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Hebert, Breathitt Reflect On FERC Freshman Year

Hebert, Breathitt Reflect On FERC Freshman Year

One of the most significant regulatory events at FERC in 1998 went by practically unnoticed: the word "proposed" was put back into the notice of proposed rulemaking (NOPR), said Commissioner Curt Hebert Jr. in reflecting on his first full year at the agency. Commissioner Linda K. Breathitt, who also just ended her initial year, agreed "proposed" took on a "stronger meaning" in a specific NOPR last year, but she hardly found it to be precedent-setting.

"There were a lot of things that occurred last year, but I can boil it down into one...If you look historically at what this Commission has done, even if you go back to [Order] 636, you can see that the NOPR was the rule" that typically was transformed into a final edict with only minor adjustments. But all that changed in July when FERC issued the landmark NOPR that touched off a comprehensive review of the entire gas industry, Hebert said.

That NOPR was not viewed as pre-ordained law by the Commission, but rather was a genuine invitation to the industry to discuss issues critical to natural gas, he said. It sparked immediate debate on two fronts - inter-industry and FERC, and intra-industry - that is still ongoing and will likely consume much, if not all, of 1999. "For the first time, we are finally making people believe that this is a Commission that is interested in intellectuals coming forward and giving us information to help us shape and mold this industry...into what it can be."

Restoring the real meaning to the NOPR "is the one thing we've done this year that affects everything. It has a huge effect on how this industry operates...The industry can now look at a NOPR and say 'we're going to study this NOPR and we're going to debate it because we genuinely believe the FERC will listen and even address our concerns.' What more could you ask for?" Hebert asked.

Breathitt agreed greater emphasis was placed on "proposed" in the July NOPR, but she doesn't think it marked a shift in Commission policy. Rather, the feature was accented due to the nature of the specific proposed rulemaking. "...[W]e put something out that was so new, and quite frankly, it didn't have a lot of detail as to how a mandatory auction would work. It was a theoretical piece in some regards and a thought piece in some regards," she said. Because the NOPR was "so broad" in scope, it elicited an unparalleled "response and thought" from the industry.

The former state regulator from Kentucky said she expects the Commission to continue its "openness" with future NOPRs, "but it doesn't mean that they're all going to be so broad that they'll take [the same] amount of time" to debate. For Breathitt, the most significant event for gas in 1998 was the mega-NOPR and notice of inquiry (NOI) themselves and the "package" of issues they addressed, such as lifting the price cap in the short-term market, auctioning and negotiated terms and conditions.

Hebert was particularly pleased the mega-NOPR has prompted the gas industry to sponsor a series of meetings in Houston to discuss the "real" issues in a collaborative fashion.

Breathitt called this one of the "unintended consequences or unintended benefits" of the mega-NOPR. "You have sectors of the industry that have traditionally kept to their [own] segments" to work out their problems. But now "they're coming together [under] the auspices of the Natural Gas Council for what is beginning to look like very effective sessions for coming to consensus on what might be another way to handle the capacity release of the short-term market," she told NGI.

Breathitt sees "quite a lot" in store for gas at FERC in 1999. "Whereas 1998 was the year of the NOPR, 1999 may be the year of the rulemaking." She said she expects the mega-NOPR to become a final rule in the new year, along with NOPRs on the complaint, certificate and ex parte processes. She noted that FERC discussions on the landowner-notification process also will move along.

Hebert, a former state legislator and regulator from Mississippi, was more issue-oriented in his predictions. He sees the "real" issues continuing to be whether there will be an auction process to address market-power concerns, negotiated terms and conditions, the prospect of seasonal ratemaking, and "whether or not we're going to have additional pipelines...and how hard they're going to be to put together and make happen, and how costly that's going to be."

New Electric Rule

He said he's particularly "excited" about FERC's direction on electricity issues. "When I came in here, it was ISO, ISO, ISO. Now, if you listen to what's going on the electric side, we're talking about alternatives. We're talking about RTOs." These are regional transmission organizations that include ISOs, transcos and other groups that would assume the operational control of transmission facilities from transmission-owning utilities. FERC also is looking more at market solutions and incentives for the power industry now, he noted.

"I think electricity will take as much of the Commission's time in 1999 as gas will take," Breathitt said. "We're certainly looking at another rulemaking in 1999 addressing issues that have arisen from seeing a real competitive wholesale market in the [past] two and a half years." Some expect the initiative to be a sort of mid-term correction, but Breathitt doesn't see it that way. It will be "just [a] furtherance of 888's goals."

In his first year at FERC, Hebert earned the reputation of being something of a maverick, dissenting from the majority on a number of occasions and going head-to-head with the senior FERC commissioners at public meetings on a range of issues, especially those involving the clash of federal and state jurisdictions. While some may characterize his first year as slightly tumultuous and rocky, Hebert doesn't see it that way.

"I didn't find [it] rocky at all...I had my eye on the ball the entire time, just like I do today. I came in here with a purpose and that was to do a good job. I didn't come in here to be everybody's friend," he told NGI. Although he concedes some would disagree with him about the "rocky" part, "I wouldn't change anything about this last year because it was a great learning experience for me." He said he's a "firm believer that we learn from our mistakes, and those people who don't make mistakes aren't really doing anything."

Breathitt admittedly had a smoother first year. "I certainly wasn't as outspoken as Commissioner Hebert, but what I tried to do in my first year was really delve into the process at the Commission." She believes she's been "very effective in seeking a middle ground, centrist approach to items. I think you'll continue to see the same style for me" in the new year.

Susan Parker

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