Despite the many gains made by restructuring, the promise of lower electricity rates has not fully materialized.

An adequate supply of reliable, efficiently priced electricity is critical to the success of New England's economy. The region's power system has had a long history of dependability, but electricity costs have been an issue for businesses and residents for decades. As the region plans ahead, New England's policymakers face a series of decisions that will have an abiding impact on our energy future.

Since industry restructuring was introduced in the mid-1990s, wholesale competition has prompted the industry to become more efficient, attracted private investment in new supply to meet growing consumer demand, and jump-started long-

overdue transmission investment to move power throughout the region more efficiently. Despite the many gains made by restructuring, the promise of lower electricity rates has not fully materialized. Chief among the reasons why is the cost of the industry's raw materials - namely the price of natural gas or oil used to produce electricity, as well as the cost to build power system infrastructure - has risen significantly. New environmental requirements to reduce carbon emissions through Renewable Portfolio Standards and the Regional Greenhouse Gas Initiative will most likely introduce additional costs.

Price pressures resulting from these new environmental goals coupled with price pressures from our growing reliance on natural gas raise concerns about the long-term economic impact on our region. As policymakers develop a strategy to manage rising electricity costs, any plan to help meet New England's energy future should consider the following:

• Reduce peak demand. Demand for electricity during the summertime is growing at a faster rate than growth in electricity use the rest of the year. This requires building and maintaining a fleet of power plants to meet everyone's needs on those few days a year when demand peaks. Pursuing efficient and reliable ways to lower demand is the most cost-effective-and environmentally friendly-route to take. In the short term, it limits daily price volatility during those peak periods. In the long term, it slows down the need to build costly infrastructure to meet ever-increasing demand. "Demand Response," which provides large customers with financial incentives to cut electricity use during peak periods, and giving consumers tools to better manage their electricity use in real time are important ways to slow peak growth.

• Diversify electricity sources. More than 60% of our electricity is produced by power plants that operate on natural gas or oil, tying electricity bills to the price of those two fuels, and posing potential reliability problems if there are major disruptions in gas or oil supplies. Diversifying the fuels we use to produce electricity would loosen the tie between electricity rates and volatile fuel prices. But this is easier said than done. Other sources such as nuclear and coal are difficult to site in New England, and coal would not help reach environmental goals. Because renewable resources have high capital construction costs, they may be more costly than conventional power plants in the short term.

• Address environmental policy. New environmental requirements must be balanced with the goal of achieving reliable, efficiently priced supply. The Regional Greenhouse Gas Initiative seeks to reduce carbon emissions across a 10-state region. Renewable Portfolio Standards establish aggressive goals for increasing the use of renewable energy. But meeting these goals will require far more renewable energy than is currently under development in the region. In addition, sources of electricity that yield the least emissions are not necessarily the cheapest to produce, perpetuating the tug-of-war between environmental goals and cost concerns.

• Explore the resource potential of northern New England and eastern Canada. New England's higher environmental standards are converging with the timing of significant new wind resources that are being developed in northern New England and new wind, hydro and nuclear resources in northeastern Canada. Bringing that electricity to the areas of high consumer demand will require new transmission lines, which require long lead times to construct and often face local opposition.

Economic, reliability and environmental goals are not always perfectly aligned when it comes to electricity generation and transmission. Whatever path policymakers choose to take will require trade-offs. How New England officials balance these sometimes conflicting goals will demonstrate our priorities, impact the regional economy and determine which objectives we can realistically achieve.

Gordon van Welie is president and CEO of ISO New England Inc., the not-for-profit corporation responsible for the operation of New England's electricity system and its competitive wholesale markets.