President Bush “obviously likes and trusts Pat Wood,” said former FERC Chairman James J. Hoecker last week, when asked why he thought the president decided to get rid of current Chairman Curt Hebert Jr., a Republican, after just seven months on the job and replace him with Wood to lead the Commission.
Hoecker further called Wood a “competent leader” in response to a question about the key challenges that lay ahead for Wood. “He will need all his personal skills and the good will of his colleagues, not to mention the extraordinary talent of the FERC staff, to accelerate the electric industry through what has proven to be a difficult transition…Electricity markets must be made competitive. The FERC must be given the skill mix and the data to be able to monitor markets and prevent market power abuse.”
These were just a few of the questions that Hoecker, who left the Commission last January, fielded during an online discussion of energy policy on Washingtonpost.com last Wednesday.
“Pat Wood has called for a more proactive FERC with a call to increase its market monitoring function. But Curt Hebert only recently said that FERC was not retaining the type of talent needed for this function. Isn’t it naive to think that savvy Enron types would exchange their six-figure salaries” to help the Commission monitor the energy markets? asked an online caller from Vienna, VA.
“Until recently, the FERC was an old style cost-of-service regulator predominantly. We recognized in the late 1990s that was changing, and that the Commission will have to be at least as much a market monitor and referee,” said Hoecker. “This means hiring people that specialize, not in calculating depreciation rates for example, but in financial markets and e-commerce and arbitrage, and analyzing market concentration. The Commission’s Office of Market Tariffs and Rates was created to foster and develop those skills but, as you point out, the competition is great and there is a lot of work ahead,” he noted.
An online caller from Washington, DC, suggested that perhaps FERC, which has “such widespread responsibilities” for regulating energy markets, needed to be expanded. The former chairman agreed. “The Commission is fully one-third smaller than it was in the early 1980s, partly as a result of the decontrol of wellhead natural gas prices. I think a good argument can be made that some rebuilding is necessary at this point, but the important issue is a change in the training and skill mix of the staff. Believe me, they are experts at what they do, but their tasks [are] currently overwhelming.”
Hoecker came under attack from another DC questioner, who appeared to be a FERC insider, for his FERC First program. It “is accepted, at least within FERC, that your FERC First initiative was an almost total failure. The multi-million-dollar computer system you approved called FAMIS is barely used, and we are in the process of deciding whether it is even worth trying to spend even more money to make it useful.
“The offices are being reorganized yet again as I write to try to undo some of the damage that was caused by the contractors you brought in to totally reorganize the agency…There has never been a full accounting of this waste of ratepayer dollars, which in my opinion is an example of government ineptitude at its worst. You even used thousands of dollars of government money to have someone write a book about FERC, which might have been useful if you did not retain editorial control of his conclusions,” the caller said.
But Hoecker begged to differ. “I think FERC First was a dramatic and necessary effort that emulated what is happening in every successful corporation.”
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