Ongoing worries by Wall Street and the public over corporate misconduct within and outside the energy business have led lawmakers to reexamine the role federal regulators play in keeping markets competitive. The General Accounting Office, an independent investigative arm of Congress, said the Federal Energy Regulatory Commission needs to rethink the way it monitors the nation's natural gas and electric businesses, which have shifted from highly regulated monopolies to competitive energy markets.
In a June 14 analysis, GAO suggested FERC is struggling to be relevant, although it noted that the agency's problems are not all self-inflicted. FERC is forced to rely on antiquated laws that do not give the agency authority to levy meaningful civil penalties when there are bad market actors, GAO found.
But GAO also warned FERC that it needs to do a better job retaining and recruiting staff that understand how competitive markets work.
"FERC does not currently have enough staff with the skills and knowledge of competitive energy markets to effectively regulate and oversee these industries," GAO said.
FERC officials agree with GAO. Regulators said internal restructuring done to support its new market oversight role has not kept pace with a changing industry, although regulators are working to change that through recruitment and training.
Congressional role
GAO suggested that Congress consider public hearings to consider giving FERC an "appropriate range of authorities" to levy civil penalties against market participants that engage in anticompetitive behavior and violate market rules. But given the limited amount of legislative days left in this congressional session, energy marketers anticipate existing proposals may be negotiated under a pending comprehensive energy bill.
According to Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy Committee, his Senate-passed energy bill already addresses GAO's issues and concerns.
"The energy committee has asked FERC commissioners and others, 'How should laws be changed to enable the FERC to better execute its responsibilities?' The answers are all incorporated in our energy bill," Bingaman said in response to the GAO study. The Senate bill includes provisions to expand information disclosure requirements, repeal PUHCA (Public Utility Holding Company Act), expand FERC's merger authority, increase requirements for merger approvals, clarify market-based rate authority, grant authority over reliability, extend jurisdiction over transmission facilities, require the Federal Trade Commission to promulgate rules to protect consumers from unfair trade practices, and expand the civil and criminal penalty authority under the Federal Power Act.
Next steps
Whether an energy bill becomes finalized or not, Congress has signaled it wants to see fuller disclosures on electricity and gas market trading, as well as stricter accounting rules for corporate America. It may also give FERC more money to beef up its enforcement division so it can hire more qualified people away from private sector salaries. Another looming problem is the agency faces the impending retirement of a large portion of its staff. Over one quarter of its employees will be eligible to retire by 2005, GAO said.
