After a four-month struggle and $700,000 in consulting fees,FERC went public with the first tier of its FERC Firstreorganization last week. The initiative, which includes creatingseveral new offices, efforts to increase pre-filing activities, andnew regulatory approaches designed to speed up processing ofapplications, will be made effective over the next two years.

The announcement marks the beginning of a top-to-bottomrestructuring that promises to leave nearly everyone at theCommission with their heads spinning. “A lot of people arebewildered and I’ll tell you, you can get bewildered by thisprocess,” said Richard P. O’Neill, director of FERC’s Office ofEconomic Policy. “It is different from anything I’ve been involvedin before. If you try to describe it, it’s hard to describe.”

And it’s still difficult to tell how and where the gas industrywill be affected. “Hopefully [the companies we regulate] will get amore responsive and effective FERC,” said Christie L. McGue, FERC’sexecutive director and chief financial officer and the projectmanager of FERC First. “One of the things that we found in ourfocus groups from our external constituents was that our decisionswere not always timely and in some cases we were a black box. Therewas frustration with our filing requirements, our being able to getinformation in and out. We feel this is a blueprint for a new wayof doing business with more of a focus on the externalconstituency.”

The structural changes include the creation of the new officesof Markets, Tariffs and Rates; Administrative Litigation;Information and Technology; Strategy and Organizational Management;and Finance, Accounting and Operations. The offices of theSecretary, External Affairs, Hydropower Licensing and the GeneralCounsel will remain basically as they were prior to therestructuring.

“I think [the new] office of Markets, Tariffs and Rates,organizationally probably is one of the most significant thingsthat came out of this,” McGue added. “It’s a combination of thecurrent office of Electric Power Regulation, many functions of theOffice of Pipeline Regulation, Economic Policy and certainaccountants from the Office of the Chief Accountant – the ideabeing a more collaborative approach. Instead of us passing offwithin the Commission from office to office, we’ll have all partiesinvolved from the beginning, including an attorney assigned. Thatwill be a more efficient way of doing business.”

Some of the operational changes include devoting more effort tomonitoring market activities and identifying potential marketproblems. Beyond that general statement, however, the Commissiongave no specifics on how it will take a closer look at the market.FERC said it also intends to pursue a pre-filing process for rates,terms and conditions and will emphasize “collaborative pre-filingprocedures and early resolution of issues.” McGue said those issuesmight have to be dealt with through a Notice of ProposedRulemaking.

The Interstate Natural Gas Association of America (INGAA) hasbeen supportive of the Commission’s restructuring, but thepossibility of including pre-filing requirements for pipelineconstruction raised some eyebrows at the association. “We’ll haveto evaluate that further,” said an INGAA official.

Commenting on the pre-filing recommendations, Natural Gas SupplyAssociation President Nicholas Bush noted, “There is probably someconflict between due process and the need for timelydecision-making. At the same time, a collaborative process mightimprove our industry’s ability to resolve some issues withoutwholly relying on the Commission.”

Other FERC operational changes include a review of ex-parterules, greater use of Alternative Dispute Resolution, time limitsfor the issuance of decisions, greater effort toward buildingrelationships with other stakeholders, and the implementation of alargely paper-free environment with electronic filing and documentposting. The reorganization plan was accomplished with the help ofAndersen Consulting.

Rocco Canonica

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