<<  <  >  >>

Page 15

deregulation is a matter for states to handle.55

If mandated open access becomes law, utilities will use legal challenges to delay

the new system, and those challenges will often have merit. Consider how

telecommunications reform, which requires local providers to open their lines to long-

distance phone companies wishing to compete in their local area, has proceeded. Recently

GTE Corp., the nation's largest local phone company, sued to prevent implementation of

the telecommunications reform bill unless or until the company is properly compensated

by customers and competitions who use its network.56 The act has been challenged on the

grounds that its "order constitutes an uncompensated taking under the Fifth Amendment

by requiring the sale of services below actual costs."57

Electric utilities will make similar arguments if open access is imposed on them.

Disputes will occur over whether any government has the power to require access without

compensation, the reduction in system reliability created by the need to accommodate

numerous independent generators, and the role of states' rights in limiting federal authority

to order access.

The elimination of monopoly franchise protection, on the other hand, rests on a

stronger constitutional foundation because the federal government may prevent states

from blocking interstate commerce. That stronger foundation might speed deregulation.

The regulatory thicket necessitated by open access lies at the root of all hesitation;

abandoning forced access in favor of a more defensible crusade against illegitimate

exclusive franchises could mean faster deregulation.

Independent System Operators: Socializing the Grid?

Mandatory open access is an impediment to rather than a facilitator of reliability

because it blurs the connection between ownership and control. An independent system

operator (ISO) will be responsible for scheduling the use of generators to meet demand

but will not receive any market-driven profits for performing well. Reliability problems

that arise will become political footballs as the ISOs and the utilities try to shift blame to

each other.

Optimal reliability of the grid will arise only from an appropriate definition of

property rights and, hence, responsibility. Utilities should retain control over their

transmission assets but face the constant threat of competition from alternative networks

and decentralized power systems. The end of monopoly franchises will avoid the need for

the invasive and technical regulatory planning necessary to maintain reliability in an open-

access system.

A fortunate side effect of deregulating by simply eliminating franchises is that it