FERC Chair in the Hot Seat

By Published On: May 11, 2007

A committee of U.S. senators grilled the Federal Energy Regulatory Commission chair about his commitment to protecting consumers from high rates arising from alleged manipulation in deregulated natural gas and electricity markets. At a May 10 reconfirmation hearing, members of the Senate Energy and Natural Resources Committee also took issue with Joe Kelliher’s position on liquefied natural gas siting and queried him about FERC’s role in reducing greenhouse gas emissions from the electricity and gas sectors he regulates. The hearing was held to elicit responses from the FERC chair that senators considered more informative than the written answers he provided to committee members’ questions. Committee chair Jeff Bingaman (D-NM) asked Kelliher what FERC was doing to “enhance real-time market monitoring” of the physical and financial gas markets. Earlier this month, federal regulators took legal action to force publisher McGraw-Hill to reveal the basis for its energy indices. The Commodity and Futures Trading Commission suspects that the indices may have been tainted by manipulation by gas traders. During the 2000-01 energy crisis, one of that company’s publications faced legislative inquiry over publishing trading data that allegedly inflated the liquidity of the market. Kelliher only talked briefly about the agency’s authority because the matter is under investigation by his agency. Kelliher emphasized that FERC’s role in LNG siting was limited to safety issues. Senator Ron Wyden (D-OR) said his constituents were dissatisfied with FERC’s role. When asked about his support for deregulation, the chair said the commission supported competition, adding that “Market-based rates are not a right but a privilege.” Two days earlier, Kelliher reiterated that competition in wholesale power markets is “national policy.” During a May 8 conference, he stated that he expects reforms to FERC policy aimed at improving competition in the organized wholesale markets to bolster demand response and to promote long-term contracts and regional grid operators. On the greenhouse gas reduction front, Kelliher noted that FERC approved a new cost-recovery mechanism to allow the transmission project connecting to wind power in the Tehachapis to go forward. At the same time, he said he supported coal development, noting that the different kinds of grids are needed to support coal-fired electricity and renewable juice. Senator Robert Menendez (D-NJ) exhibited concern that the federal agency is too quick to approve mega utility mergers. The senator also asserted that FERC failed to adequately investigate alleged market-monitoring failures by PJM, the Northeast regional grid operator. A vote on Kelliher’s reconfirmation to a second term is expected in about a month. A vote on his reconfirmation could be sent to the full Senate committee and used as a bargaining chip, possibly to get some concessions on the federal transmission corridors that FERC proposed last month (Circuit, April 27, 2007).

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