WE MANAGE CONFLICTING AGENDAS
When California wanted more natural gas at the expense of our transportation contract (and the contracts of other southwestern companies) with El Paso Natural Gas, we went to the Federal Energy Regulatory Commission (FERC) and fought against erosion of this "full requirements" contract. Erosion of the El Paso gas contract would increase our costs and make for a less stable supply. We expect resolution by mid-2003 without material cost increases.
We have actively sought a workable transmission structure for the Southwest by forming an independent transmission group known as WestConnect. In 2002, the FERC granted conditional approval of WestConnect, its for-profit structure and its departures from the current standard model. A for-profit structure will provide incentive for new investment in the transmission grid, which is needed in the West. We’ve said for years, without a robust transmission system, there can be no robust wholesale market. Without a robust wholesale market, we can’t have broad retail competition. In fact, the current path is leading to more regulation, not competition.
In the West, we believe the FERC must spend more effort addressing the real barriers to competition – insufficient transmission capacity and the inability to incorporate public power into the competitive structure. Municipal and federal agencies control large chunks of transmission, making tight coordination of scarce capacity even more difficult. Patchwork rules only result in disorder. Without a set of common protocols and full participation by all parties, western wholesale market development is problematic.
There are other unique issues in the West that must be respected. We have long geographic distances between load centers, typically with only one or two transmission lines. Our systems are not "networked" to the degree of denser East Coast systems. The West has large amounts of hydro capacity that often cannot be scheduled a day ahead.
The mantra of competition will continue to be the catalyst for greater state and federal regulatory involvement. Competition, regulation and the physics of a western electric system will coexist, inconsistencies aside. With the FERC continuing to push for generation deregulation and the ACC maintaining vertical integration, we must deal with incompatibilities and live in different universes at the same time. Business opportunities have and will continue to develop from these apparently colliding forces. We plan to capitalize on them by remaining agile and versatile enough to occupy the ground between these two, while always remaining focused on the ultimate best interests of our customers and shareholders.
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