<<  <  >  >>

Page 17

federal system is all about"62 ignores the question of individual rights. The exclusive

franchises granted to utilities by states violate the individual rights of Americans. Exclu-

sive franchises preventing free trade among willing customers and willing providers clearly

deserve scrutiny at the federal level. States serve neither justice nor economic efficiency

when they prevent firms and consumers from voluntarily buying and selling low-cost

power across state lines.

Conservative groups are correct to oppose legislation that would mandate access

for any electricity producer to existing utility transmission lines and regulate the grid as a

monopoly. Mandatory open access to transmission, however well intended, is not the

proper approach to retail deregulation. Instead, Congress should accomplish the same

competitive goal, if states do not do so first, by eliminating state-created exclusive utility

franchises that frustrate competition and have interfered with interstate commerce.

Congress can also open federal highway, railroad, and other rights-of-way to competitive

transmission.

As important as federalism for the protection of liberty is the government's duty to

protect individual rights against the all-too-common efforts of state officials and utility

commissioners to create and perpetuate monopolies within their borders. The Constitu-

tion's commerce clause was written primarily to ensure the free flow of goods and services

among the states and hence to protect the right of U.S. citizens to engage freely in

commerce with out-of-state agents. If states may legitimately prohibit citizens from

purchasing electricity from out-of-state power generators, then the basic purpose of the

commerce clause is subverted, state officials have triumphed, and the rights of the people

have been extinguished.63

Ironically, despite their full-page ads and appeals to federalism, utilities aren't

actually opposed to federal restructuring. Utility lobbyists have for years vigorously urged

Congress to unilaterally repeal the Public Utilities Holding Company Act of 1935 and

PURPA.64 Repeal of PUHCA and PURPA would bring some consumer benefits, and the

simultaneous elimination of franchises would be even better.

The elimination of franchises avoids the state vs. federal authority debate over

open access that otherwise threatens to hamper deregulation. In addition, franchise

elimination protects the property rights of all parties and does not force states to accept

congressional and FERC dictates regarding common carrier access. Nor would states be

forced to accept federal decisions regarding stranded costs, since no such costs would

emerge as a consequence of mandated access to lines.

Stranded Costs: The Offspring of Mandatory Access

The construction of nuclear power plants and high fossil-fuel prices during the