Document Type

Article

Disciplines

International Law

Abstract

In 1791, the U.S. Constitution was amended to include the Bill of Rights.' The Tenth Amendment of the Bill of Rights said that, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are preserved to the States respectively, or to the people."2 Thus the U.S. federal system of government was created such that the federal government in Washington, D.C. is vested with enormous powers under the Constitution, yet the individual states are vested with sometimes equally formidable authority not expressly found in the Constitution. This federal system of splitting authority between Washington, D.C. and the individual states has created a sometimes confusing, sometimes frustrating, set of rules and policies for U.S. businesses. But this split has also been lasting and has produced unique advantages for the economic well-being of the nation. Nowhere is this governmental split in authority more apparent than in the regulatory jurisdiction over the electric power business.

To characterize the U.S. situation, the Federal Power Act3 declares that the interstate sale of electricity at wholesale and the transmission of electricity in interstate commerce is affected with the public interest. Accordingly, the Act gives the U.S. Federal Energy Regulatory Commission substantial authority to regulate interstate wholesale power transactions and transmission services. Remaining authority over retail sales of jurisdictional utilities, siting responsibilities for transmission, and most generation facilities is reserved to the individual states. Most states have similar provisions establishing electric utility regulation by state agencies. There are nuances to this characterization that will become more important in the following discussion of the U.S. situation. This split in authority has evolved over the last 100 years to regulate an electric power industry that was relatively free of competition and was largely seen as a natural monopoly in generation, transmission, and distribution functions. Those circumstances are changing rapidly. It is now widely accepted that wholesale generation of power is no longer a natural monopoly and is increasingly competitive. Notions of competition in transmission and retail markets are under examination. Customers are awakening to choices in electric power service that call into question the foundations of the U.S. regulatory system. The basic issue now facing electric power in the United States is that there is no consensus among the industry entities, among the states, or among the federal government, concerning the desired industry structure for satisfying electric power needs in more competitive markets. Furthermore, there is no one entity at either the federal or state level that could force broad industry change across the country if such change was warranted.

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