Over the last decade there has been an ongoing, extensive discussion of the environmental implications of increased competition in the electricity industry. As part of that discussion, this study examines the Federal Energy Regulatory Commission (FERC) analysis of « Order 888 », a proposal to increase competition in US wholesale electricity markets by promoting open access to transmission lines.
FERC’s final environmental impact statement (FEIS) for Order 888 was issued in 1996, including detailed forecasts of the expected environmental effects of increased competition. Starting from a base year of actual data for 1993, the FEIS projected several scenarios for electricity industry activity and associated air emissions for the years 2000, 2005, and 2010. The FEIS found that competition would slightly increase air emissions under some scenarios, and would slightly decrease emissions under other scenarios. The overall environmental effects of competition appeared to be small, and FERC projected that they were likely to be less important than other benefits of increased competition. We now have the opportunity to compare the FEIS projections for 2000 with actual experience up to and including that year. Our objective is not to critique FERC’s methodology with the benefit of hindsight, but to identify lessons that can be learned about the expected and unexpected environmental implications of increased competition in the US electricity industry.