The gas and power industries are going to have to develop products on the retail level to shield consumers from the volatility of the wholesale market, FERC Commissioner Nora Meade Brownell told an Energy Bar Association audience last week.

“Market volatility at the wholesale level sends correct economic signals to make things happen, to get things built, to get investment going. But what we now know is that consumers cannot handle that kind of volatility, and I don’t think there’s a full understanding at the state regulatory level, particularly about what financial instruments are, and what they can and cannot do. I think we have to work on getting stronger dialogue going on that issue,” Brownell said.

“I think markets will work, I think consumers are a whole lot smarter than we give them credit for,” and some of them will want to take their chances with the market. “But I think there needs to be a whole lot of options” for those who can’t tolerate the volatility. “I want there to be options and products out there that don’t necessarily artificially interfere with the market.”

Brownell said it appears that “retail markets have stopped dead in their tracks,” but she believes there is an opportunity to develop some uniform rules for retail sales, building on what is working in markets in New England and Texas. But, “FERC can’t play a leadership role in retail markets,” so it will be up to the states or regional groups.

In the meantime, FERC has held infrastructure hearings throughout the country “because we don’t want California to happen again.” Brownell said she was concerned about California, that there appeared to be a “significant slowdown in new infrastructure, both in terms of takeaway capacity for gas, certainly in generation capacity, and not much movement in Path 15 or any other transmission fixes, nor much replacement of the old generation fleet. That’s going to be a problem, the fact that we’re relying on rain and snow, and continued recession, and an old fleet that I don’t think can run full out again.” She said FERC commissioners had “communicated our concerns to our colleagues in California,” and hoped to see some additional attention focused on the problems.

Meanwhile, FERC is prepared to take another look at the terms of its affiliate notice of proposed rulemaking (NOPR), Brownell said. The Commission has received a lot of comments from market participants, and “I can say honestly that we heard you. We understand that perhaps in that NOPR we did not reflect a full understanding of governance structures and some of the business issues.” The Commission will be having a technical conference on the NOPR sometime in the next several months, and “one of the important messages I would send is that as an agency we are also trying to listen more and to be more flexible. We want to make sure we get it right.”

Siting of new power plants “is going to be a huge issue, but I don’t think FERC should do it. I don’t think there’s the political will that FERC do it,” Brownell said, suggesting there might be regional solutions. She made clear she’s not happy with the status quo and doesn’t “buy the argument that ‘we’ve never turned down an application.’ Who in their right minds would bring an application and put themselves through such a festival of pain.”

As for the organizational tussle over who’s in charge of creating business and reliability rules, Brownell is “incredibly disappointed it has taken the participants so long to have the debate about who does what. I think the debate has been about control and not about substance,” she added, suggesting that if the participants acted “like mature adults,” they could get on with producing the important rules the market needs to go forward.

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