ENERGY MARKETS:

Senate panel hands FERC 'cease and desist' power for gas, electricity markets

Correction appended

The Senate Energy and Natural Resources Committee yesterday approved an amendment that hands the Federal Energy Regulatory Commission new power to quickly act against suspected manipulation of natural gas and electricity markets.

The amendment from Sen. Maria Cantwell (D-Wash.) was added to a broad energy bill the committee hopes to complete next week. The "cease and desist" power would enable FERC, without a hearing, to quickly require parties to halt what it believes are manipulative practices and freeze assets.

Former FERC Chairman Joseph Kelliher, who headed the agency under President George W. Bush, has sought this authority, and other FERC commissioners have also sought stronger powers to prevent manipulation, Cantwell noted. "FERC is saying the problem is that instead of investigating the crime after it has already happened, they would like to be a policeman on the beat," Cantwell said, adding that the Securities and Exchange Commission and Commodity Futures Trading Commission already have similar power.

Ranking member Lisa Murkowski (R-Alaska) opposed the plan. "Just because they have asked for it perhaps is not the best reason for us in Congress to give the authority to them," she said, alleging FERC's power would be too broad. "Removing the requirements for notice and hearing even in limited circumstances begins stripping away the right to due process."

Cantwell said the authority is needed to allow FERC to halt market practices that harm consumers. "These are important new tools for the Federal Energy Regulatory Commission to come in when a company like Amaranth or an Enron is ... manipulating the market, and instead of waiting for a court decision three years later about whether they did it, gives them the power to stop these kind of actions on the spot," Cantwell told reporters after the vote.

Amaranth Advisors was a hedge fund that collapsed in 2006 after taking huge positions -- and amassing huge losses after betting wrong -- in natural gas markets. Cantwell said Amaranth was able to liquidate its portfolio before FERC could complete its enforcement action, leaving little for FERC to collect from the $290 million in penalties it sought.

The major energy and climate bill moving through the House also provides FERC with cease and desist powers.

The Cantwell amendment also provides FERC new powers to temporarily modify electricity rates and terms under "emergency" circumstances. Emergencies, under the amendment, are major disturbances in regulated wholesale electric markets that disrupt consumer service, or periods of sudden and excessive price fluctuations.

FERC may issue orders, without notice or hearing first, to temporarily suspend or modify "any rate, term, or condition of service" under these circumstances to ensure reliable service to power consumers, and protect them from market abuse or manipulation in wholesale markets the commission regulates. The orders have initial 10-day periods and can last a maximum of 30 days.

The amendment was approved by voice vote. It was not unanimous, but a roll call vote was not requested.

Cantwell plans to offer an amendment next week that would allow FERC new power to require retroactive refunds to consumers by natural gas pipeline companies if FERC finds rates have been unfair.

The refund idea has won backing by groups such as the American Public Gas Association and the American Public Power Association, as well as consumer groups and industries that rely on natural gas, such as ethanol producers and the forest and paper sector.

But pipeline companies are fighting the effort. They say the plan is unfair and creates financial uncertainties that make it difficult to raise the capital needed for investment in needed pipeline infrastructure.

"In today's difficult economic climate, our industry is not requesting federal outlays to construct new natural gas infrastructure. Instead, all we ask is that the Congress not make it more difficult for existing companies to raise private capital for new pipelines by amending the 70 year old statutory framework that has served the Nation well," states an April letter to committee Chairman Jeff Bingaman (D-N.M.) from the Interstate Natural Gas Association of America.

Demand reduction, renewable energy amendments adopted

The committee approved several less controversial amendments without debate yesterday.

This includes another Cantwell amendment that sets peak power demand reduction goals through 2030, aiming to reduce the gap between periods of lowest and highest demand 1.5 percent annually, according to Cantwell's office.

This would be achieved by use of "smart grid" and demand-response technologies, such smart meters, distributed generation, time-based pricing and other means. It would require the Energy Department -- working with FERC as well as regional transmission organizations and utility regulators -- to craft an action plan to achieve the goal.

The committee also accepted an amendment by Sen. Bernie Sanders (I-Vt.) aimed at fostering renewable energy development on brownfield sites. It would require DOE and U.S. EPA to identify opportunities for such development and provide resources and technical assistance to states, local governments, developers and others to help identify sites and launch projects.

Correction

Joseph Kelliher is the former FERC chairman. An earlier version had incorrect information.

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