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The Commission: The Market's Eye-in-the-Sky?

FERC's plan to expand into energy market-monitoring faces many challenges.
Fortnightly Magazine - March 15 2002

available to RTOs and market participants through FERC remains in place, and works. Thus, FERC has done a good job of enabling the growth of largely self-regulating entities in a highly defined regulatory context. Again, this mirrors the sort of relationship that exists between exchanges and the CFTC.

In the case of market monitoring, though, FERC has moved in the opposite direction by reducing the role of RTOs and enhancing its role without taking over the function altogether. While consistent with the CFTC model, the balance between self-regulation and regulator oversight is more skewed toward the regulator in the case of electricity markets. The underlying question to be considered is whether de-emphasizing self-regulation in market monitoring has the unintended consequence of reducing the effectiveness of more generalized self-regulation of the entire RTO.

Meanwhile, such issues as the institutional drag coefficient, best practices in methodology, and the balancing act that involves RTO self-regulation in a FERC regulatory context will persist and influence the maturing of monitoring. Early consideration of these and other issues will help policy-makers to sustain the methodical progress that has been the hallmark of the last decade's restructuring efforts.

  1. , by the staff of the Federal Energy Regulatory Commission, December 17, 2001, p. 10.
  2. Ibid. p. 10-11.
  3. 98 FERC 61, 075 (January 30, 2002).
  4. , Department of Market Analysis, August 10, 2000.
  5. , September 29, 2000.
  6. FERC staff issued a report November 1, 2000 and simultaneously formalized its findings in an order directing changes in the CalPX and the CAISO, including revocation of the CalPX tariff and directions to CAISO to restructure its board to ensure its independence. See, November 1, 2000.

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