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Kelliher's "Believe It or Not!"

FERC attempts to reform competitive markets.

Fortnightly Magazine - August 2007

It’s fascinating and bizarre—a strange curiosity or shocking oddity that just can’t be explained, but may be true. It doesn’t reach the level of strangeness of the Elephant Man, or instill fear or marvel as in the stories of the Curse of the Egyptian Mummy or the lost city of Atlantis, respectively.

But the fact that the Federal Energy Regulatory Commission (FERC) actually released an advance notice of proposed rulemaking (ANOPR) in late June, on competitive markets of all subjects, has many in disbelief, including this correspondent.

At a commission meeting, even FERC Chairman Joseph T. Kelliher remarked at the oddness: “I mean, we are making proposals and we’re also seeking comments, so I think an ANOPR is an unusual thing. The last ANOPR I can recall the commission issuing was Bastille Day of 2000, when the commission issued an ANOPR on OASIS II, and that was the last.” To which Commissioner Marc Spitzer quipped: “Mr. Chairman, it’s not Bastille Day, so no heads will roll.”

But Spitzer may have spoken too soon. If there is any subject in the power industry that has ended more energy-policy careers, it is electric competition. Governors on the West Coast and East Coast, a NARUC president, and various state and federal regulators, to name a few, have had their heads handed to them over their steadfast support of competitive markets. That’s probably why senior industry watchers never expected much energy-market reform from the current contingent at FERC.

In fact, when Kelliher came to chair the commission, he was seen to have staked out more of a law-and-order mandate (in addition to implementing the Energy Policy Act of 2005), while other newly minted commissioners said they would pursue natural-gas sector reform, renewables, and demand-side management policies. These are all very safe policies from a political standpoint. This would be the “caretaker” FERC, as some have described the current commission, a throwback to an earlier era, where structural reforms would take a backseat to day-to-day operations and oversight.

That’s probably why the ANOPR and the technical conferences on wholesale competition in the last few months haven’t drawn much media attention. No one is expecting anything as momentous as Order 2000, Order 888, or Order 889 from the current FERC because of the highly contentious political environment.

In fact, one could argue that proposed energy legislation on climate change, discussions on renewable mandates, and green issues in general have taken away the spotlight from what FERC has been doing lately.

Certainly, FERC’s hearings on competition got people’s attention earlier this year, as has the commission’s work on reliability standards and enforcement ( see “ Cyber Standards: FERC Asserts Its Authority ).

But in respect to the industry conferences on wholesale electricity markets over the last few months, one analyst remarked that FERC had rounded up all of the “usual suspects” to reiterate much of what had been heard before.

But we don’t know who Keyser Soze is in this whole affair—the person pulling all the strings, making

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