Politics on Display as FERC Ends Standard Market Design

In the face of regional politics, the Federal Energy Regulatory Commission ended a three-year effort to impose a common power-market design across the nation. And in another political move, FERC's new chair made a historic visit to Senate and House conferees debating the pending energy bill. The commission announced July 19 that the rulemaking to create a standard market design started in July 2002 was terminated, explaining that the proposal had been overtaken by events. Chair Joseph Kelliher, in an E&E TV interview linked to the commission's home page on the Internet, explained: "I think one thing . . . important to recognize about U.S. electricity markets is that we don't have a national electricity market. We have regional markets, and there's very important differences among those regions." On the subject of regional differences, he noted that the California crisis began in May 2000 and pointed out that five years later, Southern California still "has the worst electricity supply situation in the entire country," and that is "incredibly discouraging." Although Kelliher refused to make comparisons between himself and his predecessor Pat Wood, some FERC-watchers jumped in. A member of Washington?s regulatory bar said, "Wood could have terminated the rulemaking at any time . . . in the face of congressional criticism. For whatever reason, he did not." This lawyer, who spoke on background, said, "Kelliher wanted to send the Hill a message that he is responsive to their concerns. It was an entirely symbolic action, since standardization was dead as a doornail. But symbolism matters." Stating that he wants to reach some agreement with the other two commissioners before unveiling a policy agenda, FERC's new chair said he sees "a rough consensus" on things to pursue. In comments last week, Kelliher also said that he wants to look at gas storage pricing in order to expand storage capability and limit price volatility, and to keep tabs on escalating regional transmission operator costs ( Circuit , July 15, 2005).

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Politics on Display as FERC Ends Standard Market Design

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