COMPETITION IN ELECTRICITY MARKETS
 

The Northeast states are moving forward to develop a regional competitive marketplace in electricity which will result in reduced rates and greater choice for consumers. States’ activities in pilot projects, legislation and other implementation actions are creating valuable experience and insights into options for retail choice. This will enable the states to protect the region’s consumers, mitigate potential negative consequences, develop options for retail choice, and maintain the reliability of the system.

The Administration and the Congress are expected to address restructuring of the electric system in the 105th Congress. Federal legislation must be carefully drafted if it is to advance retail choice. Legislation which imposes rigid Federal mandates could set-back the substantial progress already underway in states and various regional electricity markets, and also reduce the flexibility which states need to create viable marketplaces.

Federal legislation can advance the development of a competitive marketplace for electricity by enabling state efforts in a number of areas. The Coalition of Northeastern Governors (CONEG) urges the Congress and Administration to work closely with the states on these matters.

• In the changing environment for electricity, the jurisdictional line between Federal and State regulatory authorities is unclear. Federal legislative action could clarify the jurisdictional relationship of federal regulatory and state legislative/regulatory authority and reduce judicial questions. Federal legislation should make unambiguous State jurisdiction over the distribution and retail sale of electricity and affirm the States’ right to: apply distribution charges, access charges or other mechanisms deemed appropriate by the State; order wheeling for retail sales; and determine the appropriate recovery mechanisms for costs stranded through retail competition. State jurisdiction should also include access to the generation profile, books and records for any company generating or selling electricity in the State.
   
• As this regulatory system is changed and the electricity industry restructured, care must be taken to maintain an appropriate level of reliability. The federal government must provide leadership and oversight in developing an appropriate mechanism to ensure adequate reliability standards and enforcement, while allowing states to set additional standards appropriate for their systems.
   
• The restructuring of the electric industry highlights the need for the federal government to impose equitable environmental requirements on all regions of the nation. The Clean Air Act currently allows different rates of emissions for older power plants and for plants located in areas designated as non-attainment for ozone compliance. The differentials provide an unfair advantage to these power plants which may be exacerbated in an increasingly competitive market, and could make it impossible for Northeastern states to comply with the Act. Federal action, through EPA, or if necessary, through legislation, is needed to deal effectively with this problem.

The CONEG Governors will continue to work cooperatively on regional restructuring activities, and to expand those efforts to analyzing any emerging federal legislation in the 105th Congress for its potential impact on the regional economy.

Adopted: December 13, 1996