Federal Energy Regulatory Panel Unveils Plan for Wholesale Electricity Markets

The Federal Energy Regulatory Commission released details of its much-anticipated plan late Monday. Some Southern states derided earlier versions as too authoritarian for giving the federal government the ability to dictate rules that might not apply to the states' unique circumstances. The new proposal would let state and local governments decide if they had enough power plants and lines to keep the lights on, with federal officials acting in a "supporting" role.

Also, it would require utilities nationwide to join regional wholesale grids similar to PJM Interconnection L.L.C., the Valley Forge-based operator of the Mid-Atlantic's electricity market. And it would pressure regions to reduce barriers for moving power cheaply from one area to another. "The core elements of our proposal will combat the type of market flaws that led to the California crisis three years ago," regulatory commission chairman Pat Wood said in a statement.

A combination of lax oversight, inadequate power supplies, and unscrupulous market activity at times boosted wholesale electricity prices in California to more than 100 times ordinary levels, and resulted in blackouts in early 2001. Potential builders of power plants and transmission lines throughout the country have been reluctant to proceed in recent years because they were not sure how a patchwork of state and federal rules would affect their business, said Glen Thomas, chairman of Pennsylvania's Public Utility Commission. With the federal game plan now clearer, "the ability to eliminate uncertainty in the marketplace will hopefully attract some capital" to build additional capacity, Thomas said. That, in turn, should result in lower prices for consumers.

Pennsylvania, New Jersey, Maryland and Delaware have been largely insulated from major electricity problems, though not completely immune to market malfeasance, because of their membership in PJM, Thomas and others said.