FERC Chairman James Hoecker earlier this week gave theoft-disputing segments of the energy industry, especially naturalgas, an ultimatum: either play nice and come to agreement with theCommission on the series of major proposed rulemakings now facingthem, or the agency will pull the plug on comprehensive reviews inthe future.

“…[Y]ou and the Commission must either come to grips with thebig issues in the coming few months or the Commission will returnto doing this job as it typically does – one rate case orcertificate case at a time,” he warned the energy industry in aspeech at a conference sponsored by the Southern Gas Association inPinehurst, NC, Monday.

The simultaneous comprehensive reviews of gas and electricitythat are taking place at FERC now are a one-time opportunity thatboth industries should embrace, Hoecker said. “Unless I completelymiss my guess, it will be years before the FERC once again putssuch an array of public policy considerations on the table at onetime for open debate and resolution,” particularly in the gasarena. “…[I]t simply cannot continue to commit the same level ofresources to generic natural gas market issues that we have in thepast 15 months.”

In order for the gas industry to reach consensus on policyissues, it’s going to have to get rid of the long-held view thatthe business is a “zero sum game – that what goes into onesegment’s pocket as a result of a change in public policynecessarily comes out of someone else’s pocket,” he noted. “If a 30Tcf market is ever going to be attainable, the industry must stemthis kind of intramural misunderstanding in favor of a growthmentality, where a rising tide can lift all boats.” Hoecker said hewas encouraged that the proposals have led to a “broad exchange ofviews” so far among gas officials.

He conceded there were “numerous [and] difficult” issues facinggas. With respect to “leading-edge innovations” like capacityauctions, many would prefer to “just say ‘no.’ I have even beenurged to slow down or stop by a former FERC chairman [MartinAllday], who seems to think that our situation, and energy marketsgenerally, are static,” said Hoecker. But “largely because ofcompetitive initiatives that he and his Commission colleaguesstarted a decade ago, nothing could be farther from the truth. Itis the very dynamism and interconnectedness of a competitive (butpartly regulated) energy market that necessitates such a searchinginquiry.”

Responding to criticism that he is initiating too many changesat one time, Hoecker said “I want you [industry] to see, not aclutter of cases, but a strategy” when weighing the notice ofproposed rulemaking (NOPR) on the short-term gas market, the noticeof inquiry on long-term gas issues, proposals to revise FERC’scomplaint process and its ex parte rules, initiatives oncollaborative procedures for pipeline certificate cases andlandowner notification, as well as FERC’s “ambitious” electricagenda. The strategy is three-pronged: to fine-tune the interstategas market and diminish market power, increase competitiveness inthe wholesale power market, and make the Commission a morecustomer-oriented organization, he said.

On the electric front, he believes there’s a “seriouspossibility” the 106th Congress next year will consider a “packageof measures that could range from system reliability to retailcompetition to renewable portfolio requirements to PUHCA reform andjurisdictional issues involving federal power marketingadministrations and public power.”

Hoecker said electricity eventually will be an “even moreformidable competitor” to natural gas in end-use markets, while atthe same time it will be an “ally of or complement” the gasbusiness in energy services markets.

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.