Wednesday, November 05, 2008

Will President Obama Repurpose FERC?

Change is in the wind
With the election of a new president comes renewed speculation about leadership change at the Federal Energy Regulatory Commission (FERC) in an Obama administration.
The president . . . can designate a new chairman, who generally will belong to the party in the White House. But the president must await a commission vacancy to actually appoint a new commissioner and shift the balance of power if there is a change of party. No more than three commissioners can belong to the same party, so currently FERC has three Republican commissioners and two Democrats. Normally, however, a chairman who is replaced will not want to remain as a commissioner and will resign. The Energy Shadow Government.
Currently FERC is filled with a bipartisan cadre of five pro-deregulation commissioners, all appointed by President Bush, who appear intent on approving mega mergers of utility holding companies and implementing the discredited Enron agenda to supplant traditional regulation with reliance on unfiled, unreviewable, and unrefundable "market-based rates" and "organized" spot markets such as those run by the NYISO. See
As stated by Jay Hancock of the Baltimore Sun:
Would a President Obama try to reform interstate electricity markets that have soaked consumers in Maryland and other deregulated states, inadequately invested in the future and unjustifiably enriched Exelon, Constellation and other companies? Or would he maintain the Bush administration's blind eye toward evidence of wholesale-electricity market failure, irregularity and price gouging? Obama's Exelon Ties Merit Close Look.
As with recent presidents of both parties, the incoming president received significant campaign financial support from utility executives, investment bankers, and energy traders who still promote electricity deregulation, but hope still remains for change in the interest of consumers, for whose protection the Federal Power Act was enacted in 1935.

New Chairman soon
President Obama will name a new FERC Chair, to replace the current Chairman, Joseph T. Kelliher. A former lobbyist, congressional staff lawyer for Texas Rep. Joe Barton, and coordinator of Vice President Cheney's controversial energy task force, Kelliher steadily continued the agency's efforts to deregulate wholesale electric rates. Under his leadership FERC continued its unresponsiveness to widespread consumer concerns about unreasonable rates and problems with the spot markets and "market-based rates" FERC approved in an effort to supplant traditional filed rate regulation. See, Public Power, Industrial and Residential Consumer Groups Demand FERC Review of Organized Spot Markets. Although he received Senate confirmation of a new term earlier this year, it has been reported that Kelliher agreed with Senator Harry Reid to resign if a democrat is elected President. That time has now come.

Will Kelly succeed Kelliher?
Commissioner Suedeen Kelly was mentioned a year ago as a possible FERC Chair in a democratic administration. A protege of deregulation democrat Senator Bingamon, Chairman of the Senate Energy and Natural Resourcees Committee, she was formerly an energy industry lobbyist, law professor, Chair of the New Mexico Public Service Commission, and was an attorney for the California ISO. It is not clear, however, if the democratic president envisioned last year when her name was floated for Chair was Barack Obama. If, instead of becoming Chair, another chair is picked, Commissioner Kelly might move on when her seat becomes vacant June 30, 2009.

Is Wellinghoff leaving?
Commissioner Jon Wellinghoff from Nevada has been mentioned as a possible candidate for a cabinet position in the Obama administration, as Secretary of Energy, as well as for FERC Chairman. His interest at the FERC has been in the direction of encouraging "demand response" to unreasonably high electric rates, i.e., not using electricity, as an alternative to more direct regulatory attention to the often malfunctioning and gamed wholesale markets and market-based rates now under lax FERC regulation. See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers;

Other Commissioners to stay?
Assuming that Chairman Kelliher leaves, will the two other republican commissioners making up the current majority -- Marc Spitzer (former Arizona utility regulator and republican cousin of former New York Governer Eliot Spitzer) and Philip Moeller (a former utility lobbyist) -- stay on under a new Chairman? Assuming they stay, President Obama surely will name a new Chairman, perhaps Kelly, or a new pick, and could have even three democratic vacancies to fill (if Kelliher, Kelly and Wellinghoff leave).

Consumer protection is FERC's main mission
FERC has grown in importance to electricity consumers in states like New York that allowed their utilities to sell their power plants (formerly operated on a state-regulated cost of service basis) to new owners with "market-based rates" from whom they now must buy power for customers based on what the market will bear in flawed FERC-approved spot markets. It is thus essential for the new President's FERC picks to be sensitive to more than the usual major utility, power generators, energy traders, lobbyists, and other institutional market "stakeholders." The new picks must be more dedicated than the current FERC to the achievement of just and reasonable electricity rates, as the Federal Power Act requires. See FERC Commissioner Kelly: The Purpose of the Federal Power Act is to Protect Consumers.

March 25, 2009, Wellinghoff Designated Chairman of FERC by President Obama

Jan. 23, 3009, Wellinghoff Named Acting FERC Chairman

Nov. 25, 2008 -- Obama Picks Transition Team for DOE, FERC.

Dec. 8, 2008 -- Las Vegas Review Journal says U.S. Senate Majority Leader Harry Reid supports Jon Wellinghoff for FERC Chairman:
At the Federal Energy Regulatory Commission, one of two Democrats is Reid ally Jon Wellinghoff, a former Nevada public utility consumer advocate. In Washington, Wellinghoff has aggressively pushed for energy efficiency and renewable technology, Energy Daily reported.

Asked about Wellinghoff in a recent interview with the Review-Journal, Reid said he definitely believes the Nevadan should chair the FERC.
Political Notebook, Las Vegas Review Journal.

12/18/08 -- Other names floated for FERC commissioners or chairmen include two state utility commission chairmen, Charles Box from the Illinois ICC and John Norris from the Iowa Utilities Board.

1/07/09 -- Chairman Kelliher announces he is resigning effective Jan. 20. See FERC chief Kelliher to step down; Energy Regulator Resigns; Top Energy Regulator's Exit Is Chance for Obama to Reverse Deregulation Fiasco, Put Families Over Power Company Profits.

1/12/09 Nemesis to State Resigns at FERC, Connecticut Post, ("It's up to Obama, when he takes office, to find a more suitable chairman for FERC, certainly a chairman who will be more amendable to the concerns of states and their citizens who many times must bear the burdens of controversial energy projects").

FERC Chief to Resign,
("FERC’s five commissioners serve five-year terms. Kelliher’s term does not end until 2012, but, in a statement, he said he will 'immediately begin to recuse myself from FERC business as I explore other career opportunities'”).

See Wellinghoff Named Acting FERC Chairman, Jan. 23, 2009.


Anonymous said...

Paul Afonso, former General Counsel and Chairman of the Massachusett Dept. of Telecom and Energy, would make an excellent FERC Commissioner. Smart and energetic, he was well respected enough by a Republican governor (Mitt Romney) to be appointed to the DTE even though he is a recognized Democrat.

Gerry Norlander said...

Isn't he a deregulation democrat? See Disconnected Policymakers, Electricity Journal - Aug. - Sept. 2001,

Anonymous said...

I think Sue Kelly, General Counsel at APPA, would be an excellent choice. She has enormous experience as a FERC lawyer and will be willing (finally!) to take a serious look at weather deregulation and "organized" markets have produced any benefits for consumers, let alone the massive benefits promised by the prophets (profits?) of deregulation back in the 90s.

Robert said...

You are dreaming if you think Obama would appoint some anti-market, return-to-cost-of-service regulator to FERC. Look who he has put in his top economics positions: all strongly pro-market economists.

The FERC rumor mill is putting forward two names: naming Wellinghof chair, or bringing in John Norris, currently chair of the Iowa Utilities Board, who is highly connected to the Democratic machine there.

Gerry Norlander said...

One need not be completely anti-market to see that the current system needs major fixing.

The Federal Power Act has always allowed privately negotiated wholesale power sale contracts so long as they are made public, filed, and are at least in theory subject to review and revision for reasonableness. The deterrent effect of transparency and threat of review should not be underestimated.

Most energy needs can be anticipated and should be arranged for by contract well in advance.
The current FERC system discourages long term contracting, discourages transparency, favors secrecy, frustrates review, and encourages sellers to sell at next day or real time spot market prices. As a result, the majority of sales are made at -- or indexed to -- last day/last minute spot market prices in defective and poorly designed RTO/ISO markets.

Anonymous said...

If you followed any of the persistent and concerted efforts by all 5 dereg commishs to abolish Long Island Sound for more power, rather than establishing a context for conservation, you would plainly see that the whole troop must get the boot. Save none, esp. Kelly.