Supreme Court upholds federal electricity rules

By Gina Holland

Associated Press

WASHINGTON – The Supreme Court today upheld federal rules intended to give people choices for electricity service, but rejected arguments by Enron Corp., for even freer access to the nation’s power grids.

The justices, in a case involving states’ rights and federal authority over electricity markets, also turned back an argument by nine states that the government had overstepped its authority when it directed utilities to open power lines to competitors.

Enron, which before its bankruptcy was one of the nation’s top electricity traders, had maintained that federal regulators had not given power marketers the same access to electricity grids as held by traditional, state-regulated utilities.

The states in presentations before the court Oct. 3, before the severity of Enron’s troubles was publicly known, said the Federal Energy Regulatory Commission had usurped the states’ traditional authority to regulate retail prices when it opened the wholesale power grids to competition in 1996.

But the Justice Department, speaking on behalf of the commission, had argued that the commission pursued a balanced approach that allowed competitors access to power lines, but left retail market issues to states.

The justices agreed and in its ruling today rejected the arguments of both Enron and those of the nine states, led by New York.

The case has been viewed as pivotal in determining the direction of electricity competition at a time when many states – in light of the Enron debacle and recent California power crisis – have been reconsidering electricity deregulation and retail competition.

Some members of Congress also have questioned the extent to which wholesale power markets should be regulated amid allegations of market abuses by Enron.

Enron had maintained that the 1996 FERC order continued to give too much power to state-regulated utilities to “hog” the transmission lines with power they generate and also sell retail.

The ruling said the federal government controls the management of the nation’s power grids – and the future of electricity competition. But it also said that the federal government could limit its assertion of such authority in some cases.

Writing for the majority, Justice John Paul Stevens said that while FERC had the authority to require broader access it also “had discretion to decline to assert such jurisdiction in this proceeding in part because of the complicated nature of the jurisdictional issues” between federal and state interests.

The FERC’s decision in 1996 to require utilities’ power transmission lines to be opened to competing power merchants was key to helping companies like Enron, which sought to market electricity on both the wholesale and retail levels.

Richard Pierce Jr., a George Washington University law professor, said the ruling in its general endorsement of federal authority over power line access, “is terribly important for anybody who’s a consumer and interested in getting a level playing field.”

“The issue is far from dead, even if Enron’s role is no longer what it once was,” he said.

FERC’s 1996 order led numerous states to end monopolies in retail power markets. About half the states have moved toward electricity competition.

But utility regulators in Florida, Idaho, New Jersey, New York, North Carolina, Virginia, Washington, Vermont and Wyoming filed suit arguing that FERC’s directive limited states’ authority to control retail sales.

Enron filed for bankruptcy protection in December. A division of the company, Enron Power Marketing Inc., was involved in this case.