERC and state courts to
strike it down.
T he issues the utility petition-
ers have raised to FERC are
serious and deserve careful atten-
tion. But we urge FERC to con-
sider whether the important pub-
lic policy goals embraced in the
PSC orders may not be permitted
within the interstices of the less-
than-comprehensive sweep of the
Federal Power Act.
A crude preemptive approach
could chill effective least-cost
planning by the states and open a
gap in the quality of planning that
no one should want.
44 The Electricity Journal