In its “Strategic Plan for Fiscal Years 2003-2008” submitted to Congress, the Federal Energy Regulatory Commission outlined some of the new programs that it is planning to help identify incidents of market-power abuse more quickly and ensure more widespread compliance by energy companies with the agency rules and regulations.

To protect energy customers, the Commission is planning to develop “our own analytic capabilities, such as automated audits that flag potential abuses,” and “we are exploring ways to work with the corporate boards of energy companies” to promote more effective compliance with federal energy rules, FERC said in a 36-page report to Capitol Hill lawmakers.

“We will discuss with other regulatory agencies, such as the Office of the Controller of the Currency, what the best ways are to interact with corporate boards. We will then institute a program to make sure that the boards are aware of what compliance requires and how well their companies are complying with Commission regulations,” the agency said.

In addition, the Commission intends to institute a “random audit process that will systematically assess the degree to which companies are complying with Commission [regulations],” it noted. Under this program, FERC each year would choose one key aspect of its regulation — for example, affiliate abuse in the natural gas industry — and determine the degree to which companies are complying with it.

“Focusing on one major area each year will let us complete a full, in-depth review of that part of the rules. We will audit a representative sample of companies to whom the rule applies and assess compliance with our regulations,” the Commission said. “We will judge our investigation program to be a success if the audits find few or no violations.”

The Commission said it will continue to closely “track market behavior and evaluate market performance so that we can understand and discern:”

To aid it in its market oversight, the Commission will continue to maintain its state-of-the-art Market Monitoring Center and develop its Electric Quarterly Report so that it offers a “more comprehensive view of physical electric markets than we have ever had before.”

Moreover, “it is important that the nation have clear, systematic benchmarks that assess the performance of energy markets and identify infrastructure issues that could hurt market operations. We will present these benchmarks in scorecards detailing how well the industry is operating, as part of an annual State of the Markets Report,” the agency said.

FERC also anticipates that each regional transmission operator/independent system operator will have its on Market Monitoring Unit, which will be able to identify “rapidly developing problems and will be the first line of defense against market problems.”

In addition to closer oversight, the Commission said its policies will be aimed at promoting greater infrastructure development. Specifically, they will give investors greater confidence that they will be able to recover their costs and receive a fair return on their investment; will give transportation customers “reasonable certainty” about the costs they will pay for transportation and about future terms and conditions; and will give transportation owners the right incentives to provide customers with better services, lower costs, or both.

FERC also pledged to expedite its processing of energy projects. Notably, “we will expedite review of projects during the next few years that will provide additional transportation capacity out of the Rocky Mountain region to help alleviate the current gas supply shortage, and stand ready to handle the permitting of a pipeline for Alaska natural gas if Congress and the market deem if desirable,” the agency said.

The Commission said its long-range objective is to decrease the excessive price differentials between locations for gas.

During the past year, “the natural gas industry filed an increased number of new [liquefied natural gas] import terminals along with expansions at existing terminals. This trend is expected to continue.”

Although it has no authority over the siting of electric transmission lines except for licensed hydroelectric projects, the Commission said it was working with state regulators to establish regional state committee groups to identify needed transmission and do regional system expansion planning. “The nation’s transmission grid has experienced a decade of under-investment. Electric load has grown markedly but the grid has not, and the result is increasingly costly congestion and, occasionally, reduced reliability of service.”

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