This FERC isn't like any FERC you've known

Here's the activist thinking
of the other half of the
Wood-Brownell team
___

This FERC isn't like any
FERC you've known or
worked with recently

If you don't like markets, here's the very bad news.
"This FERC is all about markets and everything we do is going to be guided
by that," Nora Mead Brownell reminded.
She intends being a one term (five years) member who has her work cut out
for her -- building market infrastructure.
"Not retrenching and not recreating, we are going to be defining and
directing and collaborating to transform ourselves as we make the markets work -
- creating policies that make markets work."
Look for some "very specific business planning and strategy so there will
be no doubt about what's coming. It won't be the surprise of the hour or `I
don't know what that FERC is all about.`"
What does she think of the MORC room -- the market observation resource
center at FERC where five people can watch transactions and prices
real time?
"It's a good first step but it needs further development," she replied.
The agency needs people who've worked in markets and have real world experience
on energy trading floors, Brownell noted.
Brownell is not much for rulemaking but early on "you've got to set the
guideposts" especially where the "power of the incumbent is very, very strong."
"If you don't have any rules in place you can't find anybody guilty," she
noted, "cause there's no crime."
It's been noticed that the market-based rates were not conditioned on
certain behavior, such as:
"If you engage in the following behavior it's a no-no."
There may have been behavior in the market "of which you and I would
disapprove but if it's not in the Ten Commandments, it's hard to take somebody
out to the woodshed."
Meanwhile, we expect the White House to give FERC a fifth member who will
provide a market-oriented vote. Is there any doubt in Brownell's mind?
"Not in mine. President Bush has been very, very clear about his
philosophy on markets for a long time," she said.
Brownell is excited about the opportunity the new commission has "to make a
difference."
"We better make a difference."
For her, the issues are bigger than jurisdiction and even markets. What's
at stake in her mind is creating an economic environment in which people invest
in infrastructure. "If we don't really begin to take advantage of that
opportunity there's going to be an enormous price to pay. We saw it in the West
and we're about to see it in lots of other places.
"It's what drove me to feel so strongly about those RTOs. I know that's
complicated and we have work to do but when I see unnecessary costs in the price
of electricity I know what happens to the end user, the small businessman the
big users and the retail customers on limited income.
"If we can solve the problem and we can focus on the problem the
jurisdiction answers will come or they'll be so clear that it will be
unavoidable.
"Rather than start with who's going to do what, we should start with what
do we need to do to build the backbone for this country to continue to grow,"
she explained.
It's her goal to recast the debate on "what this is all about." Her view
is that "it's about economic development -- plain and simple."
How about making progress in bringing market forces to bear on transmission
costs?
Maybe an auction of capacity as with gas capacity.
Brownell wants to know more about the proposal before expressing a view.
Without RTOs and transparency in the market, she's skeptical "that that can
happen."
How can you bring market forces into transmission, we asked.
She sees RTOs fostering market forces to bear because the market will have
confidence that there will be equity and opportunity.
"Until we resolve the issue of access and structural management, no capital
will flow." For her, the capital flow is the proof that a market is working.
Those two issues, if unresolved, prevent innovation, she added.
Brownell cited congestion pricing that rewards congestion, "if you happen to
be the guy who owns the line that's creating it," Brownell explained, "having
the opposite effect."
The massive structural changes that cause some consternation in the
community are what's necessary.
She doesn't want to wake up two years from now and realize "either we've
totally destroyed the markets and therefore totally put our country's
development back five years because we have no investment and no plants and no
real reliability oversight -- nor do I want to create a system in which we have
unregulated monopolies as in the telecom industry.
"You saw that wonderful burst of new technologies and the long distance
prices dropping that no one ever imagined."
Brownell expects that kind of technological explosion in energy but we
haven't seen it yet.
When a market really drives the energy field, she predicted fuel cells that
work in a short period of time or we'll see 50 new things.
Those who believe the old system works just fine win no brownie points with
Brownell. "It wasn't supporting growth. It wasn't terribly efficient.
"I didn't notice a lot of innovation. Frankly I don't miss my old, black
rotary phone. I'm not going to miss my clunky, 40-year old plant. I'd like to
have distributed generation right at my back door.
"And then it became more and more clear that the (telecom) market was not
working to everyone's advantage, was not equitable and you had this meltdown and
you now have unregulated monopolies."
In electricity that would be a tragedy and the cost would be even greater
than with regulated ones, she said.
What kind of changes would Brownell like to see at FERC?
New ways of problem solving. "Markets do not wait 15 months or 11 months
while you go through the ritualized process... Not just with FERC but anybody
that has to observe due process."
But when the Pennsylvania PUC implemented the retail power marketing,
stakeholder from the marketers, the incumbent, operations people, not lawyers,
ran into problems daily.
The PUC created a team under Kevin Cadden who's joined FERC as external
affairs director.
The Cadden team met three times a week in the first couple of weeks to deal
with problems of multiple scheduling coordinators and Cadden had the authority
to make decisions at the meetings.
Where there was a huge policy impact he would go to commissioners for
notational voting.
That meant that stakeholders couldn't go commissioner shopping -- "a big
sport in Pennsylvania, people got real serious about it and they solved the
problems."
Brownell wants to see that methodology in Washington. "We need to find
ways to build up the trust here.
"The best thing in the world that could have happened in the California
situation or the western mitigation is for all those people to get in a room and
settle," Brownell advised.
Her fear is that FERC will make a decision and it will be litigated for five years
leaving everyone -- the agency, the companies and the customers -- exposed
to the vicissitudes of the courts.
We noted that it's been about five years in New Hampshire from enactment to
implementation.
Brownell favors non-traditional ways of solving problems -- the use of
"swat teams of people starting with say 10 real smart state commissioners" to
get in a room to come up with options to prevent congestion pricing for example
"and then we'll have an open hearing and talk about it."
Brownell is a big supporter of Chairman Pat Wood's operational switch away
from the method of recent FERC leaders whereby members' staffs carry around
notes and ideas from commissioner to commissioner until an accord is struck.
Then the decision is presented as a done deal with written-in-advance
speeches read at voting.
The commission in effect says "here is the right answer," Brownell claims.
Wood's plan is to have open debate.
"It's a great idea," Brownell said. "It encourages our staffs to think in
a safe environment instead of just being told what the answer is."
FERC members have talented staffers who need to be encouraged to come up
with "and get out" imaginative solutions, she observed.
The open debate "let's us signal to people how we're thinking and where
we're going."
"We're talking at meetings because we want ideas. We want to explore all
the options and not come in and say `here is the right answer.'
"There are probably 10 right answers," Brownell reminded.
Many sacrifices so far: On a personal note, leaving Pennsylvania when she
did, Brownell lost a newly enacted pension for state government employees.
Had she hung on three more weeks she would have gotten a pension but the
urgency of big votes on California and the RTOs was such that she thought it
wrong to sit around in Harrisburg waiting for the money.
"The last thing I wanted was to have the lights go out in California and
have me sitting there (in Harrisburg)," she observed.
While the FERC pay of $125,700 is greater than the PUC's $105,086 the cost
of living in the Nation's Capitol is much, much higher.
The PUC provides a car and doesn't charge commissioners monthly parking.
Brownell bought a home on Capitol Hill and will be able to walk in good
weather but will still have to pay the monthly parking.

The is part two of a two part series and I'd love to send you part one and our Pat
Wood interview too - simply write to season@restructuringtoday.com and I'll
rush them to you.

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