Senate Committee Begins Consideration of FERC Nominee, Raising Consumer and Environmental Issues

On May 10, 2007 the Senate Energy and Natural Resources Committee held a hearing to consider President Bush’s nomination of current FERC Chairman Joseph T. Kelliher for a new term of five years. He was initially appointed to fill a vacancy in 2003 and became Chairman of FERC in 2005.

Several Senators expressed dissatisfaction on issues related to

Following are some highlights of the first confirmation hearing, which was webcast.

Senator Tester (D Montana) asked Kelliherabout FERC’s allowing market rates for PPL in Montana despite the fact that they were so high. [Montana Power Co. sold all its power plants to PPL, and is now buying energy from the new owners of divested plants at FERC-allowed market rates. Montana consumers, who once had some of the nation’s lowest cost power, faced major rate increases due to the ability of low cost producers to achieve high market prices with FERC-approved market rates. Montana’s Consumer Counsel complained to FERC that PPL had market power to drive prices up, but FERC approved PPL’s market rate authorization). Tester repeatedly asked when FERC would act on Montana’s rehearing petition, and said that new contracts were coming up that would be strongly affected by whether or not FERC acted. He asked FERC to get back to him about when the rehearing order might issue. Kelliher promised to “look seriously” at the Montana commission’s arguments.

Tester asked Kelliher about FERC’s market power tests used to decide whether to allow “market based rates.” Kelliher said FERC’s market rate authorizations, which allow sellers to avoid publicly filing advance notice of all rate changes subject to review and revision by FERC, are a “privilege.” He admitted that under the “hub and spoke” test nearly every seller won market rates. Then he mentioned FERC’s new market power screens. Tester asked him if they were in place when FERC determined that there was no market power in Montana. Kelliiher said yes, but that they were looking at the regional market.

Tester said “whether I vote for you or not, I appreciate your public service.”

Senator Burr (R NC) was full of praise for the nominee.

Senator Menendez (D NJ) gave Chairman Kelliher a hard time about PJM Market Monitor Joseph Bowring’s recent testimony alleging PJM management interference with his independence. Sen. Menendez criticized FERC for not investigating, and instead allowing PJM – a private utility – to conduct the investigation, referring to the fox guarding the chicken coop. Kelliher maintained this was raised in complaints before FERC and so he couldn’t answer.

Sen. Menendez asked whether PJM was the “cop on the beat,” and Kelliher said “no,” PJM had no enforcement authority, and Menendez said, well they could at least file crime reports! Kelliher said it is FERC’s job to enforce, and they can’t delegate it to an RTO.

Sen. Menendez invoked global warming, claiming FERC was encouraging tranmission lines to bring high pollution coal-fired power into New Jersey, and criticized Kelliher about FERC’s approval of the Exelon merger (which eventually failed after state opposition in New Jersey).

Sen. Menendez finally said to Chairman Kelliher: “I’m not satisifed with your comments. We look to you and when you don’t do [your job]… we’re not sure the consumer is protected.” “Right now–I’m not convinced.”

He said that he would have further questions.

Senator Wyden of Oregon asked Kelliher about a controversial proposed LNG plant in Oregon. Sen. Wyden said he would have more questions

They Committee did not vote on the Kelliher nomination, and appears to have embarked on a more thorough review.

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