By Kathy Larsen and Rich Heidorn Jr.

WASHINGTON – Former chairs gave a primer on the last 36 years of federal energy policy Thursday as the Federal Energy Regulatory Commission celebrated its 1000^th open meeting.

Former chairs Betsy Moler (term 1988-97, chair 1993-97), James Hoecker (1993-2001, 1997-2001), Curt Hebert (1997-2001, 2001) and Joseph Kelliher (2005-2009) talked of their achievements, regrets and recommendations for the future. Charles Curtis (1977-81), FERC’s first chair and the last chair of the agency’s predecessor, gave his reminiscences by video.

They praised FERC’s bipartisan decision making and its expanded authority and regretted the persistence of seams between RTOs. Two, who now represent utilities, gently chided the agency for the aggressiveness of its enforcement actions.

The formers were introduced by Commissioner Cheryl LaFleur in what was, coincidentally, her first meeting as acting chair. “We’re so thrilled that you’re here,” LaFleur gushed. “These are FERC celebrities, so I’ll keep the bios short.” (See video of the meeting.)

FERC’s Origin: Replacing a “Broken Agency”

Curtis recalled FERC’s origin as a replacement for the Federal Power Commission, a “broken agency” with a 15-year backlog of cases and low respect in the appellate courts. “It was a mess,” he said.

For the first few years, the new commission held day-long meetings twice a week — very unlike the brief, mostly ceremonial meetings of current practice.

“I’m very pleased to note that in the ensuing years … its reputation, both in the appellate courts and Congress, has radically improved,” Curtis said.

Order 888

Moler headed the agency when it implemented the Energy Policy Act of 1992, issued the landmark open access transmission Orders 888 and 889, and moved into its current headquarters.

When she took office, she recalled, there was limited competition among generators, tight power pools but no Regional Transmission Organizations. Wholesale power sales required individual commission approval. “The incumbent utilities owned and governed the wires — fiercely, I might add,” she said.

She acknowledged the growth of competition since, but she lamented the commission’s “ineffective federal siting authority” and noted that “seams persist” between RTOs

Order 2000

Hoecker chaired the agency when it issued Order 2000, which created the framework for Regional Transmission Organizations.

He noted the commission’s increased subject matter expertise and the expanded enforcement authority it obtained since his departure.  He said that the agency now looks more like the Securities and Exchange Commission.

“I think going forward FERC will be much more capable of managing crises and understanding markets in real time.”

West Coast Energy Crisis

Hebert served as chair for only seven months in 2001, a stormy period marked by power crises in California and the west, created by California’s dysfunctional rules and exacerbated by predatory traders at Enron and other power marketers.

The commission came under fire from Congress and the states for not enforcing powers it lacked — and wouldn’t gain until after the 2003 blackout. “Whereas generally you have the states pushing back [and saying] we don’t want you in our business… they wanted help, they wanted enforcement,” Hebert said.

Despite progress since, Hebert said, “the end of electric restructuring is nowhere in sight, after two decades — or more if you date it back to PURPA,” the 1978 Public Utility Regulatory Policies Act, which required utilities to buy power from cheaper “qualifying facilities” operated by independent power producers.

Praise for Bipartisanship

Kelliher led the commission’s implementation of the 2005 Energy Policy Act, which gave the agency authority to set mandatory reliability standards and to issue civil penalties of up to $1 million per day.

He praised the agency for its history of bipartisanship, contrasting it with the SEC, Federal Communications Commission and Commodity Futures Trading Commission, where he noted party-line votes are common. “The fact that we served different presidents but we’re not saying tremendously different things is very important and a source of strength at FERC,” he said. “It means policy is more longstanding, more permanent.”

Regrets, They Have a Few

Commissioner Philip Moeller asked the formers what they might have done differently, or what they didn’t do that they wish they had.

Moler said she was tempted to extend competition to the retail level in Order 888. “I didn’t have the votes,” she said, adding, “I also know all hell would have broken loose. Just ask Pat Wood,” a reference to the 2001-2005 chair, whose proposed Standard Market Design sparked a backlash from states and Congress.

Hoecker cited Enron, whose traders’ schemes, he said, “flummoxed” the agency.

Kelliher said he would have liked to make more progress on transmission cost allocation.

The question was whether the commission should act by rule making, something like Order 888 but limited to RTOs. “We thought about it,” he said, but didn’t know what framework to use. “The models hadn’t been in place long enough” to have confidence in them, he said.

Kelliher also said he wished he had been more aggressive in addressing the PJM-MISO seam in 2006 — an issue still bedeviling policymakers today. (See FERC to Look Over PJM’s, MISO’s Shoulders at Joint Talks, p.1)

“You should do it,” he told the sitting commissioners. “Don’t be seduced like I was” by promises, he advised.

Talking their Books?

All of the former chairs worked in the industry after their FERC tenures and some of their recommendations to the current commission appeared to reflect those interests.

Moler, who headed Exelon Corp.’s Washington office as executive vice president for government affairs and public policy from 2000 until her retirement in 2010, said the most important thing facing FERC now was “protecting the integrity of competitive markets.”

She decried the “meddling” in markets by Congress and states through tax credits and renewable portfolio standards. These influences are “absolutely pernicious,” she said, and “do lopsided, crazy, wacky things to competitive markets.”

Enforcement Critique

Hebert and Kelliher both suggested that FERC has been overzealous in its enforcement.

Hebert remarked that his point of view has changed from his time as a young lawyer and state legislator, through his service on the Mississippi Public Service Commission and after his FERC term, a stint as executive vice president at Entergy Corp. between 2001 and 2010. He’s now a partner at the Jackson, Miss. law firm of Brunini Grantham Grower & Hewes, and a visiting scholar at the Bipartisan Policy Center in Washington.

“Enforcement actions done well can protect the consumers,” he said. “Enforcement actions not done well — punitive in nature maybe when they shouldn’t be — can move things in the wrong direction and hurt the consumer.”

Kelliher, now NextEra Energy Inc.’s executive vice president for federal regulatory affairs, called for “a little more Christmas spirit in the enforcement mission.”

“FERC always said its policy was ‘firm but fair’ enforcement. I feel like I’m Jacob Marley’s ghost carrying chains to confess it was really was more firm than fair,” he said. “I’m asking you to do a better job than I did in helping good companies comply.”

Order 1000

Hoecker, senior counsel at Husch Blackwell LLP in Washington, is counsel to WIRES, a trade group representing both incumbent utilities and independent companies that own transmission.

He urged commissioners to work on Order 1000 implementation. “You’re going to make mistakes. It’s not going to be perfect,” he said. “You have got to get it done in my lifetime. I want to see these markets happen.”