When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Comment

We revisit one of the results in Cicala (2015) and show that the previously estimated large and significant effects of US electricity restructuring on fuel procurement are not robust to the presence of outliers. Using methodologies from the robust statistics literature, we estimate the effect to be less than one-half of the previous estimate and not statistically different from zero. The robust methodology also identifies as outliers the plants owned by a single company whose coal contracts were renegotiated before discussions about restructuring even started. (JEL D83, O13, O33, Q16)

An Open Access Distribution Tariff: Removing Barriers to Innovation on the Smart Grid

This Article proposes that the Federal Energy Regulatory Commission (FERC) consider promulgating an Open Access Distribution Tariff (OADT) to open the nation's electric grid to new products and services at the consumer (distribution) level. Design of the OADT would be comparable to the Open Access Transmission Tariff that the FERC has used previously to open the nation's transmission wires. This Article argues that an OADT is necessary to create a smart electricity network that would be national, multimodal, and interactive. There is no smart electricity network at present, and there are numerous barriers to the development of open networking, such as obstacles to open access, lack of consumer demand for such a network and its products, resistance of incumbent utilities, and a variety of other factors. An open access principle will likely be necessary, but the timing of such regulation is of critical importance. This Article argues that regulatory establishment of an open access principle will eventually be necessary-and to assess when open access might be desirable, this Article examines the revolutionary transformations that took place in three regulated industries: telecommunications, electricity restructuring, and finance.This Article examines key near-term and long-term questions involving an OADT's timing and development by analyzing these regulated industries using three criteria: (1) signifiers of when a transition would be necessary and conditions that might make open access more desirable to industry actors, (2) regulatory prerequisites necessary in the near term, and (3) risks involved in drawing lessons from the specific regulatory transformation (including federalism concerns). This Article concludes that rather than waiting for an organic transformation of the electric grid and evolution of open networking, a deliberate path of preparatory work will best set the foundation for open access.