The authors asked pipelines
and LDCs how they used storage.
Leasing activity proved a surprise.
Since deregulation, the natural gas industry has seen tremendous changes...
markets. Transparency of data is also essential because it gives all participants the ability to understand market forces and improve the competitiveness of their offerings. This same data may benefit stakeholders by enabling a stronger emphasis on fact-based critiques and recommended market design and market rule changes. And in cases where market abuse is alleged resulting in either an or mitigation, transparency of data is a vital line of defense against inappropriate or overly constraining remedies.
Second, undertake a process of developing disciplinary procedures that RTOs may implement as a first line of defense of their markets. Neither nor mitigation is sufficient for RTOs to ensure that their markets work efficiently with a minimum of abusive behavior. The reason for this is that markets by their nature are fast-paced and inherently unpredictable. Without powers to immediately address a wide range of types of misconduct, RTOs are less able to quickly respond and reduce the risk of significant price excursions, as California experienced in 2000.
The prophylactic benefits of having monitors on the operating floor, as suggested above, should be a part of RTOs establishing a systematic approach to using disciplinary tactics. Disciplinary tactics should be formalized in a process that can be executed quickly. Disciplinary tactics can range from informal warnings and formal notices to cease behavior to formal quasi-judicial proceedings in which alleged misconduct is prosecuted by monitors and defended by the accused before a review body that includes market participant peers. RTOs should specify disciplinary tactics they will use and set forth a schedule of sanctions and penalties tied to specific forms and degrees of misconduct. FERC should support this internal self-regulatory aspect of market monitoring.
RTOs should make their processes, procedures, and associated sanctions and penalties explicit and public for market participants.
As monitoring practices mature the challenge for FERC is to clarify the boundary between what may be acceptable internal RTO disciplinary action and FERC-executed remedies. As presently conceived, FERC's approach is to minimize RTO disciplinary powers. Underlying this approach is the larger question of how FERC balances the emphasis on its regulatory prerogative and RTO self-regulation.
FERC Regulation and RTO Self Regulation: A Symbiotic Relationship
FERC's vision of market monitoring includes internal RTO monitors and/or external RTO or multi-RTO monitors, paid for by the RTO(s) and reporting directly to FERC. FERC staff foresees the commission itself monitoring as well. RTO monitors report and can recommend mitigation measures. Beyond this they do not have other powers. As outlined the vision for market monitoring does not include the scope of the surveillance functions of commodity and financial exchanges but approximates the tight relationship between the self-regulating entity and the regulator consistent with what exchanges enjoy with the CFTC.
RTOs in general are FERC jurisdictional entities operating under approved FERC tariffs that define the scope and methods of operation of the institution. For most operations-related activities RTOs are for all practical purposes self-regulating. Their independent boards provide policy guidance. Associated advisory boards and processes ensure continuous involvement by market participants. The long established institutional means of administrative law and justice