Democrat senators ask GAO to investigate FERC on gas, power

By the OGJ Online Staff

HOUSTON, Apr. 16, 2001—Senators Joe Lieberman (D-Conn.) and Jean Carnahan (D-Mo.) asked the US General Accounting Office to conduct an investigation of Federal Energy Regulatory Commission’s actions to ensure that wholesale electricity prices are reasonable.

They also requested the GAO take a look at FERC’s role in overseeing interstate natural gas pipelines. The senators said they were troubled because electricity suppliers in California are charging many times more than the cost of producing electricity and the price of natural gas was often five times that of the national average.

The high electricity prices in that state reflect a nonfunctioning market that has in turn exacerbated the state’s electricity shortage, according to their letter to the GAO.

Worried about the impact of pending electricity deregulation in the state of Missouri, Sen. Carnahan wants to make sure that there is adequate federal oversight.

“Under federal law, FERC has the responsibility to ensure just and reasonable prices for interstate wholesale transmission, but there is mounting evidence that FERC may not have fulfilled this role in the California situation,” according to the letter.

The written request asked the GAO to answer the following questions:

• Has FERC fulfilled its mandate to ensure just and reasonable rates?

• Has FERC devoted sufficient resources to carry out its oversight obligations effectively and timely?

• Does FERC need additional authority to ensure just and reasonable prices given the partial deregulation present in many states?

• Is there a role for another agency to exercise an oversight role with respect to the voluminous wholesale transactions in electricity?

• How should FERC deal with the tradeoff between the need for transparent prices for buying and selling electricity in a competitive market and the need to keep prices confidential for a period of time to protect against collusion?

With gas costing about five times the national average in California, the senators wanted the GAO to look into the possible abuse of market power in the transmission of gas in California. They posed the following questions to GAO:

• Has FERC adequately regulated interstate pipelines? If not, what areas require improvement?

• Is there a continuing role for FERC to ensure equal access to the limited amount of space currently available on the gas pipelines? Should this role be enhanced?

• Can there be alleged abuse concerning pipeline capacity in other parts of the US besides California?