Frontlines & Op-Ed

Frontlines

How Einstein discovered relativity, locational pricing, and participant-funded transmission.

Frontlines

The commission may find it's powerless on capital finance and credit issues. <p><b class="hook">Some say that without Alan Greenspan attending the Federal Energy Regulatory Commission's</b> (FERC's) Jan. 16 and Feb. 5 technical conferences on capital availability for energy infrastructure and energy market credit issues, the commission will have few options other than market enforcement and the design of fair and competitive markets</p> <p>In announcing the conferences in Washington, FERC declared its interest in clarifying the state of capital available to energy markets and infrastructure. But what, if anything, can the commission do to support the embattled energy merchant and energy trading space during its current credit crunch?</p> <p>Certainly, FERC's concern is understandable. What's the point in designing an energy market that has no participants? Furthermore, the commission is all too aware that illiquid wholesale markets don't end in "just and reasonable" prices.</p> <p>The issue is timely, with wholesale energy markets in a rather bleak state (see <i>"Energy Markets: Down but Not Out,"</i> on p. 18).</p> <p>Yet, given that FERC has no congressional authority to shore up confidence in markets by providing liquidity to avert a collapse in the sector, as the Federal Reserve did during the 1997 stock market crash, what can the commission do?</p> <p>The agency can provide performance-based ratemaking to attract infrastructure projects and their financiers in the area of transmission. In terms of energy markets, the commission can also develop a standard market that inspires investor and industry confidence. As everyone knows, properly designed markets would attract more market players and financiers, and thus provide liquidity.</p> <p>But FERC may have to face that it cannot bail out the industry from its current credit problems. Credit ratings analysts already predict a grim year for utilities.</p> <p>Fitch Ratings believes that a debt crisis will dominate the U.S. power sector in 2003 and could last well into 2004. "Companies that specialize in the sale of wholesale energy are coping by stretching out debt maturities, retaining the assets they can manage, shedding the rest, and hoping they will stay afloat long enough for energy demand and prices to strengthen," according to a Fitch report.</p> <p>Of course, FERC's inquiry opens up the controversial issue of whether the government should bail out the industry. Given events in the airline industry recently, the prevailing wisdom in Washington is that markets for airline transportation and power will have to sort themselves out.</p> <p>&nbsp;</p> <p class="center"><b>Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.</b></p>

FERC: Lender of Last Resort?

The commission may find it's powerless on capital finance and credit issues.

Some say that without Alan Greenspan attending the Federal Energy Regulatory Commission's (FERC's) Jan. 16 and Feb. 5 technical conferences on capital availability for energy infrastructure and energy market credit issues, the commission will have few options other than market enforcement and the design of fair and competitive markets

Frontlines

Presenting a new look and new editorial content for 2003.

Fortnightly: A New Frontier

Presenting a new look and new editorial content for 2003.

In this Jan. 1, 2003, issue, Public Utilities Fortnightly magazine takes pause in this column from its energy industry commentary to tell readers about several important developments at the magazine.

Back to the Drawing Board

Executive and academic views on what to fix and what's not broke.

The sound and fury over trading scandals, credit defaults, and market manipulation so far has drowned out much of the mind-numbing debate over a standard market design (SMD), and rightly so. Utilities understand (as does the press) that Enron, "Deathstar," and "Get Shorty" will always sell more newspapers than locational pricing or congestion management.

Fashionably Retro

Why rate base is back in style.

It's no surprise that traditional utilities are now fashionable with Wall Street. With merchant generation and energy trading gone bust, bankers, analysts, and fund managers at the 37th Edison Electric Institute Financial Conference, held last month in Palm Springs, Calif., were falling over themselves to find those regulated gems overlooked during the energy merchant boom years.

Absolute Power

Reviewing FERC's omnipotence over markets.

Reviewing FERC's omnipotence over markets: Market players like Calpine say standard market design (SMD) and RTO issues "while laudable and important objectives … will do little to enhance wholesale competition if contract sanctity is not assured."

Flashpoint Congress

This year, or next, legislators will close in on a national energy bill.

This year, or next, legislators will close in on a national energy bill. Some agreement already looks promising for several industry flashpoints.

The Fourth Wave

Are banks better at trading power than utilities?

Bank of America's recent request to FERC to be allowed to trade power was yet one more reminder that a whole new class of companies are quietly positioning themselves to dominate what's left of the energy trading space after the departure of traders like Enron and Aquila.

Grading Pat Wood

Reviewing the FERC chairman's first year, and what he might do next.

This September, Pat Wood III completed his first year as chairman of the Federal Energy Regulatory Commission (FERC). Some long-time FERC watchers gave Fortnightly some insights into how this chairman has performed so far, and what we might expect from him in the future.

The Empire Strikes Back

Will FERC's market solution wipe out state commissions?

One might say, when it comes to FERC, some state public utilities commissions' lack of faith is disturbing—to paraphrase Lord Vader. It's also necessary, as any journalist would tell you. The FERC NOPR on standard market design (SMD)—which completes the "trilogy" of regulation on wholesale markets, as chairman Pat Wood described it—had some state PUCs blasting the NOPR even before its July 31 release.