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Kelliher's "Believe It or Not!"

FERC attempts to reform competitive markets.

Fortnightly Magazine - August 2007

market competition a high-profile agenda item again. Some cynics believe it was Kelliher, who, they suspect, designed the hearings to appease the pro-competition camp prior to his re-nomination as FERC chair.

Only last year, Kelliher had been extremely neutral on the subject of market structure. While never outwardly opposing electric-market competition or the vertically integrated model, Kelliher last year, in a speech at a New England ISO conference, declared that there were four market structures in the United States—the ultimate political act to appease everyone.

Kelliher also has failed to condition merger approval on RTO membership, which has been seen as a very public retreat on FERC’s previous pro-competition efforts. Of course, Kelliher and his commission also have been very active in reforming RTOs and ISOs.

Given all this, one might find it difficult to know what to believe on whether Kelliher or his commission will be a true champion of the cause. But that’s the fun of this new “politically sensitive” FERC. The show “Ripley’s Believe It or Not!” would present fantastic stories of human endeavor that would challenge our belief of what is possible. FERC has accomplished no less a feat with its ANOPR.

No Guts, No Glory

Although FERC’s ANOPR doesn’t seek to change the world, it is quite remarkable given the political climate. According to FERC press materials, the ANOPR will help the commission identify challenges facing competitive wholesale power markets in regional transmission organizations (RTOs) and independent system operators (ISOs) and propose workable solutions to determine those areas in which the commission has jurisdiction.

In fact, if there is any question as to where Kelliher’s and FERC’s loyalties lie, it would seem to be answered by the FERC chair.

“The nation’s policy is to encourage competition in wholesale power markets and the commission’s fundamental responsibility is to protect consumers from exploitation and manipulation in those markets,” Kelliher said. “The commission relies on both competition and regulation to assure just and reasonable wholesale power prices. Today we propose a package of reforms to strengthen wholesale markets.”

Kelliher also acknowledges that “other wholesale markets are bilateral markets, where wholesale sales are made on a bilateral basis rather than through a centralized auction or exchange. The commission recognizes that these two market structures have their own distinct strengths and weaknesses, and both market structures face competitive challenges.”

The commission is seeking comment on four discrete issues in its ANOPR:

• The role of demand response in organized markets;
• Increasing opportunities for long-term power contracts;
• Strengthening market monitoring; and
• The responsiveness of RTOs and ISOs to customers and other stakeholders.

The commission reiterated that it is not “seeking to fundamentally redesign organized markets or to appropriate jurisdiction” from its state colleagues.

Putting it in perspective, according to a recent insightful Energy Legal Blog by Gunnar Birgisson, “Each of these issues relates to recent hot topics at the agency. Commissioner Jon Wellinghoff has become a vocal proponent of demand response. An increasingly acrimonious dispute between PJM management and its market monitor has drawn attention to the role of market