Historical Context of Energy Regulation:

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• Historical Context of Energy Regulation
• What is energy?
• How have humans harnessed energy for their own
  use?
• How and why do governments intervene in the
  market to control the use and development of
  energy resources?

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What is energy? From where do humans get
useable energy?
Energy the ability to do work
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PATH OF ENERGY
SUN
? Solar energy ? EARTHS SURFACE
Ocean absorption heat and convection currents
Land absorption heat absorbed by animals,
plants, etc.
Energy is stored in stocks of energy resources,
like combustible (fossil, biomass) fuels (Btu),
water power, etc.
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1st 2nd LAWS OF THERMODYNAMICS
FIRST LAW OF THERMODYNAMICS Energy can neither
be created nor destroyed, only converted from one
form to another.
SECOND LAW OF THERMODYNAMICS As energy is
converted from one form to another, the
availability of energy (and the useable amount)
decreases. (a/k/a the law of entropy).
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ENERGY FORMS/CONVERSIONS

• GRAVITATIONAL
• MECHANICAL
• ELECTRICAL
• THERMAL
• CHEMICAL
• NUCLEAR

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USEFUL ENERGY PRIMARY SOURCE USE
Mechanical energy for industrial use (e.g.,
mills) or to run electricity-generating turbines

• HYDRO (falling water) or WIND
• COAL, OIL,
• NATURAL GAS, WOOD,
• BIOMASS, etc.
• URANIUM
• SOLAR

Combustion to produce useable heat or to generate
electricity
Controlled atomic reaction releases heat to
produce electricity
Passive solar heat used directly or converted
chemically (active solar) to electricity (by
photovoltaic cells).
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U.S. Energy Timeline
1700s first use of hydromechanical
power 1859 Edwin Drake struck oil in western
Pennsylvania 1865 First natural gas utility
opened in Fredonia, NY 1882 Edisons Pearl St.
Station power plant opened Late 1800s First
hydroelectric stations 1880s Rise of state
utility commissions passage of
federal major antitrust legislation 1930s
Federal Power Act Rural Electrification Act
Public Utilities Holding Co. Act
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Source EIA
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SOURCEEIA
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Electric Generation Fuel Sources,
Worldwide Source IEA Key World Energy Statistics
2001
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Share of U.S. Net Summer Electric Generating
Capacity by Energy Source, Year-End 1999 (EIA)
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Electricity Generating Capacity by Industry
Sector and Ownership, as of January 1, 1999
(SourceEIA)
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Extraction of primary source fuels
Regulate externalities
Commercial or residential end use
Transformation into electricity
Regulate competition
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• ENERGY LAW addresses the development,
  distribution and sale of energy resources.
• externalities of energy production
• pollution
• safety and health risks (workers)
• regulation of competition
• public utility law
• state ownership
• antitrust/competition law

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EXTERNALITIES

• HYDRO
• WIND
• COMBUSTION (COAL, OIL, NATURAL GAS, WOOD,
  BIOMASS, etc.)
• URANIUM
• SOLAR
• TRANSMISSION

? Aquatic/terrestrial habitat
destruction aesthetic
? Primarily aesthetic
? COMBUSTION Air pollution (SO2, NOx,
global warming) Water pollution aesthetic
impacts EXTRACTION habitat
destruction aesthetic water pollution
? EXTRACTION water pollution habitat
destruction aesthetic. USE nuclear waste
? aesthetic waste production (photovoltaic
cells)
? aesthetic EMR?
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POSSIBLE LEGAL RESPONSES TO EXTERNALITIES

• PIGOVIAN TAXES tax creator of externality an
  amount that maximizes social net benefit
• REGULATION
• Prescriptive and proscriptive rules
• e.g., licensing statutes allow regulatory
  agencies to impose conditions to
  minimize/internalize externalities
• STATE OWNERSHIP
• PRIVATE LAW (TORTS)

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EXTERNALITY REGULATION JURISDICTION (U.S.)
HYDRO FERC STATES, subject to preemption
limits WIND LOCAL GOVERNMENT

• HYDRO (falling water) or WIND
• COAL, OIL,
• NATURAL GAS, WOOD,
• BIOMASS, METHANE
• URANIUM
• SOLAR

State ownership is norm elsewhere
Extraction of fuels DOI and states, subject to
preemption Combustion EPA and STATES
NRC with limited STATE jurisdiction
LOCAL GOVERNMENT (zoning)
Other nations state may owns/supply energy
resources, and regulate externalities
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Multiple Jurisdictions and Preemption

• Allocation of Powers in Federal System
• PUCs, controlling natural resources
• Federal Supremacy
• Barriers to commerce
• Hydro, Energy Transactions

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• Menu of options for addressing the dangers of
  monopoly and unfair competition
• manage private competition ex post (antitrust
  law)
• manage private competition ex ante (public
  utility/common carrier rules)
• state ownership