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~toreoyer, :~PP.~ has vie~~~ed ~,vith increasing alarm the busincas strategies <br />that some of our early allies in the open access u-ansmission debates, as <br />well as many of our competitors and wholesale power suppliers, have <br />adopted to rake pecuniary advantage of FERC's policies. "Competition," <br />"restructuring," acid creation of a multitude of "markets" for their o~~~n <br />sake seem to have become the way to higher profits, not the means to <br />lower costs and improve services to coast-irners. <br />New markets and protocols have been implemented without a clear <br />understanding of ~~~hether these measures would in fact. provide real <br />benefits to electric consumers-benefits commensurate ~~~ith the costs <br />and risks that FERC and the industry have asked consumers to bear-or <br />whether they lead to exorbitant profits for some and unstable prices for <br />all. These increased costs and risks have made it. more difficult for public <br />po~ti~er systems to serve their own customers ~,~ith reasonably priced and <br />reliable po~1•er. They have also resulted in substantially higher poorer <br />prices in long-term bilateral markets, prices that seem to bear little <br />relationship to sellers' actual costs. <br />The Public Power Business <br />Model: Sticking to the Basics <br />Because they are locally owned and controlled, the interests of public <br />power systems are necessarily aligned with the long-term interests <br />of their respective customers and cornrnunities. Public power utilities <br />embrace their obligation to serve their local communities, and have <br />pursued vertical integration (accomplished in a variety of ways) as the <br />most efficient and effective means to do so. <br />Some systems, particularly tl~~e larger ones, are Cully integrated. They own <br />and operate the facilities necessary to provide electric service to retail <br />customers. Many others arc "virtually° vertically integrated-they have <br />conu-act and tariff arrangements under which they buy transmission <br />service fi-om others and join together through municipal joint action <br />agencies to o~~~n or procure generation. Still others are distribution <br />utilities that purchase full requirements-type encrgry and u~ansmission <br />service from larger utilities. Collectively, public power s}'stems are net <br />buyers oCwholesale power. A wholesale power market that „corks is thus <br />critically important to them. <br />4 Restructuring at the Crossroads: FERC Electric Policy Reconsidered <br />