Activist group makes case against electricity market rates

Washington (Platts)--14Mar2007

The activist group Public Citizen made its case in federal court
Wednesday for a requirement that all wholesale electricity rates be filed in
advance and assessed on how reasonable they are, rather than blanket approvals
being issued for fluctuating market-based rates in competitive markets.

Public Citizen told the US Court of Appeals for the District of Columbia
Circuit that the Federal Energy Regulatory Commission is failing to exercise
its responsibilities under the Federal Power Act to assure that rates are just
and reasonable.

The oral arguments quickly focused on the question of whether FERC had
done all it needed to do--at least for the regulatory case under appeal--by
requiring all tariffs to be modified to include market behavior rules.

All three judges on the panel hearing the case pressed Public Citizen
attorney Lynn Hargis, herself a former FERC attorney, on why the federal
agency did not have the discretion to address the specific issue of seller
conduct through the specific remedy of market behavior rules.

Hargis responded that market behavior rules were not enough, because they
did not control rates. "Whether you like it or not, [Congress] has chosen rate
regulation," she said, and that required FERC to assess filed rates, not rely
on behavior rules, in her view.

FERC attorney Robert Solomon said the case began in 2001 as an
investigation initiated by the commission into possible anticompetitive
behavior. "It was a targeted investigation going to the terms and conditions
of market-based rates," he said.

The agency narrow the investigation in 2003 to focus on market behavior
rules, and subsequently it issued rules to correct what it saw as deficiencies
in the control of seller conduct.

That is the extent of FERC's obligation in such an investigation, Solomon
said, that it identified a problem and came up with a solution.

The agency has told Public Citizen that if it wants to challenge the idea
of market-based rates, the group is free to file a complaint that would
address the issue directly.