H.B.W. Schroeder

"Paradigm shift." "Think out of the box." "Lead, follow or get out of the way." These phrases, and the new corporate-think that accompanied them, were mantras of the likes of Lee Ioccoca, Jack Welch and Ted Turner. It was fascinating to watch these leaders use this type of thinking to move their respective companies into new large areas of profitability and leadership. Such examples rarely exist in the electric utility business. Indeed, there are stories of famed leadership, which led to the destruction of utility empires despite their original innovativeness: Sam Insull, Wendell Wilkie and Ken Lay come to mind.

In the next few years, though, the industry has a chance to set some examples of forward thinking heretofore unheard of. To be sure, this "forward thinking" has been 25 years in the making but belated progress is better than no progress at all.

In the late 1970's, Congress passed a spate of bills at the behest of a changing market. New entrants were trying to get into the utility business and, it appeared, the American people were quite ready to think about "choice" in the electricity markets. The most significant of these bills was the Public Utility Regulatory Policies Act (PURPA). This law made it possible for the emergence of new generators and obligated existing utilities to take advantage of this generation in a changing market. It was the birth of the Independent Power Producer, or IPP. But within ten years of the passage of PURPA, it became apparent that this law, alone, could not satisfy changes in the utility markets. Entry was still stifled. Congress corrected itself, though, in the mid-'80s by repealing the Powerplant and Industrial Fuel Use Act (which it had enacted along with PURPA), thus creating a whole new generating model - the relatively quick to build, only some assembly required gas generating plants. The move to competitive generation was on.

Still sensing that the proverbial "level playing field" was still out of reach, the market demanded further change in regulations affecting this industry. After four years of debate, Congress finally passed the Energy Policy Act of 1992 (EPAct). EPAct further opened access to utility markets and gave the Federal Energy Regulatory Commission (FERC) real responsibility in a few important, key areas. Among these was broader authority over wholesale transmission.

FERC took that authority and wrote two regulations that dramatically changed how utilities would view transmission. Orders 888 and 889 spelled out how utilities would handle transmission tariffs and declared once and for all that "open access" was new term of art in the electricity industry. No longer, it was thought, could integrated utilities use their transmission systems to manipulate markets to advantage their own generation and/or distribution. Still, although more generation was entering the market, getting that generation to its market was still stifled. So FERC issued Order 2000 in the waning days of the last century.

Order 2000 went to the next logical step and expanded the idea of independence not only to generation but to transmission as well. Basically, FERC said that the best way to rationalize a restructured industry would be to allow and encourage independent transmission companies to enter the market, thus erasing any temptation to utilize this important "highway" in an abusive way. Truly independent transmission companies - those not affiliated either actually or historically with an integrated utility company - were encouraged into the market with new incentives to make transmission, itself, an interesting and profitable business.

One company, Trans-Elect, Inc., foresaw this trend during the development of the above-stated history and formed itself into a truly independent transmission company before FERC even issued its Notice Of Proposed Rulemaking on Order 2000. To be sure, the small group of us who conceived Trans-Elect are not in the same Zip Code as Lee, Jack or Ted. But, like many entrepreneurs in the history of our economy, we saw a market and are pursuing a strategy to fill it.

Officially organized in April 1999, Trans-Elect has grown from four "basement Thomas Edisons" meeting in a subleased office to a major player in the transmission system of North America. In the last fourteen months, Trans-Elect has become involved (either as general partner or outright owner) in assets totaling $1.1 billion, with 14, 400 miles of transmission lines and employees approaching 300. And our mission is simple: We want to build an independent system of electricity transmission in North America to ensure true competition, guarantee significant investment in long-ignored transmission and ease restructuring of the industry to the benefit of customers.

But just as one cannot build a power plant one megawatt at a time, so, too, does the balkanized transmission system need time (and other independent players) in order to evolve into the kind of system that can truly benefit electricity customers.

In responding to market demands, the federal government - especially FERC - has clearly mapped a strategy for a restructured (though decidedly not de-regulated) electricity industry.