The Obama administration's nomination of Norman Bay to become chairman of the Federal Energy Regulatory Commission is ushering in a new round of analysis of the commission and its future. Is Bay the safe choice or the best choice to lead the agency? During today's OnPoint, Marc Spitzer, a former FERC commissioner and now a partner at Steptoe & Johnson, discusses the prospects for Bay's confirmation and the future role of acting Chairwoman Cheryl LaFleur on the commission.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Marc Spitzer, former FERC commissioner and now partner at Steptoe & Johnson. Marc, it's great to have you back on the show.
Marc Spitzer: Love being on your show, Monica. Thank you.
Monica Trauzzi: Thank you. Marc, last month's nomination of Norman Bay to become chairman of the Federal Energy Regulatory Commission is jump-starting a new round of analysis of the commission and its future. Is Norman Bay a safe choice? Is he the right choice to head up the commission?
Marc Spitzer: Well, most important, he's the president's choice. And that's where we go. He was chosen in the wake of the Ron Binz nomination process, where Ron Binz was nominated for chairman of FERC and ultimately did not have support of the Energy and Natural Resources Committee in the Senate, so Ron withdrew his nomination and the president has selected Norman Bay. It's, we can talk about where that will head in sort of the dynamics of the Senate, but one thing I think needs to be said is, after Chairman Wellinghoff left the FERC in November, the president named Cheryl LaFleur to be acting chair, and that came at a very difficult time for FERC with a lot of complicated issues. There was the negotiation with the CFTC over the memorandum of understanding, there was a dispute with the state of Idaho regarding how they were treating PURPA contracts, and there was actual litigation between FERC and the state of Idaho. And then there was a very important hearing in the United States House on Dec. 5. Cheryl LaFleur presided as acting chair over those three very complicated matters and was superb.
Monica Trauzzi: And many people assumed that she would be the nominee for chair. She also expressed publicly that she was interested in that top spot. Why do you think that she wasn't nominated?
Marc Spitzer: Well, that, it's not for me to say, and I'm on the Republican side so I don't, we've not [had] the best contacts with the White House. But the White House makes its decision, as it did in my case in 2006. I'm not sure whether it's worth speculating, I'm not gonna try to find any value in that, but I do think it's worth reflecting on acting Chairman LaFleur's tenure at FERC and which will continue for some time during the pendency of the Norman Bay nomination. It's important for the stakeholders in the regulated industries to understand FERC performed very well. They'd love to have the full complement of five commissioners, but with four commissioners, they've done their job. They've done the blocking and tackling on the regular orders that have coming through, and then, again, those three very complex matters, I think, were resolved, to the credit of the agency, resolved very well, and that's a credit to the four sitting commissioners as well as to acting Chair LaFleur.
Monica Trauzzi: Bay is someone who former Chairman Jon Wellinghoff brought into the commission to head up the Office of Enforcement back in 2009. So is the expectation that he'll have sort of the same method as Wellinghoff because he was appointed by him?
Marc Spitzer: Well, Norman Bay was nominated by the president to be, for commissioner. And so he's answerable, in that respect ...
Monica Trauzzi: You know them both though; you've worked with them.
Marc Spitzer: Oh, yeah. Yeah. And Norman Bay's his own man. I worked with him pretty closely for 2½ years in his role as director of enforcement. He's thoughtful, he's studious, and he'll make up his own mind and make his own decisions. I have great confidence in his intellectual ability to deal with the issues. And enforcement, of course, in order to do your job as enforcement, you need to understand the innards of the gas and electricity markets, and he has assimilated that information during his time. And the beauty of the Senate confirmation process is there will be questions posed by members of the Committee, by other stakeholders, and answers will be made by Mr. Bay and the process will provide, I think, a lot of transparency to his views.
Monica Trauzzi: So let's talk about prospects for confirmation. What are the key points of contention that you could, you believe could be an issue during the confirmation hearings, and also what kind of timeline do you think this could be on?
Marc Spitzer: I was taught never to speculate as to timing on FERC orders, and certainly, I'm not, we would be unclear as to what the Senate process would be other than there was an external force that intervened. The majority has changed the rules of engagement for executive nominations. It was designed, I think, to move some of the traditional nominees around the filibuster that would require 60 votes to bring a nomination to the floor and clear the Senate. That was changed to 51 by the majority. This is my personal opinion and I understand the majority might have had a different reasons for changing the rules, but I think it has created some degree of animosity on the part of the Republicans and some disquiet. The Senate was never a majority rubber-stamp institution. The House is organized -- 218 votes is the rule. In the Senate, the rules were different. Each senator had greater degree of prerogatives. The filibuster rule, the cloture rule, has provided an avenue for individual senators to exercise more authority, and that, nominations that might otherwise have been not controversial, because of the rule change and the minority's irritation or vexation with that, might have unintended consequences to nominations that wouldn't otherwise be problematic.
Monica Trauzzi: So what kinds of questions do you expect in that confirmation?
Marc Spitzer: Well, we observed the prior nominations and there are a lot of interests of the members. Some will have concerns about matters within their state; others will have more global issues. Others on the electricity side, some on the natural gas side, and we'll see what kind of process we have.
Monica Trauzzi: This is a critical transitional time for the electric power industry. What should the next chairman, whether it's Bay, if he is confirmed or someone else, what should that next chairman be focusing on?
Marc Spitzer: Well, yeah, a lot of attention was paid to enforcement. And I received a number of inquiries when I was at the commission from Capitol Hill on the FERC's enforcement regime. The Office of Enforcement was drastically expanded by act of Congress, so it was Congress that, in the Energy Policy Act of 2005, directed FERC to pursue cases of market manipulation, and some were in the wake of the California energy crisis. Others had different views. But these matters are of great importance. It was critical to restore the public's faith and confidence in the energy markets in the United States in the wake of California. I think FERC has done that. The question is, some people say, "Has FERC been overbearing? Has FERC's reaction been overbroad in some of these areas?" I don't think so. I voted for those orders. Norman may have worked on some of this orders. His predecessor ... worked on some of those orders. But Marc voted for them, so they're more Marc's orders than the other commissioners'. I think the orders were based on the facts of each case. Some of the recent cases and settlements that have come out with regard to the New York trading operations, I don't think they damaged liquidity, what they said was, 'We like investment. We want more liquidity into the capital markets, but what you can't do is manipulate the markets.' And in the settlements that FERC reached, FERC really did try and, I think achieved, the balance between the objective of liquidity into the energy markets and preventing fraud and abuse that not only disadvantaged customers in the United States, but also undermined public faith and confidence in those markets.
Monica Trauzzi: All right, Marc. We're going to end it right there on that note. Thank you so much for coming on the show.
Marc Spitzer: Thank you.
Monica Trauzzi: Interesting insight. And thanks for watching. We'll see you back here tomorrow.
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