FERC Chairman James Hoecker announced yesterday the Commissionhas formed a fact-finding team to delve into the events thatprecipitated the pricing turbulence and volatility in the Midwestelectricity market in late June.

The team is made up of staff members drawn from several officesat the Commission, he said, adding that Commissioner Vicky Baileyhas agreed to “participate actively” in the fact-finding effort.The probe could last several weeks or “until we understand morefully what occurred and how the maturing bulk power market wasaffected…” When the staff reports back, “we will go from there,”Hoecker noted. The team expects to work cooperatively with stateregulatory officials.

FERC’s present “understanding of the events” that led to powerbeing sold at astronomical levels in the Midwest market a few weeksago is “very imperfect,” and the “remedies available to thisCommission are not entirely clear,” the chairman said at thebi-monthly meeting. “…[W]e are not prepared in anyway to rush tojudgment on this. On the other hand, we are not disinterestedeither, far from it.”

Bailey agreed it was important for FERC to respond responsibly,and to take a “very temperate” approach. She reasserted her beliefin the workings of the electricity market. “I’m not walking awayfrom the market concepts we have in place.”

Still, “oftentimes there are prices that require Commissionintervention. I’m making no pre-judgment here….Right now I thinkmost people want things to calm down for awhile,” and for prices toreturn to a “reasonable level.” She noted the fact-finding effortwouldn’t be a “witch-hunt or a gotcha” type of exercise.”Ultimately, we want to understand what happened. Is this apersistent problem?”

Specifically, the Commission “would like to know did the marketsucceed or did it fail under these circumstances? What did peopleknow and when did they know it? What led to these price spikes,…pricing disparities and to contract problems? What does thistell us about emerging market structures and behaviors,” Hoeckersaid. In short, was the Midwest market upheaval the result of thegrowing pains of a young market, or did something more seriousoccur?

The most oft-cited culprits for the huge run-up in Midwest powerprices during the last week of June have been the protractedheatwave, unplanned generation outages, transmission constraintsand contract defaults by power marketers. Hoecker added “variouspsychological pressures” to the list.

“We do promote competitive markets, and we want them to work andwork efficiently, and to work if possible without our directintervention,” he noted. But, “we, of course, need to protectcustomers…” If necessary, Hoecker predicted a “growing role forthis Commission in monitoring market performance” in the future.

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