Misguided Energy: Why Recent Legislative, Regulatory, and Market Initiatives are Insufficient to Improve the U.S. Energy Infrastructure

Abstract

This Article reviews recent legislative and regulatory activity seeking to increase energy infrastructure and analyzes the ability of each action to achieve this goal efficiently and effectively. In Part II, the Article briefly reviews the Energy Policy Act of 2005 (EPAct 2005), which included the historic repeal of the Public Utilities Holding Company Act of 1935 (PUHCA). This Part will briefly consider the events leading to the passage of PUHCA and its subsequent repeal and will assess the likely impact, positive and negative, PUHCA repeal will have on timely investment in energy infrastructure. Part III describes the use of pricing incentives and the advent of market-based rates in wholesale energy markets and the apparent economic and political rationales behind such incentives and rates. It then summarizes recent and expected developments related to such incentive pricing programs. Part IV looks at recent legislation and the subsequent regulatory actions related to approval of mergers and acquisitions under the Federal Power Act (FPA). Finally, Part V explains that while significant legislative and regulatory activities abound, the actions to date provide little reason to expect significant changes in the near future. The crisis will only get worse: the current energy infrastructure is insufficient for current demand, and the demand for energy in the United States is increasing at approximately 1.1% per year. Furthermore, this Part considers recent FERC action in the response to certain emergencies related to the California energy crisis of 2000-01 and Hurricanes Rita and Katrina. This Part argues that these emergency actions provide yet another example of plans that, despite some promise, fail to effectively and immediately improve the nation's energy infrastructure. More aggressive action than has been seen to date would be necessary to implement the programs effectively. The Article concludes that it is time for an aggressive and innovative plan that will lead to immediate and sustained energy infrastructure enhancements. Even with financial incentives tied to specific deadlines to put new facilities in service, such as those used in FERC's emergency orders, improvements in energy infrastructure under current policies are insufficient to effectuate real change.