ATTENDED ANY HEARINGS LATELY AT THE FEDERAL ENERGY Regulatory Commission? They're getting ugly. I see a federal agency under siege (em from without and from within.

The Commission seems to have lost the easy confidence that reigned during Elizabeth Moler's tenure. Don't blame new Chairman James Hoecker. He's getting it from all sides, and it's not his fault.

Consider the bottomless pit known as electric system "reliability." We need new laws to pin down FERC authority. The bullet points released three weeks ago by the Clinton Administration would spell out FERC's role over a new self-regulating reliability organization. That idea mirrors the white paper issued in December by the Blue Ribbon Panel at the North American Reliability Council: to reform NERC as NAERO (North American Electric Reliability Organization), a self-regulating industry group authorized by Congress, subject to FERC review.

In fact, Hoecker appears willing to stand back and give some room to the NERC, so that it, like Gorbachev and communism, can "reform from within." But not everyone agrees. (Remember Perestoika?) Nearly 50 utilities, marketers, individuals and industry groups have filed comments on the NERC plan. (See, www.nerc.com/~blue/view-comments.html.)

But there's a catch. Congress hasn't acted. Power marketers have stepped into the void, urging the FERC to take the lead. Even as the Administration released its plan, the Coalition for a Competitive Electric Market, joined by John Anderson's group, ELCON, filed a monumental petition (100-plus pages of "must-read," in my opinion) asking the FERC to abandon many of the basic concepts of Order 888 (em functional unbundling, native load and network transmission service! (em and build a new transmission model driven entirely by paid reservations. (Docket No. rm95-8-000, petition filed March 25, 1998.)

Any FERC move is likely to face court review on shaky statutory grounds. I say Hoecker would rather wait for Congress and let NERC do its thing. But the power marketers do have a point. The FERC can regulate transmission. That ought to give it a backdoor entry into reliability. But if Hoecker accedes to marketer demands he could end up stabbing NERC reform in the back. The Blue Ribbon Panel would melt into irrelevance. All eyes would focus on the FERC rulemaking.

So a few very clever troublemakers, pursuing their interests as is their right, have the Commission nearly paralyzed.

But what no one could have expected is that some of chaos begins very close at hand, emanating from the Commission itself.

It all began Aug. 27, 1997, during the Washington, D.C., summer doldrums. The Coalition Against Private Tariffs asked the FERC to quash the so-called "tagging" rules adopted in May (and later revised) by NERC. Known both as "NERC Operating Policy 3," and as "iTIS" (the interim Transaction Information System), the tagging rules used a computer-based electronic spreadsheet to identify parameters for interchange transactions, including all intermediary control areas along the contract path (not just the buyer and seller). The rules made all data available to all control areas along the way, many run by utilities that compete with marketers.

CAPT was led by CCEM and its Washington, D.C., attorney Jeffrey Watkiss (Bracewell & Patterson), representing four power marketers: Engage Energy, Enron Power Marketing, Koch Energy Trading, and Vitol Gas & Electric. Washington lawyer Sara Schotland (Cleary, Gottlieb) represented Anderson's Electric Consumers' Resource Council, another CAPT member. (Schotland later wrote that clever memo for ELCON, the one that co-op association lawyer Sue Kelly called "a valentine," which argued how NERC violates antitrust law as an unsupervised but self-regulating industry association.)

There's no denying: CAPT took an ingenious position. It didn't question that operators need information but complained that some control areas were curtailing deals with tags missing (especially in the Southwest Power Pool, where compliance with NERC rules became a condition of membership). Oklahoma Gas & Electric questioned whether it would be "placed in jeopardy" of violating FERC rules to comply with tagging. (See, Coalition Against Private Tariffs, FERC Docket No. el97-58-000 [filed originally in Docket rm95-9-003], including comments filed by some 30 utilities, marketers and industry groups.)

The CAPT filing threw the FERC for a loop. So it stalled. Why not call a meeting? The FERC held a technical conference in February to ask for help, but warned witnesses they could not discuss the CAPT case. As we reported in our last issue, the industry begged the FERC not just to act, but to open a brand-new rulemaking, perhaps bigger than 888 itself. ("Reliability: FERC's New Gig?" April 1, p. 18.)

And it was there, at the conference, that a new opponent emerged: none other than Curt Hébert, the FERC member appointed last fall from his seat on the Mississippi Public Service Commission. Hébert now threatens to step into the role of designated loose cannon.

With Hoecker tied to the political and fence-mending roles demanded of the chair, Hébert is free to think outside the box (em just what Hoecker doesn't need at a time like this. Hébert has become a story himself: questioning Hoecker's agenda from bench, interrupting hearings and meetings; bulldozing the balance Hoecker is trying to maintain.

Back in October, when I attended the Edison Electric Institute's Financial Conference in Disney World, when his FERC appointment was hanging in the balance, EEI put Hébert on the podium to introduce him to the electric industry. An audience member asked, "If you had to campaign for a seat on the FERC, what would your stump speech be?"

Hébert replied: "What I would hope to do at the FERC is do a lot of listening (em to industry, Congress, ratepayers and the financial community."

But at the February conference, led expertly by Commissioner Vicky Bailey, Hébert rejected the very premise of the meeting (em getting the industry together to develop rules.

"I feel," he said, "like I'm at the second day of a two-day meeting and I missed the first day¼ What about giving an incentive to the market to do what it needs to do."

Hébert rejected Hoecker's legalistic approach: "Line loading is a real concern, but why not just ensure enough capacity in the first instance through incentives¼ We've got to have an incentive to build out the transmission system.

"Where do we start? Do we put incentives in place? Or, do we say, 'When we see a problem, let's regulate it.'"

That's what the power marketers want: FERC regulation. But in this case, that would preempt Congress and make NERC irrelevant.

FERC's Nemesis?

Curt Hébert, Speaking Freely

OCTOBER 1997 (before appointment)

"What I would hope to do at the FERC is do a lot of listening (em to industry, Congress, ratepayers and the financial community."

FEBRUARY 1998 (on the bench)

"I don't believe the FERC can be all things to all people. Nor can individual commissioners be all things to the Commission."

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