FERC wants bigger budget for electricity market oversight

Kate Thomas
OGJ Online

HOUSTON, Feb. 5 -- The Federal Energy Regulatory Commission asked for a budget boost next year primarily to strengthen oversight of the US electricity markets.

The federal regulatory agency charged with overseeing the wholesale electricity market and the interstate pipeline industry will ask Congress to approve $200 million for fiscal 2003, up about $8 million from this year.

About $7 million of the proposed budget will go to hire 50 extra full-time staffers for FERC's new market-enforcement division. The new office will coordinate market oversight and investigations. FERC said it needs to act faster when problems develop and also needs to be able to "police individual behavior in markets much more effectively than in the past."

The agency said its experiences with the California market showed the need for good oversight and investigation capability is not only important but more urgent than anyone realized. FERC said it needs more people who are familiar with the details of how electric and natural gas markets actually work.

It said this includes better understanding of the interaction between financial and physical markets in the short and long term. With this closer understanding, FERC said it will know which market problems require intervention and which, patience. The agency also will have a better grasp of which market problems are due to market rules or structural flaws and which are due to misbehavior.

FERC proposed compiling regional summer and winter assessments, including supply-demand balances for gas and power, transportation, and market concentration. The reports will also include analyses of apparent market anomalies, such as instances of unexpected high prices or abnormal volumes. Anomalies can indicate data problems, new trading patterns, or gaming, FERC said.

The agency said it will tighten oversight of mergers to ensure future combinations "do no harm" to US competitive markets. To allay fears of market power, FERC said it will pay close attention to complaints and may develop automated audits that flag potential abuses.

"We will establish clear targets for how long investigations of different types may take and we will hold ourselves accountable for those targets," it said.

FERC set three goals for its market oversight initiative. Identifying key electricity infrastructure projects should result in reducing electricity grid bottlenecks, improving competition and lower congestion costs, it said. Likewise, identifying key pipeline projects in time to ensure timely completion is expected to result in fewer operational flow orders.

Finally, the agency said it will continue to press for regional transmission organizations to boost competition.