The environmental responsibility of the regionalizing electric utility industry

Duke Environmental Law and Policy Forum

Volumn 15, Issue 2, 2005, Pages 295-314

  Eisen, Joel B ^a  

^a UNIVERSITY OF RICHMOND   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ELECTRICITY GENERATION; ENERGY POLICY; ENVIRONMENTAL POLICY; INDUSTRIAL RESTRUCTURING;

EID: 27944448091     PISSN: 10643958     EISSN: 10643958     Source Type: Journal    
DOI: None     Document Type: Article

References (108)

1. Steven Ferrey, Sustainable Energy, Environmental Policy, and States' Rights: Discerning the Energy Future Through the Eye of the Dormant Commerce Clause, 12 N.Y.U. Envtl. L.J. 0507, 523 (2004).
2. Letter from Allison H. Ridder, Special Projects Editor, Duke Environmental Law and Policy Forum, to Joel B. Eisen 1 (June 17, 2004) (on file with Duke Environmental Law and Policy Forum).
3. See generally 41 Wake Forest L. Rev. (forthcoming 2005).
4. See generally Enron: Corporate Fiascoes and Their Implications (Nancy B. Rapoport and Bala G. Dharan eds., 2002).
5. Remedying Undue Discrimination Through Open Access Transmission Service and Standard Electricity Market Design, 67 Fed. Reg. 55,452 (FERC proposed Aug. 29, 2002, to be codified at 18 C.F.R. pt. 35).
6. Fed'l Energy Reg. Comm'n, Wholesale Power Market Platform White Paper (2003) available at http://www.ferc.gov/industries/electric/indus-act/ smd/white_paper.pdf.
7. Wake Forest L. Rev supra, note 3. My own essay will be titled Regulatory Linearity, Commerce Clause Brinksmanship, and Retrenchment in Electric Utility Restructuring.
8. Richard J. Pierce, Environmental Regulation, Energy & Market Entry, 15 Duke Envtl. L. & Pol'y F. 167 (2005).
9. In his upcoming essay, Realizing the Promise of Restructuring the Electricity Market, 41 Wake Forest L. Rev., supra note 3 (abstract available at SSRN Electronic Paper Collection, http://papers.ssrn.com/ paper.taf?abstract_id=585706 (last visited March 25th, 2005)), Professor Pierce argues that "the major political impediment to completion of the restructuring process consists of a group of politically powerful electric utilities in the southeast and northwest who have consistently opposed restructuring because they prefer the comfortable and profitable life of an ineffectively-regulated monopolist to participation in a competitive market."
10. See, e.g., D. Mitchell McFarland et al., Applicability of the Uniform Commercial Code to Sale of Electric Power in the Wholesale Power Marketing Context, 21 Corp. Couns. Rev. 251, 256 (2002) (noting that, "Centralized power markets now exist in which suppliers may submit bids to sell to regional markets and various trading hubs have emerged across the country trading power on a bilateral basis.")
11. U.S. Dept. of Energy, Energy Information Admin., Map and Status of State Electric Industry Restructuring Activity, available at http:// www.eia.doe.gov/cneaf/electricity/chg_str/restructure.pdf (last visited March 28, 2005) (map showing that half of the states have not begin to restructure);
12. Joseph P. Tomain, 2002 Energy Law Symposium: The Past and Future of Electricity Regulation, 32 Envtl. L. 435, 438 (2002).
13. RTOs evolved from "ISOs" (Independent System Operators) in FERC's Order No. 2000, Regional Transmission Organizations, 65 Fed. Reg. 809 (June 6, 2000) (codified at 18 C.F.R. pt. 35).
14. See Greg Edwards, Va. Power Tells SCC of Regional Grid's Cost; Utility Says Joining is a New Expense and Customers Who Will Benefit Should Pay, Richmond Times-Dispatch, Oct. 27, 2004, at C-1.
15. Jim Rossi, Transmission Siting in Deregulated Wholesale Power Markets: The Cross-Sound Cable As a Case Study of FERC's Role Under Existing Law 15 Duke Envtl. L. & Pol'y F. 315 (2005);
16. Pierce, supra note 8.
17. See, e.g., Jeffery S. Dennis, Federalism, Electric Industry Restructuring, and the Dormant Commerce Clause: Tampa Electric Co. v. Garcia and State Restrictions on the Development of Merchant Power Plants, 43 Nat. Resources J. 615 (2003). Due to the high cost of establishing new, duplicative facilities, there is little chance of a movement toward free, unfettered competition in distribution.
18. See William Hogan, Market Power in Theory and Practice at 2, available at http://ksghome.harvard.edu/~whogan/powr0300.pdf (noting that "[t]he usual separation into generation, transmission, and distribution is insufficient.") (March 17, 2000).
19. Joseph P. Tomain, Nuclear Futures, 15 Duke Envtl. L. & Pol'y F. 221 (2005).
20. Id.
21. One example I am familiar with is the protracted battle over a proposal by Tractebel, a Houston-based energy company, to build a power plant near Leesburg, Virginia. Tractebel withdrew its application after running into considerable opposition from local residents and the public interest environmental group Piedmont Environmental Council. See Piedmont Environmental Council, Power Plant Campaign, available at http://www.pecva.org/powerplants/tractebel.asp (last visited March 28, 2005);
22. David Bradkey, Tractebel ends plan to build in Loudoun, Loudoun Easterner, Feb. 27, 2002, available at http://www.easterner.com/ articles02/022702/content.htm.
23. David B. Spence, Coal-Fired Power in a Restructured Electricity Market, 15 Duke Envtl. L. & Pol'y F. 187 (2005).
24. See also Nat'l Council on Elec. Policy, A Comprehensive View of U.S. Electricity Restructuring with Policy Options for the Future 65, available at http://www.ncouncil.org/restruc.pdf (June 2003).
25. In a recent issue of this journal, a Vermont Law School professor states that utilities make up "an industry notorious for stonewalling air quality regulation." Patrick Parenteau, Anything Industry Wants: Environmental Policy Under Bush II, 14 Duke Envtl. L. & Pol'y F. 363, 369 (2004).
26. See generally Joel B. Eisen, A Critique of the Regulations Revising the U.S. Clean Air Act's New Source Review Program, 13th World Clean Air and Environmental Protection Congress and Exhibition, London, United Kingdom (forthcoming Aug. 2004);
27. Parenteau, supra note 20, at 375-78 (discussing NSR "myths and realities").
28. Spence, supra note 19.
29. Donald F. Santa, Jr. & Clifford S. Sikora, Open Access and Transition Costs: Will the Electric Industry Transition Track the Natural Gas Industry Restructuring?, 25 Energy L.J. 113, 128 (2004).
30. See Justin M. Nesbit, Commerce Clause Implications of Massachusetts' Attempt to Limit the Importation of "Dirty" Power in the Looming Competitive Retail Market for Electricity Generation, 38 B.C.L. Rev. 811, 816-17 (1997) (crediting for restructuring the flood of new wholesale generators resulting from PURPA and EPAct).
31. Id.
32. See Deepa Varadarajan, Billboards and Big Utilities: Borrowing Land-Use Concepts to Regulate "Nonconforming" Sources Under the Clean Air Act, 112 Yale L.J. 2553, 2577 (2003) (noting the deficiencies of New Source Review in raising standards for older sources).
33. See Tomain, supra note 16.
34. See also supra text accompanying note 18.
35. One example is the Bush Administration's controversial "Clear Skies Initiative." See Clear Skies, available at http://www.epa.gov/ clearskies/ (last visited March 28, 2005).
36. See, e.g., Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electric Industry, 93 Colum. L. Rev. 1341 (1993) (arguing that heavy governmental intervention that has characterized energy policy since inception is no longer viable);
37. Jerry Taylor & Peter VanDoren, Cato Institute Policy Analysis No. 422, Evaluating the Case for Renewable Energy: Is Government Support Warranted?, available at http://www.cato.org/pubs/pas/pa-422es.html (Jan. 10, 2002) (arguing that rationales for subsidies promoting renewable energy are without sound economic basis).
38. See Kathleen C. Reilly, Global Benefits Versus Local Concerns: The Need for a Bird's Eye View of Nuclear Energy, 70 Ind. L.J. 679, 699 (1995) (noting that many experts believe that solar and wind power are unworkable).
39. See James W. Moeller, Of Credits and Quotas: Federal Tax Incentives for Renewal Resources, State Renewable Portfolio Standards, and the Evolution of Proposals for a Federal Renewable Portfolio Standard, 15 Fordham Envtl. L. J. 69, 72-78, 89 (2004) (explaining the intricacies of the production tax credit for electric power generated from renewable resources).
40. See also Pub. L. No. 102-486, § 1914(a), 106 Stat. 2776, 3020 (codified at 26 U.S.C. § 45(c)(1992)).
41. See, e.g., Union of Concerned Scientists, Electricity Restructuring, available at http://www.ucsusa.org/clean_energy/renewable_energy/ page.cfm?pageID=92 (last visited March 28, 2005) (noting that "[e]lectricity generation is the source of 36% of the carbon dioxide contributing to global warming").
42. Ferrey, supra note 1, at 518.
43. See Black & Pierce, supra note 29, at 1354 (arguing that "negawatt acquisition programs," in which utilities subsidize investments by their customers that decrease customers' electricity consumption, are generally not cost-effective and produce minimal environmental gains).
44. Id. at 1361.
45. Joseph P. Tomain, 2002 Energy Law Symposium: The Past and Future of Electricity Regulation, 32 Envtl. L. 435, 465-68 (2002).
46. Ferrey, supra note 1, at 524-540.
47. See id. at 646-47 (noting that many states have adopted renewable resource portfolio requirements as part of their electricity restructuring and deregulation statutes).
48. See id. at 537-38 (explaining how an emissions tax could allocate the cost of residual pollution damages from their sources).
49. See generally id.
50. Black & Pierce, supra note 29.
51. Id. at 1394-97.
52. Nat'l Council on Elec. Policy, supra note 19, at 45.
53. Id.
54. Moeller, supra note 31, at 90.
55. Black & Pierce, supra note 29, at 1369-70.
56. See Va. Stat. Ann. § 56-583 (2004) (describing the "wires charge").
57. See Hogan, supra note 15, at 5-7;
58. Ferrey, supra note 1, at 634-35 ("This entity [the regional system operator] may be quasi-public, in that it has voluntary rules for generating unit dispatch and ramping. These rules can dispatch on a variety of protocols - essentially determined by the system operating rules and the related computer dispatch programs that drive and control the system.").
59. See Hogan, supra note 15.
60. Id.
61. Ferrey, supra note 1, at 635;
62. see also Nat'l Council on Elec. Policy, supra note 19, at 65.
63. See, e.g., Environmental Public Interest Organization Comments on the Joint Petition for Declaratory Order Regarding the Creation of a Northeast Regional Transmission Organization, FERC Docket No. RT02-3-000, available at http://nedri.raabassociates.org/Articles/ Final%20Filed%20Envir%20Comments%20on%20NERTO%2011-8-02.doc (Last visited March 28, 2005) (hereinafter NERTO Environmental Comments) (outlining steps that the proposed NERTO should take to incorporate environmental considerations in decisions).
64. See, e.g., Tomain, supra note 36, at 462 ("[t]he allocation of political authority is an open issue.").
65. Eisen, Regulatory Linearity, supra note 7 (describing as an example the litigation involving the utility American Electric Power and its attempts to join the PJM RTO).
66. In an upcoming article, Professor Pierce blames this sort of tactic for stopping progress toward restructuring. See supra text accompanying note 13.
67. Ferrey, supra note 1, at 636.
68. Id. at 619 ("For renewables, FERC has not shown any inclination to grant a preferential price or rate for power procured from renewable resources.").
69. Early versions of House Bill 6, the omnibus energy bill, would have created a federal renewable portfolio standard, gradually increasing to 20% of power generated from renewables. H.R. 6, 108th Cong. (2003). The RPS was left out of the final bill, which failed to become law in any event. See E&E Publ'g, The 108th Congress Energy Bill, available at http://www.eenews.net/sr_eb108.htm (last visited Feb. 3, 2005).
70. For a good description of how the RPS wound up on the legislative cutting-room floor, see Stephen Polasky, Electricity Restructuring and the Environment, in Painting the White House Green: Rationalizing Environmental Policy Inside the Executive Office of the President 145-47 (Randall Lutter & Jason F. Shogren eds., 2004).
71. This leads opponents to attack RPS as costly, without acknowledging the environmental benefits of electricity generated using renewable resources. See, e.g., Heritage Foundation, The Senate-Passed Energy Bill Will Hurt Consumers, available at http://www.heritage.org/Research/ EnergyandEnvironment/BG1590.cfm (last visited March 28, 2005) (criticizing the Senate-passed RPS for increasing electricity costs to consumers).
72. See, e.g., Suedeen Kelly, NM PRC Issues New Proposal for Renewable Portfolio Standard (RPS), available at http://www.modrall.com/articles/ article_110.html (2002) (describing the proposed RPS in New Mexico). Suedeen Kelly is an attorney who later became FERC Commissioner, and is also a participant in this Symposium.
73. The Database of State Incentives for Renewable Energy (DSIRE) maintains a list of state incentives for renewable energy, including renewable portfolio standards. See http://www.dsireusa.org (last visited March 28, 2005).
74. Nat'l Council on Elec. Policy, supra note 19, at 47-48.
75. Ferrey, supra note 1, at 531.
76. See U.S. Dept. of Energy, Energy Efficiency and Renewable Energy, Renewable Energy Certificates: Retail Certificate Products, available at http://www.eere.energy.gov/greenpower/markets/certificates.shtml?page=1 (last visited March 28, 2005). The European clearinghouse for RECs is the Renewable Energy Certificate System (RECS).
77. See http://www.recs.org (last visited March 28, 2005).
78. Ferrey, supra note 1, at 531.
79. Dennis, supra note 14, at 641-42 (listing the factors courts would use to invalidate this "economic protectionism").
80. Connecticut's RPS, for instance, allows utilities to count toward the standard power they purchase from qualifying renewable energy sources "within the jurisdiction of the regional independent system operator," in this case ISO-New England. See DSIRE, Connecticut Incentives for Renewable Energy, available at http://www.dsireusa.org/ library/includes/map2.cfm?CurrentPageID=1&State=CT (last visited March 28, 2005).
81. This is, of course, a very simplistic description of a very complex relationship. For example, PJM offers a course called "Load Serving Entity 201" that describes the complex relationship between the regional market and the load serving entity. Of particular interest is the lengthy list of "Requirements of an LSE," which describes the full range of interactions between the LSE and PJM. See Requirements of an LSE, available at http://www.pjm.com/services/courses/downloads/ 20040726-item3-requirements-of-an-1se.pdf (last visited March 28, 2005).
82. See, e.g., Ferrey, supra note 1, at 637.
83. Id. at 637.
84. See, e.g., Nat'l Council on Elec. Policy, supra note 19, at 49;
85. Dennis, supra note 14;
86. Ferrey, supra note 1;
87. see generally Kirsten H. Engel, The Dormant Commerce Clause Threat to Market-Based Environmental Regulation: The Case of Electricity Deregulation, 26 Ecology L.Q. 243 (1999).
88. Ferrey, supra note 1, at 645.
89. 16 U.S.C § 824(c) (2000).
90. Steven Ferrey, Nothing But Net: Renewable Energy and the Environment, Midamerican Legal Fictions, and Supremacy Doctrine, 14 Duke Envtl. L. & Pol'y F. 1, 115-16 (2003) hereinafter Ferrey, Nothing But Net).
91. Id. at 115-16.
92. DSIRE, supra note 67.
93. NERTO Environmental Comments, supra note 52 (noting that the design of a "super-RTO" proposed for the Northeast should incorporate this type of system).
94. ISO New England, Generator Information Systems, available at http:// www.iso-ne.com/committees/generator_information_systems (last visited April 4, 2005).
95. See PJM Generator Attributes Tracking Sys. Working Group, GATS Concept (March 17, 2004), available at http://www.pjm.com/committees/ working-groups/gats/download/20040401-draft-concept-paper.pdf.
96. Id. at 5-6.
97. Id. at 6-7.
98. Id. at 1.
99. See Initial Comments of the New York Independent System Operator at 7, New York Pub. Serv. Comm'n Case 03-E-0188 (2003), available at http:// www.nyiso.com/services/documents/filings/sept_2003/ nyiso_intl_cmmnts_rps_9_29_03.pdf (last visited Feb. 28, 2005) (stating that, "The NYISO supports the development of a similar system in New York and is working informally with Market Participants and vendors ... to attempt to develop the scope of a GATS requirement.").
100. Nat'l Council on Elec. Policy, Reg'l Assistance Project, Technical Assistance for the New Jersey Renewable Energy Task Force 4-5, available at http://www.ncouncil.org/rap.pdf (2003).
101. See id. at 4.
102. Id.
103. Id. The New Jersey report recommended that power count only from these renewable facilities outside the PJM market that commenced construction on or after January 1, 2003.
104. Id at 5.
105. Id.
106. Id.at 6.
107. Regulators in New England have proposed that the entire region develop a collective portfolio standard with tradable credits. See DSIRE, Maine Incentives for Renewable Energy, available at http://www.dsireusa.org/ library/includes/ incentive2.cfm?Incentive_Code=ME01R&state=ME&CurrentPageID=1 (last visited March 28, 2005).
108. Polasky, supra note 58, at 141.