It will probably take four to five years of working through the current crisis environment in the energy markets, setting up regional transmission organizations (RTOs) and installing a standard electricity market design before FERC can ratchet down the current levels of regulatory oversight over the industry, FERC Commissioner Linda Breathitt said last Thursday.

In an appearance before the Natural Gas Roundtable in Washington, DC, Breathitt was asked to comment on where she thinks the energy industry is going.

“I’m getting that question asked of me quite a bit,” Breathitt responded. “And I told someone the other day that I think it will take us four or five years to get totally through this crisis, to get the new rules written, the standard market design in place, get RTOs fully up and running and then, I believe, we can return to more of the self-policing, lighter-handed regulatory practices.”

“There is tremendous potential for a competitive market. I think there [are] real benefits to consumers, but we’re going to have to work a little harder and dig a little deeper to find those and make sure that they really do end up on customers’ bills and also through innovative services and certainly coupled with a more balanced and thought out approach to supply and demand.”

Breathitt also thinks that the Commission over the short term will likely have to act to close “loopholes” in energy markets. “I think that we are going to have to work for the next couple of years to close loopholes,” she said. “We found loopholes recently and that may be one of the things that we’ll have to add to our task list…looking for loopholes and closing them when we find them.”

“You want a smart, savvy, active market out there, but we have to be just as smart and savvy and active in closing loopholes when they cause competitive harm and they hurt consumers.”

FERC has launched a sweeping probe into whether energy companies executed trading strategies designed to exploit prices in western markets over the past two years. Companies were given a deadline of May 22 to say whether they had used any of the questionable trading techniques cited in internal Enron memos that FERC disclosed on May 6. The federal agency is also pressing energy suppliers serving California and other western states to disclose whether they have engaged in round-trip, or so-called “wash” trading transactions.

The commissioner was also asked whether she thought, given everything on FERC’s plate right now, that implementation of a standard market design by the Commission will be slowed down.

“I think that is the one area of the Commission’s agenda that our chairman and my colleagues and I really want to keep on its track,” Breathitt said. While standard market design is not the “panacea” for all of the issues facing the Commission and industry, she believes “it really can begin to cure a lot of the seams between RTO regions.”

Breathitt also thinks standard market design “helps to address uneven pricing across the country. I think…there [are] so many things that the standard market design can bring to an energy industry that’s a little sick right now and needs some antibiotics.”

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