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Power Grab

What do you do with a bad idea?

If you’re the Federal Energy Regulatory Commission, you try to improve it.

Ten years ago FERC helped launch the idea of deregulating the electric utility industry. Hey, other big industries were doing it—airlines, telephones, health care—wouldn’t it be great to deregulate electricity?

It’s been clear for several years that electricity deregulation isn’t turning out as promised.

There’s no evidence that deregulation has reduced rates. California’s energy disaster two years ago resulted directly from deregulation. So did the Enron bankruptcy scandal. Enron had nothing to sell, so it had to build its empire on hollow hype and lies. Fast-buck artists always appear when new territory opens up.

Deregulation began with the simple idea that competition reduces prices. States that mismanaged their energy policies to the point of having high electric rates saw a quick-fix way to cover up their bungling. States that worked hard and smart to craft policies that kept rates low, like Kentucky (where we enjoy the lowest rates in the nation), were skeptical.

What went wrong? It turns out that things aren’t always simple. Electricity is not like other products or services. Maintaining the complex network that provides our electricity takes effort. But those chasing easy money don’t have time for such details.

Another motive keeping deregulation alive is the effort by high-cost states to grab some less expensive power. Translation: California and the New England states want to raise electric rates in Kentucky so they can get our cheaper power.

So the great deregulation machine coughs and sputters. And FERC keeps trying to keep it running with duct tape and chewing gum.

FERC revised the rules in 1996 and again in 2000. Now they’ve got a grand new plan to hand over authority for transmission lines from utilities and state regulators to a bunch of mysterious regional organizations. You can read all about that loony proposal in the article “Electrical Storm” on page 32 of this magazine.

The trouble with this latest FERC fix is that no matter how many bad ideas you layer on top of each other, you still end up with a bad idea.

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