FERC agenda

Patrick Crow
Washington, D.C.
[email protected]

FERC will continue to promote competitive markets for energy in 1999, says James Hoecker, Federal Energy Regulatory Commission chairman.

He contends that energy products and services are increasingly commoditized, and FERC wants to facilitate entry and exit, minimize discrimination and inefficiencies, and help firms manage risk.

Hoecker said, "I anticipate that, as we move away from command-and-control regulation, the commission will be more engaged in setting market rules, monitoring transactions, and enforcing standards of conduct and non-discrimination and less involved in governing the industry's strategic and operational decisions."

Hoecker said the agency will continue its reorganization, due for completion in early 2000.

"It is bearing fruit already, as we eliminate backlog, utilize teams, and improve our electronic capabilities. The end result will be a more adaptable, customer-oriented, market-responsive regulatory regime."

Gas marketplace

Hoecker said FERC will continue to seek improvements in the interstate natural gas marketplace.

"Our work in this area is especially important, not because open access and competition in the transportation arena are new-they are now 13 years old-or that gas markets are dysfunctional-clearly, they are not.

"Our work is important because the realities of the market are now substantially changed from those that prevailed when we adopted Order 636, almost 7 years ago.

"Retail choice among gas customers is becoming more prevalent. LDCs, as holders of interstate capacity as well as suppliers of last resort behind marketers, have changing roles. And the pipeline capacity market is increasingly short-term.

"Finally, where the commission is seeking to accommodate the need of all market participants to have flexibility-whether in rates or in terms and conditions of service-it must also deal with the residual market power that remains at various junctures between the wellhead and burnertip."

He said FERC is seeking public comment on a range of questions and problems regarding the "fine-tuning" of the industry.

Electricity

Hoecker said the competitive make-up of the electricity business is ready for fundamental change.

FERC mandated wholesale transmission open access in 1996 with Order 888 but left many issues on the table, however, including whether all uses of transmission (including native load) should be 'on the tariff,' and how to improve transmission pricing and eliminate rate "pancaking" from one system onto the next.

He said FERC should help foster the creation of regional transmission organizations (RTOs) and address important related issues, such as transmission pricing.

"There are some recognizable structural impediments to greater competition that will continue until the grid is managed on a different basis consistent with its natural operation, that is to say, regionally."

Hoecker said FERC will begin consultations with state regulators soon on how to define the appropriate boundaries of regional markets, and thereby of RTOs themselves.