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<title>March 2000: Ready For Reddykwh.com?</title>
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<p align="left"><font face="Arial"><strong><small>About The Author:<br>
<br>
</small></strong><span lang="X-NONE" style="color: black"><font size="2">
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.</font></span></font></p>
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<td width="75%" valign="top"><img src="../images/feldman.gif" alt="Washington Viewpoint by Roger Feldman" border="0" WIDTH="375" HEIGHT="75"><p><b><u>March
2000</u><br>
</b></p>
<font FACE="Palatino" SIZE="5"><p></font><b><font face="Arial" size="6">Ready
For Reddykwh.com?</font></b></p>
<p><strong>by Roger Feldman -- Bingham, Dana L.L.P.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2000/04</em>)</font></p>
<p><font FACE="Palatino" SIZE="2"> </p>
</font>
<p ALIGN="JUSTIFY"><font face="Arial">Suddenly Washington has been again
reminded that electricity regulation is just part of energy policy. DOE
Secretary Richardson has been dispatched to negotiate with the Gulf
potentates.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">It is just a "warmup",
however, for his work this coming summer when one shining day peak prices go
through the roof in New England or the Midwest. California too is likely to
face recurrent power supply shortages during peak summer demand period this
year according to industry leaders, and not receive much help either from
the Pacific Northwest which also faces high load demands.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">As always, as with the oil price
"crisis" there are four alternative proactive approaches for the
Federal establishment in Washington to follow in response to this looming
problem. All derive from "Project Independence" (which Kids, you
can look up on the internet; it was circa 1973 and a bust).</font></p>
<ul>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">Unleash the Energy Secretary.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">Pass a new law letting the
"invisible hand" of free markets, freely interconnected, sweep
aside the problem.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">Put new dentures in FERC’s RTO
administered integration.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">Specifically focus on the impact
of new e-commerce technology as a path out of existing free
market-fixes.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">The first three are Old News; the
fourth, perhaps is Good News.</font></li>
</ul>
<p ALIGN="JUSTIFY"><font face="Arial"><b>Old News</b></font></p>
<ol>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">The first possibility is likely to
be spoken for by the fact that this is an election year. There is a
reason Mr. Richardson holds his cabinet position. It has to do with
electoral votes. And that is probably just as well.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">(2) Comes then the Congress: the
last gasp, one way or the other, of the classic hard deregulatory right.
There does not appear to be a burning new consensus for the rekindling
– HR 2944, which went down in the flames of what must be termed its
"deliberalization" in the waning days of the last session.
Mostly there are proponents of components of that bill such as doing
away with PUHCA and PURPA. Most recently there are proposals keyed
exclusively to enhancement of grid reliability, which the partial
administrative deregulation to date has thrown into some jeopardy. The
predictable responses to this legislation have been that is only partial
fix which would leave stranded other important issues unaddressed and in
proposed forms leaves too much unregimented regional variability in
play. To paraphrase the Democratic nominee for the New York Senate seat:
"It takes a blackout [to make Congress act].<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">(3) Still on duty at the helm of
the Lame Duck power boat is the FERC, having issued Order 2000 and
trying to use it to chart a course. To do that, it is having to both
provide discipline and guidance to the existing ISOs, and deal with the
unruly competitive battle to establish ISOs in as yet ungoverned
regions.</font></li>
</ol>
<p ALIGN="JUSTIFY"><font face="Arial">New England has been a focus of an RTO
tea party that ultimately may prove only to have been a tempest in a teacup
-–or could signal a fundamental challenge to "neutral" ISOs by
the emerging power generation-rich class which constitutes one of its major
stakeholders’. There, a coalition including several of the largest owners
have complained of heavy handed ISO interference with market prices, with
resulting adverse impact on the depth and liquidity of forward markets. The
Coalition wants generators closing prices regularly set on the basis of
generators’ actual costs. It recommends the permitted competitive
operation of multiple independent power marketing exchanges. While admitting
the ISO has "inherent flaws", the ISO has asserted its need for
all NEPOOL members to band together to support market changes to deal with
them.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Meanwhile, in the tumultuous Middle
West, the concept of for profit independent transmission companies (ITCs)
operating within the framework of a larger MISO is being propounded by the
other major stakeholder in RTOs: the utility transmission owners still in
possession of the gird. These transco proponents cast their entity as the
solution to the needs for market organization and congestion management.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">FERC meanwhile, in recent rulings and
utterances, has, supported limited RTO price interference, floated a trial
balloon of mandatory interconnection (son of PURPA) and kept the faith that
guided pluralistic democracy can provide sound technological governance.
(Good thing it doesn’t control telecommunications.)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Hard to imagine old news providing
solid solutions in the near term.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial"><b>New News</b></font></p>
<p ALIGN="JUSTIFY"><font face="Arial">No one has said much, however, about
the supporting the potential of the emerging "fourth way":
bringing to bear the capabilities and sophistication of the new e-commerce
economy on the constraints to deregulated markets which has resulted in
disheartening headlines like: "New Jersey’s Competition Plan Gets
Less than 1% Enrolled in 4 Months".</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">There are a few blips on the screen
which suggest where the electric power world can be going to meet its needs:</font></p>
<ul>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">A House Committee request to EIA
to study the effects of rising e-commerce on future power demand.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">A FERC proceeding on the need for
standards and procedures in the internet sale of energy.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">New private joint ventures for use
of data transmission to control "smart appliances" over power
lines.<br>
</font></li>
<li>
<p ALIGN="JUSTIFY"><font face="Arial">A new pilot program being packaged
by Elcon to enable large industrial power users to reduce their load
during periods of high demand and sell the electricity into the
wholesale market via private electricity trading markets.</font></li>
</ul>
<p ALIGN="JUSTIFY"><font face="Arial">In short, the emergence of a
technologically-based new energy management, through what might be termed
dispersed generation may be the way out of some of the looming term energy
management crisis which lawmakers seem to clumsy or polarized to deal with.
Perhaps it is on energy management that lawmakers should put their
attention. Emphasis of the use of the internet to promote
"liberalized" operation of our economy has shifted from the
anti-government right to the pro-competitive left, as is illustrated by the
work of Professor Lessig of Harvard, now consulting on the Microsoft
antitrust case to the court. It is the "new new thing" which might
abort future power-spikes without national grid domination by a mega utility
Big Ten.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Technology has, of course, always been
the great American hope for problem solving. Like Project Independence, it
can be over touted ("American gas utilities...are at the same stage as
fledgling Dot.Coms were five years ago recently suggested a trustee of the
American Gas Foundation). Clearly, however, focused application of its
potential is one way to obviate the increasingly sterile, self serving
energy policy dialogue currently in play, which neither solves spiking nor
market power problems. After all, why send Secretary Richardson when we can
send reddykwh.com?</font></p>
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<span lang="X-NONE" style="color: black">ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.</span></font></p>
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