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News Analysis

A leaner bureaucracy sharpens its market-monitoring tools.
Fortnightly Magazine - March 15 2002

and not re-regulation."

When asked by Sen. Diane Feinstein, a Democrat from California, whether the commission had the expertise to regulate online and over-the-counter trading activity if requested by Congress, Wood conceded FERC was not ready. "That's why I've just, as I mentioned a moment ago, put out the job announcement for director of this new office, and there are a number of new people coming at it," he testified. "The Congress was kind enough to give the commission additional funds and positions to use for the enforcement and investigation purpose. I fully intend to utilize those."

Those funds totaled $3 million for fiscal year 2002, which cover the addition of five senior executives to help fill some of the top positions in the new market oversight office. For fiscal year 2003, the Bush administration is seeking approval for a total FERC budget of $199.9 million, up 10 percent from $181.1 million in fiscal year 2002. The 2003 budget includes another $7 million for the new market oversight office and 50 full-time equivalent staff positions.

Charles Stalon, an energy economist who served on the commission from 1984 to 1988, believes FERC will inevitably become the principal source of expertise on market monitoring. "The set of skills that you would expect to exist in the Federal Trade Commission's market monitoring activities or in Justice Department's antitrust department, it's not cheap," Stalon says. "I think it's logical for the FERC to build a high level of expertise and reduce the burden on the ISOs [independent system operators] in that role."

Stalon notes these other market oversight agencies have a strong record of attracting and retaining talented staff. "I would urge the FERC to copy the models that we see at the Federal Trade Commission and the U.S. antitrust department, which systematically have been able to attract high-quality scholars," he says.

Managing the evolution of electricity markets will continue to require a close and collegial working relationship among the commissioners, its staff and the industry, which Holden contends is necessary if regulators are to have any positive effect in their jobs.

"I am very aware of some circumstances where, the chairman, Charlie Curtis, did not exert all the authority that he could have claimed," Holden says. "And the commissioners, certainly I did not interpose all of the obstacles that I could have imposed. I came in with the realization from other experiences that the effectiveness of a regulatory commission depends upon a high degree of accord among commissioners."

Because of "sunshine" rules forbidding commissioners from meeting in private with more than one colleague at a time, Richard says there was a lot of "log rolling" that occurred on an individual basis in trying to persuade fellow commissioners to side with them. Before one particular public meeting, Richard recalls the other four commissioners had contacted his office that morning to arrange individual meetings with him to discuss their positions on issues that were scheduled for a vote that day.

Holden says he stays in regular contact with his former colleagues and has visited the commission on