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