Road Trips, Chased by the Feds & Blog Reactions

I’m sitting in the United Club at LAX, waiting for my Red-eye flight back to Baltimore. My son’s high school graduation is tomorrow. It’s only Wednesday evening but it feels like a full week already. Gary Ackerman and I went on a Road Trip of epic proportions on which we met six members in one day in the LA area. Next day, three members in Orange County and San Diego, and on the next two members in the San Diego area before I dropped Gary at the Cross Border Express Airport on the border with Mexico. I then drove back to LA and am writing this blog while listening to the toddler next to me report on the comings and goings of the planes out the window.

Before my day even began, I got an email from my old boss at FERC, Arnie Quinn, who is going to leave FERC this week to work for Vistra Energy. His message: “The Feds are after me”. By that I mean I seem to have slipped out of FERC at the end of 2017 without filing my “exit” Financial Disclosure to make sure I was not investing in any company that is regulated by FERC. It’s an annual reporting requirement but I had forgotten about the need to do one on the way out the door. I was tempted to tweet that it was a “witch hunt” and claim that the FBI had infiltrated my Amazon Echo, but thought better of it. It really is a good thing that the FERC takes avoiding conflicts of interest seriously. Besides, I don’t have any followers on Twitter.

What I meant to say… 

In my last blog, I made a pitch for minimizing regulatory intervention in electric markets. My argument is that, if markets are properly set up and left to allow transparent price formation, the most efficient outcome would occur over time. I got the reaction from some quarters that I seem to be advocating for a market completely free of regulatory intervention. Not quite. We all recognize that we need regulators to establish good rules – often easier said than done – to ensure that markets are not manipulated and that certain standards are maintained. An obvious example is credit requirements or unnecessary barriers to entry.

Rules are necessary, but in electricity markets we have myriad interventions and rules due to presumptions and accusations of “manipulation.” As a result, we never achieve the efficiencies of energy commodities like Natural Gas and Oil. Instead, we keep changing the score card and wondering why we aren’t getting results. I hope that helps clarify my position on market intervention. We need rules but not “helicopter regulators.

Road Trip

If you have a Trade Association as large and diverse as WPTF, it is a really good idea if you get out, see how your members work, and talk to them about what is important to them. I think this is one of the reasons WPTF has worked so well. WPTF’s success is rooted in the communication that started with the work Gary has done to understand the members. The members in turn feel comfortable discussing their thoughts and concerns about the electric markets in a non-contentious atmosphere. I certainly learned a great deal from the free-flowing discussion with WPTF’s members these past three days.

As examples, I got to hear from a small municipal utility about how they wanted access to more suppliers for options on capacity and other products to meet their needs. I heard the struggles of a large utility trying to meet the expectations for stakeholder involvement while meeting reduced emissions at a reasonable price and just how difficult that can be in California. I heard from several members about the difficulties of resource procurement when load is expected to migrate to other suppliers over the next few years, but still wanting to assure that retail choice expands to meet customer demands. This was useful to me as I will be representing WPTF at the June 22 CPUC en banc hearing on the Green Book exercise (see last blog) and Commission staff was hopeful of hearing concrete proposals.

WPTF has such a broad-based membership that Gary and I also heard from renewable developers and suppliers about how CAISO and CPUC rules often disadvantage competitive supply. We heard views on regionalization and whether CAISO can manage to evolve from the EIM into an RTO or a competing market structure like PEAK-PJM adjoining CAISO would be better in the long-run.

Perhaps what was most enjoyable to hear was that most of the members felt that there were real opportunities to get things right. There is some optimism and enthusiasm to make the CAISO market work better, and to try and help the CPUC achieve their policy goals while ensuring reliability and efficient markets. They also see great potential in a market platform of some kind developing beyond California and the benefits that regional market structure could bring.

In this last regard, many members feel that WPTF, its members and its emerging role as an “information clearinghouse” can play a critical role in market formation in the wider West. We are, after all, the Western Power Trading Forum, not the California Power Trading Forum. As one member put it, if we get a good market platform adjoining California, the sheer competition between the two should make each better.

Is that all?

While the information I got about our members was great, it wasn’t all sunshine and daisies. Clearly any competitive supplier of power that isn’t renewable or storage has a difficult road ahead. This was evident at some of our meetings. The struggle to get regulators in California to understand the crucial role traditional supply plays in reliability is a challenge. But the basic message was one of “keep plugging away” and the role WPTF could play in making the outcomes in California and the wider West better.

Finally, I came away with an appreciation for the relationships Gary has created over time with the members, and the atmosphere of helpful dialogue that is unique in most discussions in our industry. I would be stupid or arrogant – or both – if I did not have some trepidation in succeeding Gary given his record in building WPTF. I was very happy to have him put together this “road trip” and show me how he has built the relationships that make WPTF in its current form. It is a legacy I’ll try and maintain.

OK, time to get on the plane. It’s going to be a big day tomorrow as not only is my son graduating, but the Naval Academy has its “graduation” (Commissioning) and the President is the speaker. Traffic in Annapolis is going to like the Santa Monica Freeway at Rush-hour. Need to get some rest. Good night.