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FERC Nominees Split on Need for LNG in U.S. Gas Portfolio

The two FERC nominees agreed on most energy issues during their first appearance before the Senate energy panel last Thursday, except on whether the U.S. should look to foreign countries now to supplement its natural gas supplies.

"We need to do the most efficient things in this country first. So one of the most efficient things would be sources of gas supply in Alaska rather than to take LNG [liquefied natural gas] from Qatar," said nominee Jon Wellinghoff, a partner with the law firm of Beckley Singleton in Colorado, during a brief confirmation hearing before the Senate Energy and Natural Resources Committee.

"We may have to someday take LNG, but let's do the most efficient things first," he noted. In addition to Alaska gas, Wellinghoff cited the advances in technologies that "are going to reduce our energy loads in this country tremendously in the next 10 to 15 years," as well as the increasing emphasis on renewable energy sources.

But nominee Phillip D. Moeller, executive director of the Washington office for Alliant Energy Corp., told the Senate panel that foreign LNG sources should not be overlooked. "I think that demand is such that we need to frankly look at all sources...I think everything has to be on the table," he said, although he conceded domestic gas sources from Alaska would be "naturally more secure" than imported LNG supply.

Both candidates assured committee members, particularly Sen. Lisa Murkowski (R-AK), that they would work to bring about a natural gas pipeline from Alaska's North Slope to the Lower 48 states. "I can't imagine anything more critical for this country," Wellinghoff said, adding that Alaska "seems to be the most promising" gas supply source in the nation.

Moeller and Wellinghoff also agreed that the Federal Energy Regulatory Commission should do more to monitor speculative activity in the two prime markets that it regulates -- natural gas and electricity. "I think transparency in these markets is essential. To the extent we can get more data out and have that available not only for the public but for FERC to review and analyze, it will help FERC to stop speculation," Wellinghoff said.

Under questioning by Sen. Ron Wyden (D-OR), the two men said FERC should release evidence of manipulation by Enron Corp. executives in the West Coast markets in 2000-2001, provided it does not jeopardize ongoing investigations. "As much as can be legally released should be," Moeller said, but he noted the Department of Justice has restricted much of the information from being divulged because of other investigations.

If confirmed by the full Senate Moeller, believed to be the first FERC nominee from the Pacific Northwest region, said the memory of the 2000-2001 energy crisis on the West Coast "will always stay with me and guide me" at the Commission.

While stressing the importance of mandatory reliability standards for the electric grid, Moeller said he believed it was important to give "deference" to different regions on this issue, particularly in the West where generation sources are located far from load centers. He further stressed the need for FERC to "continuously" monitor for inappropriate cross-subsidization in electric markets, rather than follow it on a "snapshot basis."

"You may need more than strict structural rules" to prevent cross-subsidization, said Wellinghoff. "[You] may need to fully audit."

On the issue of power contracts, the two candidates said they believe FERC needs to maintain its ability to revisit contracts in the event they are not just and reasonable. "I think that what needs to be followed is [the] overall law that rates need to be just and reasonable," said Wellinghoff.

He also noted that "competitive regional markets are essential" to drive down electric rates, and pledged to work on this issue at the Commission. In addition, Wellinghoff said the development of solar and wind power sources has "the ability to drive down prices." These renewable sources "have to have equal access to the market. That's one of the things I want to look at at FERC."

Moeller, a Republican, has been named for a five-year term at FERC expiring June 30, 2010. He would fill the seat vacated by former Chairman Pat Wood in July 2005. Wellinghoff, a Democrat, has been tapped for the remainder of a term expiring on June 30, 2008. He would fill the seat of former Commissioner William Massey who departed the agency in December 2003.

Moeller has been involved in energy policy for more than 20 years. This included a stint as senior legislative assistant to former Sen. Slade Gorton (R-WA), beginning in 1997. Wellinghoff has served in the public and private energy-related sectors for more than 30 years. He worked at the Nevada Public Utilities Commission in the early 1980s, and then was appointed the state's first consumer advocate. Wellinghoff has been an attorney and energy consultant since leaving that post.

The two candidates are expected to be readily approved by the Senate energy committee. However, they could face some problems in the full Senate due to an abbreviated legislative session and a crowded agenda, some observers said.

"The political environment isn't conducive to getting any nominees through [the Senate]," said Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America (INGAA). It has nothing to do with the qualifications of the two FERC nominees, he noted. "If Mr. Rogers were nominated, it would be difficult to get him through" this year.

Edwards noted that it's "almost effectively the end of the session," with the July 4th recess just weeks away, to be followed by the month-long August recess during which congressional lawmakers will be gone until after Labor Day. When Congress returns, there are "so many issues jammed into the schedule" before lawmakers depart again in October for the November mid-term elections, Edwards said. And it's unclear at this point whether Congress will return following the elections to address unfinished business.

He said he doesn't see the Senate confirming Moeller and Wellinghoff "unless some kind of special deal is made between the minority and majority leaders of the Senate." The fact that Wellinghoff was recommended for the FERC seat by Senate Minority Leader Harry Reid (D-NV) "helps a little bit," Edwards told NGI.

In a related development, outgoing FERC Commissioner Nora Mead Brownell in a letter to President Bush last week said she will stay on at the Commission until "the first week of August in order allow those who have been recently nominated to go through the confirmation process." Her term officially ends on June 30.

"While I take great pride in what my colleagues and I have accomplished during my term in office, challenges remain," she told the president. 'Strong leadership is required, particularly in the electricity sector beset with 20 years of underinvestment in the power grid. And certainty is essential to attract new capital to all parts of the energy sector. I know the new commission members you have appointed are imminently capable to meet these challenges, as well as the inevitable new ones that will come along...I am very grateful for the privilege and honor to serve."

The White House reportedly has been looking at three candidates to replace Brownell. They include: Marc Spitzer, commissioner with the Arizona Corporation Commission; Alan R. Schriber, chairman of the Ohio Public Utilities Commission; and Sandra Hochstetter, chairman of the Arkansas Public Service Commission.

Industry and Capitol Hill sources confirm that they have heard all three names mentioned as possible successors to Brownell, but they're unsure at this point who is the front-runner.

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