|File Size||730.58 KB|
|Create Date||February 1, 2014|
|Please create an account and login to download|
This research paper examines the challenges associated with prosecuting acts that artificially inflate wholesale electric power market prices, following a series of high-profile federal enforcement actions against large financial power market participants. Those challenges include statutory and regulatory shortcomings, unresolved questions about jurisdiction, and, most importantly for the purposes of this paper, limitations on the role that state public utility commissions (PUCs) could play in representing the interests of retail ratepayers in federal enforcement actions. The paper concludes that, given that retail ratepayers are the ultimate victims of artificially inflated wholesale market prices, state PUCs, as their representatives, are indispensable parties in federal enforcement actions; and that such a status necessitates a series of reforms to clarify statutory intent, relax unattainable legal standards, and otherwise accommodate state participation in federal enforcement actions.
The introduction to this paper begins by asserting that state PUCs are the best representatives of retail ratepayers, the ultimate victims of artificially inflated electric wholesale prices, in federal enforcement actions given their unique relationships with retail customers. The introduction also summarizes a panel discussion that occurred at the National Association of Regulatory Utility Commissioner (NARUC) 2013 Annual Meeting in Orlando, Florida, in which industry experts and regulators raised fundamental questions regarding the prosecution of electric power market manipulation, such as (1) the proper interpretation of statutory enforcement authority, (2) the proper definition of manipulation, (3) the consequences of recent federal enforcement actions, (4) opportunities for reform, and (5) future impacts of currently pending matters. These questions are analyzed in turn throughout the remainder of the paper.
Section II offers a brief history of the formations of the wholesale electric power markets and the electric power derivative markets, as well as a discussion of differing value judgments that industry experts have attributed to financial marketer participation in physical electric power markets.
Section III outlines the development of the Federal Energy Regulatory Commissionâ€™s (FERC) anti-manipulation enforcement authority in the aftermath of the Western Energy Crisis and the application of that authority in seven recent FERC enforcement cases. This discussion attempts both to surmise FERCâ€™s approach to identifying manipulation and to highlight matters, such as jurisdiction, definitions, and application of authority, which the existing regulatory enforcement framework leaves unresolved.
Section IV discusses the difficulty in congressional attempts at defining electric power market manipulation and shortcomings in court and enforcement agency interpretations of notably unclear statutory language. The exclusion of market power from manipulation actions and FERCâ€™s market-based rate regime are noted as specific shortcomings.
Section V offers two examples of cases in which partiesâ€™ and statesâ€™ abilities to address manipulation were compromised due, in part, to the shortcomings identified in Section IV. It also discusses FERCâ€™s hostility to greater state participation in enforcement proceedings through its Order 718 proceedings and concludes that, despite such present hostility, stateâ€“federal coordination has a well-founded basis when confronting market failure.
Section VI explores potential reforms to the existing federal enforcement framework for consideration by the state regulatory community. The section considers statutory, regulatory and tariff-based reforms for the purpose of aiding state participation in federal enforcement actions against wholesale electric power market acts which artificially inflate prices.
Section VII discusses a series of pending matters including (1) the respective jurisdictional authority of competing federal agencies, (2) the consequences of multiple federal agencies pursuing electric power market participants, and (3) FERCâ€™s petition to a federal district court to affirm a penalty assessment against Barclays Bank, PLCâ€”an opportunity for a competent court to rule for the first time on many of the fundamental questions raised by this paper.
Section VIII offers a series of recommendations for consideration by the state regulatory community.