05 May 2021

IN RE | All My Exes Lost Power in Texas

Intrastate v. Interstate

The state of Texas has an intrastate utility system. Intrastate means completely within the state. Interstate, comparable to a highway, means between multiple states. 

Federal v. State Regulations

“To regulate commerce with foreign nations, and among the several states, and with the Indian tribes” U.S. Const. Art. I, § 8, cl. 3.

The federal legislature is given the power to regulation commerce that crosses state lines; interstate commerce. Intrastate commerce, that happens exclusively within a state, can be still subject to state regulation. The absence of federal regulation, does not automatically mean there is an absence of ALL regulation.

Specifically concerning energy utilities, the federal regulatory agency is the Federal Energy Regulatory Commission (FERC). FERC regulations energy utilities that operate among several states, interstate. 

The Great State of Texas, is known for its intrastate independent energy grid; intrastate. The Texas intrastate energy grid is not subject to FERC regulations, but is subject to regulation from Public Utility Commission of Texas (PUCT). Public Utility Commission of Texas, https://www.puc.texas.gov/ (last visited May 5, 2021).

Again, the absence of federal regulation does not automatically mean there is an absence of ALL regulation; states have very robust regulatory systems within themselves.

Public v. Private Utilities

Misleading title. Nearly all energy utilities are privately owned. Utility companies are permitted to operate as monopolies in their prospective localities. For a variety of reasons:

  •  Natural Barriers to Entry. Startup cost for energy plants is so magnanimous that a natural barrier to entry is created. Markets with high startup cause tend to have relatively few market participants (Vendors) than those markets with lower startup cost. 

  •  Aesthetics and environmental concerns. Utilities generally require large unsightly equipment, some form of pollution as a by-product of production, and environmental disturbance to both the human and wildlife ecosystems. So if this were a market overflowing with market participants, then those potentially negative side effects of utility production would also be overflowing. 

  • Regulation itself. Utilities in usage and production, can be hazardous. The government, and the public have an interest in oversight. Fewer market participants are easier to oversee.

Since Privately Owned utility companies are subject to such intrusive regulatory interference, utilities are not really private and not really public. Sometimes this is referred to as a Quasi-Private or Quasi-Public entity. 

One of the most notable governmental interferences into the day-to-day operations of these private utilities companies is that utilities must go through a regulatory process to change the price rate, through a process called a rate case. Interstate utility companies must do rate cases through FERC. Texas, as an intrastate energy system does rate cases through PUCT. Either way, there is a government entity regulating price.

In Re Conclusion

There are pros and cons of intrastate energy grids, and state exclusive regulation of energy. However, if an intrastate energy system fails, then the blame must also fall intrastate. And if these privately owned utilities companies are subject to so much regulation as to be considered Quasi-Public, then if there are failures in the system… then potentially the blame too should be Quasi-Public. As far as proposed federal legislation drastically changing energy policy… well if it only applies to interstate utilities subject to FERC… then intrastate systems will remain the same.