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Electricity, Contract Rules, and the Environment: Welcome to the Hotel California

December 2001

Citation: ELR 11475

Author: Steven Ferrey

One of the major news stories of this year is the implosion of California's electric power restructuring. The most capital-intensive industry in the United States, in the largest state in the Union, which itself is one of the largest economies in the world, came completely unglued. This focused attention on how we produce, distribute, and consume electric power and its profound implications, not only for social welfare, but for the environment.1

The problems in California resulted in a rash of litigation and administrative proceedings of every conceivable stripe and hue. Every party involved is suing others over every conceivable dispute as the California system struggles to equilibrate. What is clear is that private contract rights—and legal suits regarding those rights—have replaced the traditional role of regulation. The courts will have to decide more, and the regulators less, of the rules of the newly deregulated electric marketplace.

Steven Ferrey is Professor of Law at Suffolk University Law School and Professor of Law (Adjunct) at Boston University School of Law, both in Boston. Among his 5 books (and more than 50 articles) are THE LAW OF INDEPENDENT POWER (West Publishing 2001), a 3-volume treatise now in its 18th edition, THE NEW RULES (Penwell Publishing 2001), a book on navigating through the deregulated electric market, and ENVIRONMENTAL LAW: EXAMPLES AND EXPLANATIONS (Aspen Publishing, 2d ed. 2001). Professor Ferrey has served as legal counsel or an expert witness for many private and government clients on energy and environmental issues. He has represented some of the largest and most active power market participants in asset acquisition and sale, siting, and operation of facilities. He also has consulted for various federal energy and environmental agencies, as well as for the state of California and other government entities. He consults for the World Bank on power sector privatization globally. He holds degrees in economics, law, and environmental planning, and was a post-doctoral Fulbright Fellow in London, England. Copyright 2001 Steven Ferrey.

[Editor's Note: This is the first of two Articles by Professor Ferrey on the California electricity crisis. In the January 2002 issue, Professor Ferrey will, in light of the California experience, examine the unresolved question of whether the common law or the Uniform Commercial Code governs disputes concerning deregulated electric markets.]

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