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SUMMARY: Decision involving PPL electricity prices shows there's no turning back the clock on deregulation.

Federal energy regulators sent Montanans a valuable message recently in a decision involving the state's largest producer of electricity.

The Federal Energy Regulatory Commission ruled May 18 that electricity producer PPL Montana lacks “market power” and is entitled to sell electricity at whatever price the market will bear.

If you're wondering what that means, especially to you, it's this: Humpty Dumpty's broken and isn't about to be reassembled. That is, the regulated utility system that once existed in Montana has changed for good and it isn't going to be reclaimed simply because many Montanans find the new system displeasing.

The FERC ruling came in a case brought by Montana officials, who contended that PPL's domination of electricity generation in the state effectively makes it a monopoly and should be regulated as such. Had that argument prevailed, the state Public Service Commission could have regulated power rates based on what it cost PPL to make electricity. Because FERC ruled otherwise, however, PPL will continue selling electricity based, not on what it cost to make, but what it's worth in the open market. Right now, the market price is by far higher than the cost of production.

This may be disappointing to consumers hoping for lower electricity bills, but it's exactly what the Legislature voted for in 1997 when it deregulated the wholesale electricity industry.

Of course, deregulation hasn't gone entirely as expected. Not by a long shot. Passage of the 1997 deregulation law tipped the first of a long string of dominos - leading to, among other things, the breakup of the Montana Power Co. and its ultimate demise, a changing cast of characters delivering electricity and gas, and a quick transition for Montana from a cheap-energy state to a regionally expensive energy state.

Public displeasure over higher energy bills has spawned a variety of efforts to turn back the clock - from an initiative campaign to buy back dams sold to PPL, a bid by several cities to buy the power and gas distribution system, various efforts to re-regulate the industry and the state's case before FERC seeking to redefine the nature of PPL's business.

The surer bet, however, lies ahead of us, not behind us. It's simply not realistic to think Montanans can re-create what's been so completely broken apart. Instead, we ought to look for ways to create a more competitive market for electricity by increasing generating plants, expanding transmission capacity to make it easier to import and export electricity, and step up use of economical alternatives to electricity and make greater use of conservation.

Growing the market, rather than futilely trying to control it, will expand the Montana economy and also lead to more competition and the most economical energy.

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