Government Advisory Board Encourages Deregulation

Experiences in California and Texas notwithstanding, some members of the energy community are holding fast to their belief in a competitive, deregulated energy market.

The Energy Advisory Board (EAB), appointed last year by U.S. Department of Energy Secretary Spencer Abraham, recently released a report, which touts the benefits of competitive wholesale electricity and offers recommendations to increase investor confidence. Competitive Wholesale Electricity Generation: A Report on the Benefits, Regulatory Uncertainty, and Remedies to Encourage Full Realization Across All Markets, argues that the benefits of competitive wholesale markets include lower long-term prices, improved reliability, innovations in technology and properly allocated risks, or risks that are allocated away from consumers to investors.

However, to maximize the benefits of a deregulated market, the board urges a number of policies be implemented to encourage more long-term infrastructure investment, and to provide certainty in contracting and environmental regulations. One of the biggest hurdles, according to the board, is to overcome the negative perceptions associated with the experiences of California’s experiment with deregulation and the scandal involving Enron, the Texas-based energy trader.

With that in mind, the report supports the formation of a new EAB Subcommittee on Standards of Conduct and Corporate Practices to review and comment on ongoing efforts to develop standards of conduct and acceptable business practices.

"I don’t think any of us, when we were invited to serve on this board, could have anticipated what we have witnessed in our industry over the pat year," said Richard Green Jr., chairman of Kansas City-based Aquila Inc and chair of the EAB subcommittee that produced the report. EC


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