FERC Chairman: State Lawmakers to Blame for Retail Competition Failures

Michael Giberson

FERC Chairman Joseph Kelliher reached out to state policy makers in an effort to pass the blame for any failures of competitive retail power markets. As reported by Platts Electric Power Daily, in remarks to the American Bar Association Kelliher said some states have incorrectly blamed what they call lack of competition in wholesame markets for problems in their respective retail markets.

Years ago, state regulators “embraced” retail rate caps and freezes, Kelliher said. “Their gamble did not pay off and now they’re trying to affix blame [on federal regulators].”

Kelliher added that much of the criticism of FERC has come from “states that managed [deregulation] badly.”

I think Kelliher is mostly right on this point, though we ought to admit that restructuring the power industry is a complex task at both the wholesale and retail level. As much as I think that the current jurisdictional split between the feds and the states is to blame for many of the problems (and, by the way, this issue is in the purview of federal lawmakers), we have benefited from having multiple experiments.

As I remember it, eight or nine years ago I was thinking that a retail rate cap, while clearly not the efficient thing to do economically, was a reasonable regulatory “safety mechanism.” It wasn’t obvious to me in advance just how badly that approach would turn out. Live and learn.

It reminds me of a Benjamin Franklin quote that Vernon Smith likes to quote: “Tell me and I forget. Teach me and I remember. Involve me and I learn.” Of course while state regulators have been involved, it isn’t clear that they are learning the right thing. (But then that’s what blogs are for, right?)