My Faith is Shaken

DISCLAIMER: Let me reiterate that my blog reflects my opinions only and not necessarily those of the Western Power Trading Forum (WPTF) or its members.

“What the Hell?” … That was what I muttered after I was finished reading FERC’s Order in answer to the La Paloma complaint (EL18 177-000) about the California market for “Resource Adequacy” (RA). The reaction was not to the decision itself, but rather to the very sloppy and dismissive way the text of the Order treated the record on file. I’m used to not always agreeing with the decisions of the Commission – even when I was on staff there. What is so disappointing are the omissions and the cursory treatment of the record. If one had the money, I contend that this could lead to a challenge in Federal Court on purely procedural grounds. Or is the Commission counting on the fact that parties will just accept their writ?

First, let’s review the outcome of the Order. FERC rejected the complaint that the market for RA procurement in California was producing “unjust and unreasonable” outcomes. This is the standard for a complaint under Section 206 of the Federal Power Act. I disagree, but that is not the root of my dismay. In rejecting the complaint, FERC dealt only with the issues and facts raised by the initial complaining party – La Paloma. Others, including WPTF and Powerex, raised issues and facts which were not answered by FERC other than to say they “were not convinced” with no analysis or discussion as to why. That is not acceptable under any administrative or procedural rules to which FERC has traditionally adhered.

I will admit that part of the La Paloma complaint that FERC knocked down – that low prices are not (by themselves) evidence of a failed market – is well taken. The obverse – that high prices are not in and of themselves evidence of a failed market – is also true, though it is a fact that some regulators opt to forget. It is possible that La Paloma erred in making that argument central to its complaint.

Who will rid me of this bothersome filing?

While I am not necessarily a fan of markets for RA or “capacity,” they have always been supported in the industry as a necessity for “reliability.” How can the Commission ignore issues of reliability raised in the record if that responsibility is under its jurisdiction? In addition to failing to deal with matters concerning state subsidies as it had in a similar case involving the Eastern market in PJM, it ignored many other issues. How can the Commission ignore large portions of the record with a regulatory wave of the hand? The “we are not convinced” moniker felt like Queen Victoria’s dismissive “We are not amused.”

Also, of note are some justifications by the Commission that frankly border on flights of fancy. Specifically, the Commission seems to have concluded that “all is well” based on the mere fact that the CPUC has “a process” underway. This ignores a major complaint that promises have been made repeatedly over the past 15 years to “fix” RA. Each time, the effort to fix RA either dies or is morphed into another procedure. The image of “Lucy with the Football” looms in my mind when I read this part of the complaint. But perhaps the most troubling justification made by the Commission was that the current market is the subject of several filings under Section 205 of the FPA. In other words, if the CAISO files under 205, then the Commission takes the ISO’s word for it. No need to explain.

This wreaks of abrogation of FERC’s authority and certainly won’t get the Commission a chapter in “Profiles in Courage.” No, the Commission just seemed to want to avoid annoying California.

Something has changed… Something has been lost

Here is the deal: this is a strange time at the Commission. In times past, one could always count on staff to help the Commission fulfill its obligations to consider the record before it. We hear rumors of staff morale being low. Could it be that staff is not as central to the crafting of orders as has been in the past or that process has so changed that this is the kind of order that gets produced? Is it possible that all of this has turned the Commission from a bastion of collegiality and thoughtful review into a partisan battlefield? The increasing reality of contemporary Washington seems to suggest that the “circus” may have come to FERC.

So, what now? Will there be a filing requesting rehearing based on the procedural errors and administrative mistakes? That would be the normal course of events – even given tight budgets for regulatory filings. However, the sheer dismissiveness of the FERC Order, combined with the CPUC’s determination to ignore the realities created by load migration and its own resource discrimination, makes one hesitate as to what is the natural response. Could it be “normal” no longer applies to interactions with the Commission?

I hold out hope that some parties file for rehearing. FERC rarely grants rehearing, but if it rejects a well-crafted request based on the procedural omissions in this Order there would be, in my view, a case for taking FERC to Federal Court. I suggest this knowing full well that FERC would be granted great deference in any Federal judiciary venue. Nonetheless, the process by which the Commission justified this Order needs to be reviewed. Parties lose their right to complain if they don’t ask for rehearing. This order demands complaint. The solution could be found by FERC having a technical conference to build the record and allow them to answer the issues raised.

FERC is an institution I hold dear. I have great admiration for the staff’s integrity and dedication. I have had respect for every Commission I have served, or with which I have interacted as a party. I hope my recent disappointment will be short-lived. Have the times and circumstances changed such a beloved institution that much? Where is Jimmy Stewart when you need him?