FERC SETTING MARKET RULES TODAY

According to this Bloomberg News article, FERC will announce rules today to govern cross-regional wholesale electricity sales, including market monitoring and pushing “regulated utilities to cede some authority over transmission lines.” This has been coming for a while, with lots of industry and public comment time. I hope Commissioner Massey’s quote in the article is not indicative of the policy stance, though:

“We now have enough information to know what works well,” Massey said in an interview.

What disturbs me most in that statement is the missing “for now” that I wish were there — we know from history of the past five years what not to do, given existing technological and regulatory environments. But what if FERC’s standard market design is not flexible and robust to changes, especially in technology? And what if it doesn’t allow for regulatory change that would be mutually beneficial for consumers and for innovative producers? Then I worry that FERC’s standard market design will freeze the institutional structure underpinning the industry, and that it will be rigid, unresponsive, and eventually obsolete, but still legally binding, to the detriment of consumers and innovative producers. It could also create vested interests who benefit from the institutional structure frozen in that way, who then have an incentive to lobby and use the political process to stymie change.

The biggest benefit is reduced transaction costs; transaction costs have been a big impediment to regional coordination that will bolster and liquify wholesale markets. See also this Reuters article on the topic.