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Regulators' Forum: A Fight Over Market Design

FERC's attempt to standardize markets have some state regulators up in arms.
Fortnightly Magazine - November 15 2002

and our very important bridge and tunnel from Michigan to Canada are very important to the state and country for commerce-those are the kinds of things that the state has been very aggressive to make sure we're doing everything we can to be proactive and to guard against potential terrorist strikes.

In a post-Enron world, what issues are you dealing with regarding corporate responsibility and governance?

We're doing as much as we can. You know CMS had come under scrutiny because of their energy trading, and although we do not regulate CMS, we take that seriously. Through orders and meetings with companies we let them know we have a code of conduct in Michigan. In fact, it's one of the strongest codes of conduct in all the states. It has been sued on, but so far the Michigan courts have upheld it. We are continuing to flesh out certain aspects of that code of conduct through orders at the commission. We do look very closely at things like cross subsidization. We want to make sure the regulated company, which is Consumers Energy, is not improperly financing the holding company that is in financial trouble. I have said to Wall Street, "That is the beauty of Michigan," is that we took a lot of time to put this law together, and to think of all the potential downsides early and to address them very aggressively.

What is the issue of most concern to Michigan?

Infrastructure again, because we're a net importer in a peninsular state. Getting gas pipelines in here. Clearing up transmission bottlenecks, which we have been working on to a great deal of success. Just continuing to look out for aging transmission systems and getting investments in the system.

Voice of Experience

New York: Been There, Done That

An interview with Maureen O. Helmer, Chairman, New York Public Service Commission

Is FERC's proposed standard market design perceived as beneficial or detrimental to New York?

We perceive SMD as being extremely beneficial. First of all, there are numerous aspects of the SMD that appear to be modeled on the rules of New York, which have been developed after an awful lot of hard work-and I think good experience with wholesale markets… Obviously, increasing competition allows for efficient dispatch, and in addition, by increasing the standardization of market rules, it helps to prevent generators from gaming jurisdiction against jurisdiction. This is particularly true with respect to things like market monitoring rules.

What exceptions in the SMD should be made for your region?

I think there either should be some regional exceptions, or we need to make some adjustments to the SMD. For example, an issue that is going to be very controversial is that of long-term resource adequacy. I really don't think it's appropriate in New York. New York is a place that has adopted full retail access and more importantly has divested its generating units… . [I]t is more appropriate to have something that is more market-oriented than what essentially looks like old-fashioned integrated resource planning (IRP). We have ICAP [installed capacity]