presented to: goldman school of public policy university of california, berkeley october 22, 2004...
TRANSCRIPT
Presented to:Goldman School of Public PolicyUniversity of California, Berkeley
October 22 , 2004
High Power Analysis: Building a New TeamIn An Established Federal Agency
William F. Hederman, DirectorOffice of Market Oversight and Investigations
Federal Energy Regulatory Commission
WH-10/22/04
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To recover from the aftermath of California and Enron, energy markets in the U.S. require:
• Integrity
• Confidence
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The relevant energy markets are complex.
Natural Gas & Electric Market Space
Gas Supply
Trading Venues
Futures (NYMEX)
Electronic Platforms
Bilateral Trading
Voice Brokers
Pipelines&
Storage
Players
Delivered Market
Physical Nat Gas
Generation
Transmission&
Pumped Storage
Delivered Market
Phys Electric Power
Gas to fuel power generation
RTO’s & ISO’s
Price Contributors-Fixed price buyers & sellers-Speculators
Price Takers-Indexed price buyers & sellers
Source: FERC-OMTR&OMOI
Nat Gas & Electric Derivatives
Nat Gas & Electric Clearing
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The FERC strategy to provide dependable, affordable energy through sustained competitive markets has 3 elements.
Effective Rules
Infrastructure
Rules
Enforcement
CompetitiveMarkets
Just & ReasonableOutcomes
StrategicApproach
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Director
Office of Market Oversight and Investigations Organization Chart
Division of Management & Communication
Division of Management & Communication
Deputy Director Market
Oversight & Assessment
Deputy Director Market
Oversight & Assessment
Deputy Director Investigations & Enforcement
Deputy Director Investigations & Enforcement
Division of Energy Market
Oversight
Division of Energy Market
Oversight
Division of Financial
Market Assessment
Division of Financial
Market Assessment
Division of Integrated
Market Assessment
Division of Integrated
Market Assessment
Division of EnforcementDivision of
Enforcement
Division of Operational
Audits
Division of Operational
Audits
Division of Financial
Audits
Division of Financial
Audits
•
Division of Information Development
Division of Information Development
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Monitor staff characteristics for success.
• Diverse (econ, finance, law, engineering, accounting, public policy)
• Highly skilled (79 advanced degrees)
• Public-spirited
• Team-oriented
• Self-motivated
• Motivated by challenges
• Sense of humor
Much has been accomplished.
2002 2003 2004
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Director Hired
Observed CFTCMarket Surveillance
1st Market Surveillance Report
1st Seasonal Assessment report
FERC Re-organization:OMOI Official
FERC CaliforniaOffice Opens
1st Winter Assessment Report
Hotline Promotion Launched
Critique of CPUC Report IssuedTransco and Nicor Settlements
Calif Anomalous Bidding/Physical Witholding Handoff to OMOIPrice Reporting Policy StatementCleco Settlement
BLACKOUT*
Reliant Settlement
Standards of Conduct OrderBehavior Rules OrderWinter Assessment
Duke Settlement
1st State of the Markets Report
ISO/RTO Monitors Present 1st Common Metrics
Price Index Survey Report
Summer Seasonal Assessment
Williams Settlement
Storage Data Settlements
Storage Data Technical Conference
New Auditors Join OMOI
Energy Ethics Conference(http://energyethics2004.nd.edu)
Jan
Feb
Mar
OMOI e-library
Summer Assessment
1st Price Index Technical Conference
OMOI Fellows Lectures Begin
* OMOI does not claim the blackout as an accomplishment.
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OMOI has become pro-active.
• Audits
-- targeted
-- random
• Educating regulators about
markets
-- OMOI own staff
-- Other FERC
-- State regulators
-- International
• Market intelligence gathering
-- ‘signals’ (data/alarms)
-- ‘human’
• Empowering key players
-- compliance and risk officers
-- engineers
-- board members
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OMOI Next Steps
• Integrating into FERC processes• Continuous improvement
-- market surveillance reports
-- oversight meetings
-- seasonal look-aheads
-- definitions of market power, abuse, etc.• Enhanced auditing and other intelligence gathering• Empowering key market participants• Rapid response to observed anomalies• More intense scrutiny of less transparent markets• Expanded teaming
-- MMUs
-- states
-- other federal agencies
-- North American colleagues
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The market has recognized FERC’s progress.
1. The Desk: “OMOI hit the ground running on this one – that the size, speed and depth of the investigation would have made an SEC ‘tiger team’ proud.” (July 25, 2003)
2. Edison Electric Institute: “They’re clearly developing a good analytical model to monitor gas and electricity markets, and we commend them for that and encourage it.” (in Dow Jones, January 22, 2004)
3. Restructuring Today: OMOI “has a significant team and yesterday…they showed off what they can do and how well they are plugged in.” (January 23, 2004)
4. Restructuring Today: “How different the world is today from the early days of the California meltdown when OMOI didn’t exist and FERC had little idea of what was going on.” (January 27, 2004)
5. The Desk: “…a colossal effort…the sort of report your office of strategy or market analysis would typically pay tens of thousands of dollars....It is by far the most in-depth document to come out of FERC in a very long time.” (March 19, 2004)
6. American Public Gas Association: “The Commission took important and forceful steps this week to improve the fairness and effectiveness of the competitive natural gas market…the abuses uncovered by OMOI and acted upon by the commission reinforce the need for effective market rules…” (in Platts Inside FERC, August 9, 2004)
7. FERC Chairman Pat Wood III: The State of the Markets report is “everything I dreamed of” in setting up OMOI. (January 22, 2004)
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Market Integrity is Everyone’s Business
FERC Hotline:
1-888-889-8030