The Federal Energy Regulatory Commission wants the natural gas and electric markets to “know that we are watching” them, said Chairman Curt Hebert yesterday during a press tour of FERC’s new Market Observation Resource Center (MOR) at its headquarters.

The center, which is located on the eighth floor of the FERC building, is modeled after a major energy trading floor. It houses two (four feet by five feet) screens and eight work stations (each with three, 17-inch flat monitors) that are equipped with software to provide staff with real-time access to energy prices, historical prices, electric load flows, nuclear outages, downed plants, blackout areas, natural gas storage projections, congested points on transmission/transportation systems, and short- and long-term weather forecasts. In short, it gives the Commission access to the same information services that are used by key energy traders. The center is in its second full week of operation, with staff still working out the bugs.

Hebert indicated that the Commission plans to use the center as a “preventative” tool, rather than as an instrument to proactively punish market players.

“I think [this] allows us to mitigate any and all markets period,” Hebert told reporters during a press briefing. But “are we using it specifically for that purpose? No,” he said. “Does it allow us to monitor anything that’s going on in electric, natural gas? Absolutely.”

Hebert noted that the center last week identified a potential problem in the New York and New England ISOs, where bids were getting near $1,000/MWh. The center’s staff immediately called the ISOs for an explanation, and learned that the high bids involved a “fairly routine matter of new dispatch software.”

He said he expects to see more communications between the Commission and ISOs and regional transmission organizations (RTO) in the future. In addition, FERC hopes to eventually share some of its market information with state regulators and the National Association of Regulatory Utility Commissioners (NARUC).

“I don’t think any of you have any idea of just how significant this is [to the Commission],” the chairman said. He recalled that just a few years ago it took him a couple of weeks just to get maps of the U.S. electric and gas transmission systems.

Hebert believes the California power crisis could have been addressed more quickly if FERC had access to real-time market information then. Although it couldn’t have prevented the blackouts, he said the Commission would have been able to identify the problems earlier.

“It is my belief had we had something like MOR we would have been…able to more clearly and more quickly understand the problems of market misdesign and market functions” in California, he noted.

This will be “the platform upon which the Commission’s oversight activities, I think, will be built going forward,” said Daniel Larcamp, director of FERC’s Office of Markets, Tariffs and Rates. “It is not a trading floor,” but “we are trying to replicate what the traders themselves see as they are dealing in the markets on a daily basis.”

The center has a rotating staff of about five, which is headed up by Scott Miller, director of FERC’s Division of Market Development, and Tom Brownfield, manager of the information analysis group in the Market Information Division. Their job primarily is to identify gas and electric market aberrations, and see to it that the information “bubble[s] up to the eleventh floor,” where the commissioners’ offices are located.

The center will be accessible to most, if not all, FERC staff. As a result, “staff will be in a better position to make recommendations to the Commission about market design changes that may be necessary to make sure that competitive markets are delivering on their promise,” Larcamp said.

In addition to monitoring the market, the real-time market data provided by the center allows “us to see…the effects that our orders and our rules have on the markets,” as well as “how markets are evolving, [and] which changes we should be making,” Hebert noted.

FERC began developing the MOR center as far back as last December, when staff met with some of the major energy traders in Houston to get ideas for it. The Commission budgeted $750,000 for the MOR hardware, licenses for information services, support services and build-out costs for the room, but it was brought in under budget at $610,000, according to Hebert.

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