FERC last Wednesday issued an order lifting restrictions on the flow of communication between the federal agency and its market monitors spread out across the country. An unfettered, two-way stream of information between FERC and the market monitors is seen as a key element in the Commission’s overall efforts to stay on top of energy markets throughout the United States.

“Our painful experience has taught us that electricity markets can get out of hand very quickly,” FERC Commissioner William Massey pointed out at the agency’s regular agenda meeting. “The market monitors that are on the ground watching these markets very closely are the Commission’s eyes and ears. We must be able to communicate with our eyes and ears quickly, so that we can fix problems that arise.”

“It would make no sense whatsoever to have our eyes and ears in the marketplace cut off from us so that we cannot communicate with them, listen to their analysis of what’s wrong with the markets and what’s right with the markets, and act quickly [and] take positive steps in the short term to fix failures, and make the kind of changes that we need to make in market structures on a long-term basis.”

Commissioner Nora Brownell quizzed FERC staff as to whether the agency is “assured that there are no rules within the ISOs’ [independent system operators] coming the other way that would be barriers to this kind of free communication, and timely communication, that we envision.”

A FERC staffer couldn’t rule out such a scenario. “I would expect that if there are, this is the type of order that might give people a vehicle…to bring that to our attention,” the staff member said. “I don’t know of anything in particular that would necessarily bar communication the other way.” Brownell said she wants to hear from the various market monitors “just to be sure that this is working both ways.”

Brownell also stressed the importance of the timeliness of communications. “We’re all now struggling with the challenge of recreating a market two years after the fact,” she said. “We’ve periodically had some situations in other marketplaces where it’s been six or seven months before we were able to get the facts.”

“I think that now we’re staffed up and I think now that we’ve developed better relationships, I encourage everyone to kind of have that sense of urgency because every minute that goes by that there is a dysfunction in the marketplace is a cost for customers and, frankly, makes it more difficult for all of us to solve the problem.”

Meanwhile, FERC Chairman Pat Wood noted that Commission staff and market monitors from across the U.S. met in early December. The Commission’s Office of Market Oversight and Investigations (OMOI) sponsored two days of meetings with existing and developing market monitors.

“I would say really from the roundtabling that I listened in on, this was the first topic out of the box that was raised by the market monitors as a real problem that needed to be fixed,” Wood said. “I’m pleased that a mere five weeks later, which is light speed in regulatory timeline, we have before us a fix to address their problem.”

At the same time, Wood underscored the point that his agency ultimately wants to see “truly independent” market monitors at the various ISOs and regional transmission organizations. “That’s the predicate and where those don’t exist, this freedom is not so broad and I think that that’s appropriate,” he said.

Wood in December said that he wants to see regional market monitors move in concert with the federal agency toward what he called a “common approach” to monitoring power markets throughout the U.S.

FERC’s order modifies the application of its ex parte rule related to communications between the Commission and its staff and FERC-approved market monitors with respect to issues involved in pending, contested on-the-record proceedings.

Specifically, the order creates an exemption for such communications. FERC explained that less fettered communications with market monitors across the country will enhance the federal agency’s efforts to receive timely reports from those monitors, even though the information may be related to contested, on-the-record proceedings.

FERC said that Commission-approved market monitors are akin to an extension of the Commission’s own market monitoring staff, who may freely talk among themselves about issues in contested proceedings. “So it makes sense that the two groups of monitors should be able to talk to each other about matters that may be related to such proceedings,” a FERC staff member explained. “For like reasons, the order does not require these otherwise prohibited, off-the-record communications to be disclosed or noticed in the Federal Register.”

The order recognized two instances where unfettered communication may be unfair to parties in contested proceedings — where a market monitor is a party in a contested proceeding or where the market monitor is appearing on behalf of a party in such a proceeding. Accordingly, the exemption created by the order will not apply in these situations.

Wood in April of last year announced that William Hederman would lead the Commission’s newly created OMOI, which has been operational now for several months.

A staff member of the Senate Committee on Governmental Affairs in November characterized the creation of OMOI as little more than “rearranging bureaucracy,” a charge that Wood refused to let stand at a hearing before the committee.

“We’ve had, in fact, some extensive hiring from the outside. Significant people with other federal experience and a tremendous amount of private sector experience for the 90 employees that we have hired to date,” Wood said in his appearance on Capitol Hill. “It is, in fact, the farthest thing that this agency has had from a bureaucratic reshuffle.”

Hederman that same month said that OMOI was already starting to see progress toward cleaning up unacceptable behavior in the marketplace, noting that several companies had begun to enforce more “civilized” behavior within their ranks.

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