The National Energy Marketers Association (NEMA) held an emergency session to identify causes and solutions to the unprecedented spike in power prices. "It appears that the 'go-slow' partial deregulation of electricity in the United States has created regulatory and operational uncertainties that exacerbate both generation and weather-related shortages. 'Price spikes are nothing new'. They are the sign of a new commodity market finding its equilibrium". "In fact, the speed with which the price spike disappeared is a sign that electricity deregulation is on track and will work more efficiently if both state and federal regulators speed up the restructuring of the nation's electricity markets", says Craig G. Goodman, NEMA President, and former national energy policy official in the Reagan and Bush Administrations.
"As we have seen in other industries, the uncertainty of 'semi-deregulation' inevitably leads to undesirable market anomalies. Quicker deregulation with fair rules that permit operational certainty will promote competition on the basis of price and quality of service and lead to proper market signals for investments in new power generation and its delivery." says Goodman, a leading expert in energy law and deregulation.
"Last week's temporary price spikes have been attributed to warm weather, generation outages, and system reliability. Some have even alleged anti-competitive behavior. However, Goodman points out, that the rules currently in place may not encourage the most efficient use of available transmission capacity. This alone can lead to shortages and potential brown-outs."
NEMA calls for the immediate implementation of objective and truly, independently-verifiable standards to measure available transmission capacity, and to implement enforceable rules to insure equal, non-discriminatory, third-party transmission access. Implementation of such independently-verifiable standards can protect the public, and promote the efficient use of the power grid, preventing unnecessary shortages, price spikes and brown-outs."
"On a positive note, experience tells us that it could have been worse. Fortunately, FERC has partially deregulated the wholesale power market that permitted the price spike to correct itself relatively quickly. We should never forget that government price and allocation controls literally created gas lines, energy price spikes, curtailments and shortages that were far more acute and longer lasting. We also should remember, that FERC's leadership on Order 636, has restructured the interstate natural gas transmission market in a competitive and efficient manner. FERC and state PUC's must learn from these successes and immediately unbundle, restructure and deregulate natural gas distribution functions and the retail electricity market" says Goodman.
The Nation has learned repeatedly that only market forces can guarantee that energy will be available to consumers at the lowest possible price. NEMA calls upon Congress, FERC and State legislatures and PUCs to learn from the repeal of price controls, the successes of Order 636, and to permit market forces to allocate available generation, and transmission capacity in the most efficient manner possible in all parts of the country immediately." Delays in restructuring and deregulating the US energy markets imposes enormous costs onto consumers, competitively disadvantages U.S. businesses, and lowers the US standard of living", says Goodman, NEMA's President and the former Director of Oil, Economic and Energy Tax Policy under President Reagan.
The National Energy Marketers Association (NEMA) is a national, non-profit, trade association representing producers, generators, transporters and marketers of energy-related information, services, products, machinery and technology throughout the United States. NEMA is committed to working with regulatory commissions, consumer representatives, legislators and utilities to devise fair and meaningful ways to implement the final deregulation and competitive restructuring of U.S. markets for natural gas and electricity.
NEMA's next meeting is scheduled for July 23, 24th in Washington, DC. Members will develop a draft of Uniform National Guidelines for Unbundling the Electric Generation, Transmission, and Distribution Functions.
Companies interested in joining NEMA and helping to develop the group's position on these issues should contact Craig Goodman at NEMA headquarters in Washington, DC at (202) 333-3288.