Monday, March 4, 2002 Ruling Seen as Win for Competitive Electric Markets WASHINGTON (Reuters) - The U.S. Supreme Court Monday upheld a 1996 Federal Energy Regulatory Commission (FERC) order designed to ensure open access to the interstate energy transmission grid.
The vote is a major victory for proponents of competitive U.S. electricity markets, industry officials said. The justices affirmed a U.S. appeals court ruling that upheld the regulations that seek to end discriminatory, anti-competitive practices and to make sure consumers pay the lowest prices possible. The justices rejected two separate challenges. One was brought by state regulatory commissions from New York, Florida, Idaho, New Jersey, North Carolina, Virginia, Washington, Vermont and Wyoming, while the other challenge came from a unit of the collapsed Enron Corp. New York and the states argued that FERC's 1996 order oversteps state authority over intrastate commerce set in the 1935 law, while Enron asserted FERC did not go far enough and should expand its authority to both retail and wholesale markets. Justice John Paul Stevens, said for the court majority: ''Whether or not the 1935 Congress foresaw the dramatic changes in the power industry that have occurred in recent decades, we are persuaded, as was the court of appeals, that FERC properly construed its statutory authority.'' Electricity groups called the action a major boost for the FERC's efforts to open the $220 billion U.S. electricity market to greater competition. ``(The action is a) major victory for wholesale power markets,'' said Mark Stultz, a spokesman for the Electric Power Supply Association. Jim Owen, a spokesman for the Edison Electric Institute said: ``The decision today reaffirms the wisdom of FERC's approach.'' The high court heard arguments in October on a case appealed from the U.S. Appeals Court for the District of Columbia, which upheld the FERC's authority to regulate state transmission in a June 2000 ruling. Enron -- once the largest U.S. wholesale power player and an ardent proponent of open markets and nationwide deregulation -- argued the FERC should have authority to force competition of all transmission assets. The Justices voted 6-3 to uphold the FERC's middle-ground approach to regulate unbundled retail transmission service, but not bundled services as Enron proposed. ``FERC's decision not to regulate bundled retail transmission was a statutorily permissible policy choice,'' Stevens wrote in his majority opinion. In a separate companion case, the state of New York argued the FERC went too far in regulating flows of electricity within the state. The high court voted unanimously to uphold the FERC, rejecting New York's request for the court to revoke the FERC's authority to regulate retail sales, because electricity involved in such sales stays within state boundaries and is not subject to federal regulation. ``FERC did not exceed its jurisdiction by including unbundled retain transmission within the scope of Order 888's open access requirement,'' Stevens wrote. The high court affirmed Order 888, which the FERC approved in 1996 after it found that transmission-owning utilities have an inherent incentive to bar access to their wires by competing companies. The order opened the grid to wholesale competition by forcing utilities to offer nondiscriminatory policies to energy firms that want to ship electricity over non-owned transmission lines.
