Federal involvement in electricity competition protested

WASHINGTON -- Several states told the Supreme Court the government went too far when it ordered electric utilities to open their power lines to competitors, spurring a movement toward deregulation.

But one of the country's largest power marketers, Enron, argued before the court Wednesday that the Federal Energy Regulatory Commission should have gone even further to help companies like Enron get equal access to power grids.

During the hourlong hearing, the justices gave little indication of how they will decide on a case that could dramatically affect management of the nation's power grids and the future of electricity competition.

At one point, Justice Stephen Breyer said FERC, which regulates wholesale power markets and interstate transmission of power, was being "whipsawed" from both directions.

The commission's 1996 decision, which for the first time required traditional utilities to open their transmission lines to competing power merchants, triggered a movement toward wholesale electricity competition and led numerous states to end monopolies in retail power markets.

But utility regulators in nine states, led by New York, filed suit arguing that the FERC order amounts to a federal agency attempting to regulate retail sales, usurping a traditional state function.

Enron's lawsuit charged that FERC violated federal law because it did not require access to transmission lines when utilities continued to keep transmission and retail sales as one operation.

-- as remains the case in many states that have yet to allow competition.

In June 2000, an appellate court essentially upheld FERC's regulation, prompting appeals from both Enron and the state regulators.

"It's an example of where an agency has overstepped its bounds," Lawrence Malone, general counsel for the New York State Public Service Commission, told the justices at Wednesday's hearing. The other states party to the suit are Florida, Idaho, New Jersey, North Carolina, Virginia, Washington, Vermont and Wyoming.

Malone, appearing on behalf of all nine states, argued that FERC's order pre-empts state authority to regulate retail sales and set rates.

"This case isn't about rates," countered Louis Cohen, representing Enron Power Marketing Inc. before the court. "What we're concerned about is getting onto the (grid) system."