A Challenge for Federalism: Achieving National Goals in the Electricity Industry

Abstract

Initially, federal legislation respected the established jurisdiction of states over their electricity industries, but those bright-line boundaries have long faded. Congress first asserted its authority over electricity for the purpose of regulating interstate transactions, which were beyond the jurisdictional limits of state commissions. Federal authorities were mostly distinct from the traditional functions of states. However, over the past four decades, Congress and the Federal Energy Regulatory Commission have moved further into the regulatory spaces once reserved for the states in attempt to unify state policies around national goals. Despite repeated federal efforts, state legislation and regulatory choices continue to push the electricity industries of the various states along vastly different paths. In Part I, this paper examines the history of electricity regulation with a focus on the jurisdictional limits of state and federal powers. Part II explores national reforms to transmission siting and "clean electricity" generation in light of the history examined in Part I. It concludes that if Congress does pass new legislation in these areas it should appreciate the range of legal and regulatory histories and preferences at the state level. Rather than usurping state authority and imposing nationwide regulatory programs, Congress should follow its own precedent by respecting the decision making authority of states and spurring reform at the state level.

Keywords: electricity regulation, federalism, electricity

JEL Classification: K23, K32, L50, L43, L94, N72