All of the lessons of how the nation positively benefited from the successful restructuring of the nation’s natural gas markets, from greater investment in energy infrastructure to innovation, are being lost in the shuffle as the electric utility industry continues to come to terms with its own march towards competition, FERC Commissioner Nora Brownell said last Tuesday. The end result? Consumers in the United States are being denied the opportunity to reap the fruits of new technologies that come with the evolution of markets, she argued.

“I think we’re discussing issues today that are critical to the growth and the development of the economy of this country,” Brownell said during the opening day of “Transmission Summit 2002” in Washington, DC. Day one of the conference focused on the nuts and bolts of regional transmission organization (RTO) and independent transmission company (ITC) participation.

“I think that the issues have been very confused around a lot of rhetoric and red herrings that don’t get to the real issue, which is in order to sustain and indeed to develop the new economy of this country, we need to get on with these decisions,” the Commissioner said.

“And for those who would use the events of the past few months to suggest that we should return to the energy markets of the past, I would say that just the opposite is true,” Brownell told the conference. “The lack of infrastructure investment is costing billions of dollars each year in transmission constraints, a number largely hidden from consumers, but with huge economic impacts.”

The FERC Commissioner also said that consumers are being denied the benefits of new technologies “that we know new markets will bring.” Brownell argued that the lessons learned from the success of the restructured gas markets are being ignored. “Increased investment in infrastructure, liquidity, downward pressure on pricing and innovation.”

Meanwhile, Brownell noted FERC is moving forward with size and scope and governance and organizational issues involving RTOs, while at the same time tackling electricity market design issues.

She said that some of the questions facing the electric industry these days include whether a transco can be an RTO, the role of ITCs and “how do we comfortably incorporate public power to preserve what they believe is their core mission?”

“I am not, nor do I think my colleagues are, agnostic about what the organization looks like, whether it is profit or not-for-profit,” Brownell said. “Indeed, in the end, I like to say it’s okay for companies to make money, and that profit incentives inspire people to have a lot of efficiency and a lot innovation that we don’t necessarily see in other kinds of markets.”

At the same time, the FERC commissioner emphasized “We need to sort through those functional issues in a way that gives, frankly, the public confidence.”

Brownell noted that one of the things that has surprised her in the last couple of months is not the “erosion of confidence” in energy markets in the wake of Enron’s financial collapse and California’s energy crisis. Rather, she has taken note of “people really focusing in, at the state level particularly, about their concern for a for-profit entity’s ability to look after some public good.

“So, I think we need to get that debate out on the table,” Brownell continued. “I think we need to identify the key functions, and then we need to say what key functions does an ITC really need to have in order to be successful,” she added. What key functions could in fact be performed by a transco, but also giving the assurance that the public good is being protected, also deserves a closer look, Brownell added.

“I think we need to define what we’re going to do on transmission pricing and take a look at incentive, innovative performance-based rates,” she went on to say. “I believe that people should be, in fact, rewarded for innovation — I’m not all that excited about giving rewards to people who continue to do the job that they have always done in the same way that they have always done it.”

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