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The deregulation debate. (Energy).

In 1996 the Federal Energy Regulatory Commission (FERC) issued a landmark order designed to foster competition in the wholesale electricity industry. Order 888 required that electric generating utilities open their transmission grids--the wholesale market--to any company that could supply electricity. Under retail competition, customers could choose their electricity provider. But recent analyses show that Order 888 has in some cases had worse environmental repercussions than anticipated.

Restructuring has led utilities to dramatically cut spending on energy efficiency measures. From $2.4 billion in 1995, they reduced spending to $1.4 billion in 1999, according to the Department of Energy as cited in A Retrospective Review of FERC's Environmental Impact Statement on Open Transmission Access, a 2002 report of the Commission for Environmental Cooperation. This body was set up under the North American Free Trade Act to examine the impact of changes in electric restructuring in North America.

The cutbacks come, says Retrospective Review coauthor Tim Woolf, because of industry concerns over increased competition in the retail electricity business. Although retail competition is currently the law in just 17 states, utilities fear the trend will spread nationwide. In the past, utilities were able to regain the costs of energy efficiency spending--such as promotions for efficient appliances and energy audits--in their rates. Under retail competition, that wouldn't happen: "Utilities worry if they spent money on customers to improve their efficiency, that customer could sign up with another generator, and the utility would never see the benefits," says Woolf.

Furthermore, as utilities curtail their efforts to boost electricity efficiency, coal-fired electricity generation is growing sharply in the Midwest and South, because coal remains cheaper than alternatives such as natural gas. This growth was not predicted by FERC, says Woolf.

Retrospective Review found that the increase in coal-fired electricity generation resulted in 5.4% more nitrogen oxide (N[O.sub.x]) emissions than FERC expected. N[O.sub.x], which results from combustion, leads to the formation of ozone and particulates. These secondary by-products are associated with a number of health effects, including premature death, exacerbation of asthma, and cardiovascular problems, says Jonathan Levy, an assistant professor of environmental health and risk assessment at the Harvard School of Public Health. The review also notes that FERC underestimated emissions of the greenhouse gas carbon dioxide by about 8%, and probably underestimated mercury emissions as well, as coal-fired power plants are a major source of that pollutant.

Assessing the impact of the N[O.sub.x] increase is difficult. However, Levy says a 5.4% increase is substantial and that "it could be something of concern."
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Author:Black, Harvey
Publication:Environmental Health Perspectives
Date:Jun 1, 2003
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