SGA Task  Force on Electricity
Monday, August 26, 2002. 8:15 a.m.
Governor Patton’s Talking Points

Thank you.   Our nation’s electricity transmission system is virtually a two-lane road trying to do the job of a super highway.  To best understand this issue…visualize the development of our interstate highway system – a system of shared authority.  In order to build an efficient transportation system in this country, we had to take into consideration the overall transportation needs of the nation as well as the unique needs of regions and individual states. We must approach this issue in the same manner.  In response to the challenges the nation’s electricity sector faces the NGA Task Force on Electricity, which consisted of 16 states, representing different regions, - made up high and low cost states, - developed a concept that takes into account the regional differences in the electricity sector.  The states wanted to formulate their own regional remedy that didn’t force them into a “one size fits all” scenario.  Therefore, the NGA Task Force on Electricity Infrastructure recommended the formation of Multi-State Entities, or MSEs, that correspond to the boundaries of regional electricity markets.

The MSEs primary role will be four-fold…One – to facilitate a strong state role in the Regional Transmission Organizations or RTOs.  Two – to have a collective voice on issues critical to states such as cost allocation and market design.  Three – to coordinate multi-state review and permitting for proposed interstate transmission projects.  And Four – to allow the states to formulate their own solutions to regional transmission issues.

This is a win-win for ratepayers, industry and government because it places states in charge, on a regional basis, of their own electricity transmission destiny.  The MSEs will help to ensure that the Federal Energy Regulation Commission’s RTO initiative respects the unique characteristics of each region.  Through the MSEs, the states will be able to determine formally the need for transmission infrastructure as developed by the RTO, giving industry much needed certainty. 

When I presented this paper at the National Governor’s Association meeting, in Boise Idaho,  FERC had not issued its proposed Standard Market Design. Although the MSE concept does appear in the Standard Market Design, I am disappointed that the FERC did not adopt more of the positions that the Best Practices group proposed.

For instance, in the Standard Market Design, the states are NOT granted decision- making authority; instead, when it comes to key decisions that will impact electricity for an entire region, FERC has relegated the states to an advisory role. 

This is inappropriate as many of the initiatives in the Standard Market Design affect areas that are, or have historically been, under state jurisdiction.   Questions concerning where to site new lines, who should pay for these new lines, and how to best meet the long-term resource needs of a region will be made in an arena where state input is advisory only.  This not only looks a lot like a federal power grab; it doesn’t make a whole lot of sense. Once all these decisions have been made, it’s the states that will have the final say as to whether or not to actually site the new infrastructure called for in RTO plans. Why not give the states a real seat at the table as these plans are being developed? 

I am concerned about the possible impacts of the Standard Market Design on consumers, energy intensive industries and future economic development opportunities for the 23 low cost states in this nation.  We need a thorough, in-depth and intensive analysis of the Standard Market design and the nation needs more than 75 days to determine the impacts of this huge experiment on the nation’s electric transmission system.

We need to acknowledge some hard and fast realities before we move forward.  The south has a system that has worked well for almost a 100 years.  We built adequate transmission lines to serve our citizens, we built generation to provide electric power to the people, our regulators worked collaboratively with our utilities to ensure the lowest possible electric rates.  We’ve got a transmission system that is working and working well in the south.  Why are we being asked or forced through the standard market design to change a system that is efficient, reliable and meeting our needs?  Why is the south being asked to pay for a system that offers us limited benefits?  Let those that directly benefit, pay the costs.

In summary, the NGA Task Force on Electricity recommends that states take four actions in developing the transmission infrastructure for their future economies.  First, formulate their own solutions to regional transmission issues by forming Multi-state Entities.  Second, maintain state siting authority over transmission lines.  Third, be directly involved in the decision making process on a regional level.  And fourth, collectively weigh in on important questions such as cost allocation and coordination of multi-state reviews. 

While there are benefits to planning on a regional basis, as electricity flows do not stop at state boundaries, the ultimate responsibily for all states lie in doing what is in the best interest of their citizens.

I am convinced that there will be a great deal of concern expressed about these proposed rulemakings when they are fully analyzed.  It is apparent that 75 days is not enough time to complete an in-depth study of the potential impacts.  The states need more time.

Governors Huckabee, Musgrove, and Siegelman will sign a resolution reemphasizes what I’ve said here today regarding transmission pricing.  FERC’s move towards socializing the costs of expanding and upgrading the transmission system is unacceptable. 

In addition, I will hold a press conference, along with Governor Huckabee and other Governors, addressing my concerns regarding the Standard Market Design later this morning.

In closing, let me stress to you again the importance of regional remedies to electricity transmission issues and the criticality of getting a crystal clear picture of the potential impacts of the standard market design on our citizens and future economic development opportunities in the south. 

Thank you.  Are there any questions?