AL GORE'S MARGINAL UTILITY

...The agency that gave our nuclear secrets to the Chinese will now turn its talents to telling the electric utilities how to do business...

...That's equal to about one-third of last year's budget surplus and comes to considerably more over ten years than Clinton wants to add to spending on education and child care...

...sands of air miles...

...During the recent East Coast heat wave, generators kept ready to meet the tremendous peak load created by air conditioning, and left expensively idle during milder weather, were turned on to keep customers cool and, in the case of the aged ill, alive...

...It is these provisions that make this bill an expensive exercise in government planning and regulation...

...Now it's electricity's turn...

...Historically, these three functions were performed by a single company serving a specified area, in which it was given a monopoly in return for a promise to serve all comers at rates determined by regulators...

...But the pot of money estimated to be available from the greater efficiencies that electric competition will bring will not be put in consumers' pockets by passage of the administration's version of reform...

...But the fact is that since airfares were deregulated, more and more people have figured out how to wangle fares that enable them to fly to more and more places, be it to visit Granny in her retirement digs in Florida, or to take the kids to Disneyland in California, or—by making a last-minute purchase on the Internet of a seat the airline is frantic to unload—to get to London for a long, theater-intensive weekend on an airline ticket that doesn't cost significantly more than one for the D.C.-N.Y shuttle...

...a subsidized market for them will be forced into existence...

...The administration also has included complicated provisions designed to force the electric companies to triple the portion of their output that comes from solar, wind, geothermal, and biomass—known as "renewable" sources of energy—from a current level of 2.5 percent of national sales to 7.5 percent in 20102015...

...But that is what the federal system is all about: 50 laboratories in which varying solutions to complex problems such as electric utility deregulation can be tried...

...Grumble, too, about those annoying dinner-time calls inviting you to drop your long-distance telephone company in favor of one offering lower rates and thouIrwin M. Stelzer, a contributing editor to The Weekly Standard, director of regulatory studies at the Hudson Institute and a consultant to several electric utilities...

...Worse still, according to Linda Stuntz, deputy secretary of energy during the Bush administration and now in private practice representing some electric utilities, the New Deal regulatory structure is preventing companies from making competitive thrusts into the territories of distant utilities, thereby removing them as a competitive factor in the industry...

...Indeed, that bill is more likely to dilute the benefits of competition than to enhance them...

...Not perfectly, and not fully, in some cases...

...The drafters of the act claim that "the quantifiable potential cost reductions resulting from competition...

...The administration bill would consign this New Deal fossil to the dustbin of history...

...In deference to Al Gore and his earth-is-warming team, the bill requires electric consumers to pay $3.5 billion per year into a fund that would be distributed to states and tribal governments, on a 50/50 matching basis...

...Just in time to provide a home for the Gore acolytes who have been waiting in the wings to tell us what sorts of cars we may drive, how much energy we may have with which to cool and heat our homes, and how much we must curtail our use of energy in order to mitigate what the vice president calls in Earth in the Balance the "ferocity of our assault on the earth...

...And consumer groups will begin to pressure state legislators to allow them to share in the bounty that a more competitive and more efficient electric utility industry can generate...

...Never mind whether power from these sources can be produced at the same cost as more traditional sources...

...This country's electric utilities, once guaranteed the exclusive right to sell power in their service areas, are beginning to face competition as more and more states open their markets to out-of-area electric companies eager to supply customers, especially the largest ones, with power to keep the lights on, the factories humming, and—of special importance these past few days—the air conditioners converting hot, humid, unbreathable air into a cooler version that makes inhaling a feasible chore...

...After all, the administration could simply call for the repeal of the outdated New Deal and 1978 regulations, thereby clearing away two of the main impediments to a fully competitive marketplace...

...Naturally, former Tennessee senator Al Gore is fond of TVA, despite the fact that its power plants and hydroelectric dams are no more environmentally benign than those of private-sector companies...

...Consumers stand to pocket at least $20 billion, unless Bill Clinton and his energy policy team mess things up—which they are trying mightily to do...

...The industry is usually divided into three parts: generation, transmission, and distribution...

...Others are buying power plants all over the country and peddling the output in competition with other energy entrepreneurs...

...In short, we are dealing with some very big bucks...

...The industry takes justifiable pride in its ability to provide such a reliable supply of energy...

...Grumble all you want to about crowded airports, crowded airplanes, lost luggage, and over-stretched cabin crews...

...The feds would do well to stick to undoing the harm that existing federal legislation does: Repeal the antiquated, even if once serviceable, Public Utility Holding Company Act and the Public Utility Regulatory Policies Act, and allow the states to continue the roll-out of competition...

...Lately, it has become apparent that competition is possible in the generating sector, and that so long as each generator has access to customers over the transmission and distribution wires (which remain monopolies for now, as they are difficult to duplicate), customers can be given a choice of power supplier...

...The Public Utility Holding Company Act, passed during the New Deal in response to securities and other abuses by the holding companies of the time, is no longer needed to protect either investors or consumers, according to the Securities and Exchange Commission, which is responsible for administering it...

...In the Depression, Franklin D. Roosevelt established the Tennessee Valley Authority to bring electricity to the homes of poor farmers in that part of the country...

...As the Progress & Freedom Foundation notes in a recent analysis, "The Administration's bill requires the Department of Energy to establish new offices, administer new programs, issue new rules, develop new codes of conduct and databases, and undertake new studies...

...Most consumers are familiar with the benefits of the deregulation of other sectors of the economy...

...Enter the Comprehensive Electricity Competition Act, introduced by the administration after much intra-agency brawling...

...No matter how alert and well-meaning the state public utility commissions that regulate the industry might be (and not all are alert and well-meaning), and no matter how vigorous the Federal Energy Regulatory Commission has been—those agencies are no substitute for the grinding down of costs by market competition...

...Stuntz says that her records show some 22 states, containing half of the nation's electric load and 60 percent of its population, have already deregulated electricity markets, or are about to do so...

...But not all states have moved with equal speed to introduce competition, and there remain on the federal statute books laws that seem obsolete given our new understanding that the electric utility industry is not a natural monopoly, at least not in all of its aspects...

...But in the end you can now casually call anywhere in the country at affordable rates, as competition has turned a long-distance call into a commodity so cheap that Al Gore can afford to load taxes on your telephone bill to support the spread of his invention, the Internet, to places unwilling to pay for it, without sending bills up to levels sufficiently high to attract consumers' attention...

...The good news is that the Clinton bill would at least repeal two bits of legislation that have outlived their purpose...

...Unfortunately, Clinton's team has not learned that it is expensive for consumers if the government intervenes in these highly competitive markets and tries to pick technological winners...

...natural gas for their fuel...

...The states could then get on with the job of introducing competition...

...But the Clinton administration's inclination to leave well enough alone has definite limits...

...Sooner or later their large consumers of electricity will begin to cast covetous eyes on the lower rates available in neighboring states and complain of the competitive disadvantage under which they are operating...

...Naturally, all of this will require a larger Department of Energy...

...But it is now clear that the cost of this energy has been inflated by state and, to a lesser extent, federal regulation that provides little incentive for utility companies to keep their costs, and hence their charges, down...

...Generation occurs for the most part in large coal and nuclear stations, remote from users, and increasingly in smaller but still noticeably large stations that rely on cleaner AMERICA HAS BEEN BLESSED WITH A HIGHLY RELIABLE ELECTRICITY SYSTEM...

...So the administration bill contains a provision allowing TVA to sell its cheap, federally subsidized power outside of the region it was originally established to serve, thereby distorting competition by disad-vantaging private, tax-paying electric companies...

...Some are selling their generating stations to companies that are willing to enter the competitive market and vie for customers, and are concentrating instead on the still-regulated wires business...

...All without a bit of help from the federal government...

...And what of the states that don't adopt a more competitive framework for their utilities...

...The generated electricity is transmitted to central markets over the lines hung from towers that you can't help noticing from train, bus, and car windows as you drive through the countryside (they can be buried only at enormous cost), and then distributed to individual homes by smaller wires that are sometimes strung overhead, like telephone wires, and sometimes run underground...

...America has been blessed with a highly reliable electricity system, one that with few exceptions has delivered power to anyone who wants it, at any time of the day or night, in any amount...

...It would also repeal the Public Utility Regulatory Policies Act of 1978, described by the Department of Energy as "a legacy of the energy policy of the 1970s, which attempted to substitute the government's fuel-use and energy conservation judgments for those of the marketplace...

...Since then, TVA has grown into a giant power producer, owning 11 coal-fired generating stations, 3 nuclear plants, and 29 hydroelectric facilities...

...The administration may feel compelled to talk the talk of free markets, but it is reluctant to walk the walk...

...are estimated to exceed $20 billion annually...

...Despite its size and the fact that the area it serves is no longer the basket case it once was, TVA retains the privilege of financing itself at very low rates because of the implicit backing of its securities by the federal government...

...The $7 billion in annual subsidies would go towards energy conservation and new technologies that are too expensive to compete in the marketplace, and to low-income consumers...

...BUT THE COST HAS BEEN INFLATED BY STATE AND FEDERAL REGULATION...

...PURPA, as it is known in the acronym-ridden world of energy policy, forced utilities to buy power produced from solar generators, waste coal, and on wind farms—sources that were so high cost as to be non-salable in competitive energy markets...

...AL GORE'S MARGINAL UTILITY The Administration's Pseudo-Deregulation of Electric Po'wer By Irwin M. Stelzer While Congress and the president very publicly squabble over whether to give us back some of our tax money, a sum equal to at least four times next year's non-Social Security surplus is up for grabs in a little-noticed part of the economy...

...Gore's fingerprints are on another part of the bill...

...The $20 billion annual benefit to consumers may seem like peanuts to a president trying to buy a place in history by spending the projected budget surplus, but it is real money to the users of electricity...

...This stealth tax would be reflected in consumers' bills and not directly in their tax payments—rather like the one that Gore has had the FCC add to telephone bills to fund his pet Internet expansion programs...

...Many utilities are thus disintegrating before our very eyes...