Jon Wellinghoff, the Federal Energy Regulatory Commission, and the Pricing of Electricity

As Jon Wellinghoff steps down from his position as chairman of the Federal Energy Regulatory Commission (FERC) we read various articles summing up his accomplishments. In my estimation, Wellinghoff will be best remembered for establishing “dynamic pricing,” aligning consumer and wholesale electricity rates.  It’s also clear that Wellinghoff was a fan of renewable energy, smart grid, demand response, energy efficiency, energy conservation, and all the other good things that, when fully pursued, will strengthen America’s economy, security, and stature on the world stage as an environmentally responsible actor.

What we need to happen from here is clear, and it goes back to Wellinghoff’s focus on pricing.  In particular, we need pricing that reflects the true and comprehensive costs of electricity, once the broader externalities are understood and included into the equation.  The regulation of the power utilities, and the incentives provided to the consumers, need to reflect the cost of the long-term damage to our lungs and environment associated with fossil fuels.  As Thomas Jefferson reminded us, it’s a simple matter of fairness, of paying for what you use.