New FERC Center 'Watching' Gas, Power Markets

The days when the natural gas and electric markets were a step or two ahead of FERC may be over. The Commission now can see wide price swings and other energy developments as they actually occur through its new Market Observation Resource Center (MOR), which is equipped to monitor the markets on a real-time basis throughout the day.

The beauty of the MOR center, which opened its doors two weeks ago, is that it lets the natural gas and electric markets "know that we are watching" them very closely, said Chairman Curt Hebert last week, who believes this alone may help to avert abuses and problems in the future. The Commission plans to use the center primarily as a "preventative" tool, he noted, rather than as an instrument to proactively punish market players.

The center, which is located on the eighth floor of FERC headquarters in Washington DC, is modeled after the major energy trading floors in Houston, TX. It houses two (four feet by five feet) screens and eight work stations (each with three, 17-inch flat monitors) that are equipped with software to provide staff with real-time access to energy prices, historical prices, electric load flows, nuclear outages, downed plants, blackout areas, natural gas storage projections, congested points on transmission/transportation systems, and short- and long-term weather forecasts. In short, it gives the Commission access to all of the same information services that are routinely used by key energy traders.

"I think [this] allows us to mitigate any and all markets period," Hebert told reporters during a press tour of the MOR center last Thursday. But "are we using it specifically for that purpose? No," he said. "Does it allow us to monitor anything that's going on in electric, natural gas? Absolutely."

Hebert noted that the center recently had identified a potential problem in the New York and New England ISOs, where bids were getting near $1,000/MWh. The center's staff immediately called the ISOs for an explanation, and learned that the high bids involved a "fairly routine matter of new dispatch software."

He said he expects to see more communications between the Commission and ISOs and regional transmission organizations (RTO) in the future. In addition, FERC hopes to eventually share some of its market information with state regulators and the National Association of Regulatory Utility Commissioners (NARUC).

"I don't think any of you have any idea of just how significant this is [to the Commission]," the chairman said. He recalled that a few years ago it took him a couple of weeks just to get maps of the U.S. electric and gas transmission systems.

Hebert believes the California power crisis could have been addressed more quickly if FERC had access to real-time market information then. Although it couldn't have prevented the blackouts, he said the Commission would have been able to identify the problems earlier. "It is my belief had we had something like MOR we would have been...able to more clearly and more quickly understand the problems of market misdesign and market functions" in California.

The MOR center will be "the platform upon which the Commission's oversight activities, I think, will be built going forward," said Daniel Larcamp, director of FERC's Office of Markets, Tariffs and Rates. "It is not a trading floor," but "we are trying to replicate what the traders themselves see as they are dealing in the markets on a daily basis."

The center has a rotating staff of about five, which is headed up by Scott Miller, director of FERC's Division of Market Development, and Tom Brownfield, manager of the information analysis group in the Market Information Division. Their job primarily is to identify gas and electric market aberrations, and see to it that the information "bubble[s] up to the eleventh floor," where the commissioners' offices are located.

The center will be accessible to most, if not all, FERC staff. As a result, "staff will be in a better position to make recommendations to the Commission about market design changes that may be necessary to make sure that competitive markets are delivering on their promise," Larcamp said.

In addition to monitoring the market, the real-time market data provided by the center allows "us to see...the effects that our orders and our rules have on the markets," as well as "how markets are evolving, [and] which changes we should be making," Hebert noted.

FERC began developing the MOR center as far back as last December, when staff met with some of the major energy traders in Houston to get ideas. The Commission budgeted $750,000 for the MOR hardware, licenses for information services, support services and build-out costs for the room, but it was brought in under budget at $610,000, according to Hebert.

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