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The real shame of these regulatory tennis matches is t}i$ they’re a so unnecessary. If the price* utilities * pay cogenerators were set by competitive bidding, there would be less motivation for cogenerators to beg bureaucrats to prohibit new construction by utilities.
Ratepayers in states setting cogenerators’ prices artificially high have been less fortunate than Virginians. In Texas, for example, Houston Power and Lighting gets 20 percent of its electricity from cogenerators. The company estimates it will pay $750 million-more for electricity over the next eight years than it would have if it had built its own plants.
Some states, such as California, Connecticut and Massachusetts, have tried to avoid or belatedly correct these kinds of problems by promoting competitive bidding. On the national level, Martha Heese, chairman of the Federal Energy Regulatory Commission, has gone on record in favor of competition. She even suggests dropping many existing limitations on who is permitted to sell power to utilities.
But deregulation-minded regulators have to act within the law, and it’s not yet clear how much competition is “legal.” Without really trying, Congress created a “multi-billion dollar business that is providing a majority of the new generating capacity in several large regions of the country,” according to Ms. Heese.
Virginia Power’s customers are lucky the State Corporation Commission opted for efficiency. They’d be even better off it the federal law encouraged the new electricity entrepreneurs to compete in the marketplace instead of attempting to short-circuit competitors’ plans through the state regulatory process.
Henry N. Butler is a senior fellow in political economy and Jerry Ellig a research economist for Citizens for a Sound Economy, a 250,000-member independent public policy organization based in Washington, D.C.
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