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2,200 | 2002-02-13T00:00:00 | 107-82 | When a pipeline breaks a compressor station fails a transmission line collapses or a large power plant goes offline the parties in the market adjust immediately to acquire other supplies and delivery routes |
2,201 | 2002-02-13T00:00:00 | 107-82 | A sufficiently robust energy infrastructure makes this possible |
2,204 | 2002-02-13T00:00:00 | 107-82 | This has forced energy concerns to rebalance their debttoasset ratios forcing many to reduce debt and cut back investments in new gas processing pipelines and power plants |
2,205 | 2002-02-13T00:00:00 | 107-82 | During December 2001 stock prices of several energy companies hit yearly lows |
2,206 | 2002-02-13T00:00:00 | 107-82 | Enrons problems in combination with the recession and reports of potential overbuilding appear to have eroded confidence making investors more cautious about putting money into the energy industry |
2,207 | 2002-02-13T00:00:00 | 107-82 | This slowdown in infrastructure investment could be problematic in some regions as the economy recovers and demand for energy grows |
2,208 | 2002-02-13T00:00:00 | 107-82 | For that reason the Commission has accelerated its efforts to complete the transition to a more competitive wholesale power market in order to provide investment certainty |
2,210 | 2002-02-13T00:00:00 | 107-82 | The nations wholesale electric and gas markets showed great resilience and swift reaction time and demonstrated that they are much stronger than any individual player in the marketplace |
2,211 | 2002-02-13T00:00:00 | 107-82 | Some claim that Enrons demise is due to the failure of deregulation and competition in the electric industry of which Enron was one of many supporters |
2,213 | 2002-02-13T00:00:00 | 107-82 | Wholesale competition in the gas industry has spurred gas production encouraged pipeline construction driven down commodity prices for the past decade and lowered retail prices accordingly |
2,214 | 2002-02-13T00:00:00 | 107-82 | In the electric sector wholesale competition although still in its infancy has enabled the construction of thousands of megawatts of new power plant capacity across the country producing lower commodity and retail electric prices in most regions and in a cleaner generation fleet |
2,219 | 2002-02-13T00:00:00 | 107-82 | The Commission has jurisdiction over sales for resale of electric energy and transmission service provided by public utilities in interstate commerce |
2,220 | 2002-02-13T00:00:00 | 107-82 | The Commission has interpreted the Federal Power Act to include energy marketers as well as traditional vertically integrated electric utilities in its definition of public utilities |
2,221 | 2002-02-13T00:00:00 | 107-82 | The Commission must ensure that the rates terms and conditions of wholesale energy and transmission services by public utilities are just reasonable and not unduly discriminatory or preferential |
2,224 | 2002-02-13T00:00:00 | 107-82 | The Commission also has jurisdiction over sales for resale of natural gas and transportation |
2,225 | 2002-02-13T00:00:00 | 107-82 | However FERC jurisdiction over sales for resale is limited to domestic gas sold by pipelines local distribution companies and their affiliates including energy marketers |
2,228 | 2002-02-13T00:00:00 | 107-82 | Energy Marketers Competitive trading of energy by marketers generally began about two decades ago |
2,229 | 2002-02-13T00:00:00 | 107-82 | Marketers do not usually own physical facilities but take title to energy and resell it at marketbased rates |
2,230 | 2002-02-13T00:00:00 | 107-82 | Natural gas marketing began with the deregulation of the price of natural gas in 1978 and expanded with the Commissions 1992 open access rule for natural gas pipelines Order No |
2,233 | 2002-02-13T00:00:00 | 107-82 | 636 natural gas marketing has developed into a large robust activity with many marketers |
2,234 | 2002-02-13T00:00:00 | 107-82 | The Commission lacks jurisdiction over sales of natural gas by many gas marketers |
2,235 | 2002-02-13T00:00:00 | 107-82 | To maximize competition we have granted blanket authorization for those marketers under FERC jurisdiction so they do not have to file for and obtain individual approvals to sell gas at wholesale |
2,236 | 2002-02-13T00:00:00 | 107-82 | In the electric arena wholesale power marketers began selling electric energy as early as 1986 |
2,237 | 2002-02-13T00:00:00 | 107-82 | The Energy Policy Act of 1992 and the Commissions 1996 open access rule for electric transmission owners and operators Order No |
2,238 | 2002-02-13T00:00:00 | 107-82 | 888 further spurred the development of competitive electric power trading |
2,239 | 2002-02-13T00:00:00 | 107-82 | The Enronaffiliated power marketers regulated by the Commission include Enron Power Marketing Inc Enron Sandhill Limited Partnership Milford Power Limited Partnership Enron Energy Services Inc and Enron Marketing Energy Corporation |
2,240 | 2002-02-13T00:00:00 | 107-82 | EnronOnLine Before its collapse Enron was the largest marketer of natural gas and electric power |
2,241 | 2002-02-13T00:00:00 | 107-82 | Enrons Internetbased trading system EnronOnline was until recently the dominant Internetbased platform for both physical energy electricity and natural gas products and energy derivatives |
2,244 | 2002-02-13T00:00:00 | 107-82 | Although EnronOnline was the leading Internetbased trading platform for natural gas and electric power it faced competition from other Internetbased trading platforms such as Dynegydirect and Intercontinental Exchange ICE |
2,246 | 2002-02-13T00:00:00 | 107-82 | In contrast EnronOnline uses a onetomany trading format where an Enron affiliate is always on one side of each energy transaction either as a seller or a buyer |
2,248 | 2002-02-13T00:00:00 | 107-82 | In the wake of Enrons downfall the manytomany platforms such as ICE have helped to fill the void and create a more robust market by reflecting the bid and offer values of myriad different energy buyers and sellers |
2,249 | 2002-02-13T00:00:00 | 107-82 | Marketbased Rate Authorization To sell electricity at marketbased rates public utilities including power marketers must file an application with the Commission |
2,250 | 2002-02-13T00:00:00 | 107-82 | The Commission grants authorization to sell power at marketbased rates if the power marketer adequately demonstrates that it and its affiliates lack or have mitigated market power in the relevant markets |
2,251 | 2002-02-13T00:00:00 | 107-82 | FERC conditions marketbased rate authority on power marketers submitting quarterly reports of their purchase and sales activities and complying with certain restrictions for the protection of captive customers against affiliate abuse |
2,252 | 2002-02-13T00:00:00 | 107-82 | There are currently 1200 electric power marketers authorized to sell energy at marketbased rates |
2,253 | 2002-02-13T00:00:00 | 107-82 | The Commission generally grants waiver of certain regulations to power marketers which receive marketbased rate authorization |
2,255 | 2002-02-13T00:00:00 | 107-82 | The Commission also exempts power marketers from its accounting requirements because those requirements are designed to collect the information used in setting costbased rates |
2,256 | 2002-02-13T00:00:00 | 107-82 | In addition unless others object FERC grants power marketers requests for blanket approval for all future issuances of securities and assumptions of liability |
2,257 | 2002-02-13T00:00:00 | 107-82 | Because the Commissions reporting and accounting requirements are designed to address a limited set of concerns and apply only to the jurisdictional subsidiary at issue it is unlikely that requiring power marketers to comply with these requirements could prevent a future Enronlike failure |
2,258 | 2002-02-13T00:00:00 | 107-82 | Nevertheless in our current rulemaking proceeding on accounting rules we have invited comments on whether the current exemptions for power marketers from such requirements remain appropriate |
2,260 | 2002-02-13T00:00:00 | 107-82 | Traditional Electric Utilities A few years ago Enron acquired Portland General Electric PGE a verticallyintegrated utility subsidiary of Enron that handles electricity generation purchase transmission distribution and sale in eastern Oregon |
2,262 | 2002-02-13T00:00:00 | 107-82 | PGE also sells energy to wholesale customers in the western United States |
2,264 | 2002-02-13T00:00:00 | 107-82 | Although the Commission waives some of its reporting requirements for power marketers it requires continued reporting from franchised electric utilities such as PGE so we can monitor whether its wholesale transactions are inappropriately favoring its affiliates or harming its captive customers |
2,267 | 2002-02-13T00:00:00 | 107-82 | C Gas Pipeline Subsidiaries The Commission has limited jurisdiction over sales for resale of natural gas in interstate commerce |
2,268 | 2002-02-13T00:00:00 | 107-82 | The Commission has jurisdiction to regulate only sales for resale of domestic gas by pipelines local distribution companies LDCs and their affiliates |
2,269 | 2002-02-13T00:00:00 | 107-82 | Consistent with the Congressional goal of allowing competition in natural gas markets the Commission does not prescribe the prices for these sales |
2,270 | 2002-02-13T00:00:00 | 107-82 | The Commission has authority over the rates terms and conditions for pipeline transportation in interstate commerce of natural gas and oil |
2,271 | 2002-02-13T00:00:00 | 107-82 | The Commissionregulated natural gas pipeline affiliates of Enron include Florida Gas Transmission Midwestern Gas Transmission Northern Border Pipeline Company Transwestern Pipeline Company and Northern Natural Gas Company |
2,272 | 2002-02-13T00:00:00 | 107-82 | D Transactions and Activities Not Regulated by the Commission The Federal Power Act does not give the Commission direct explicit jurisdiction over purely financial transactions such as futures contracts for electricity or natural gas |
2,273 | 2002-02-13T00:00:00 | 107-82 | The Commission has asserted jurisdiction over such transactions only when they result in physical delivery of the energy which is the subject of the financial contract or when such transactions or contracts affect or relate to jurisdictional services or rates eg financial contracts affecting firm rights to interstate transmission capacity or the pricing of such capacitySUP1SUP While Enron and its subsidiaries engaged in many electricity futures contracts and other energyrelated derivatives it does not appear that these transactions have played a significant role in Enrons demise |
2,274 | 2002-02-13T00:00:00 | 107-82 | 1 In 1996 the Commission addressed the issue of whether an electricity futures contract approved for trading by the CFTC would fall under its jurisdiction pursuant to the FPA |
2,277 | 2002-02-13T00:00:00 | 107-82 | The Commission found that the CFTC possessed exclusive jurisdiction over the trading of such futures contracts and that the Commission would assert jurisdiction pursuant to the FPA only if the electricity futures contract goes to delivery the electric energy sold under the contract will be resold in interstate commerce and the seller is a public utility |
2,280 | 2002-02-13T00:00:00 | 107-82 | FERC Initiatives in Energy Markets In response to rapidly evolving energy markets the Commission has implemented a number of new initiatives to improve its marketmonitoring abilities |
2,281 | 2002-02-13T00:00:00 | 107-82 | The Commissions new strategic plan adopted September 26 2001 encompasses three major areas of activity in overseeing the energy industrybullet Infrastructureworking with others to anticipate the need for new generation and transmission facilities determining the rules for cost recovery of new energy infrastructure encouraging the construction of new infrastructure and licensing or certificating hydroelectric facilities and natural gas pipelinesbullet Market rulesensuring clear fair market rules to govern wholesale competition that benefits all participants and assuring nondiscriminatory transmission access in the electric and natural gas industriesbullet Market oversight and investigationunderstanding markets and remedying market rule violations and abuse of market power |
2,284 | 2002-02-13T00:00:00 | 107-82 | To give substance to this third strategic goal the Commission is creating a new Office of Market Oversight and Investigation MOI which will concentrate the Commissions marketmonitoring resources into one workgroup and enable the Commission to better understand and track wholesale energy markets and risk management by analyzing market data measuring market performance investigating compliance violations and where necessary pursuing enforcement actions |
2,288 | 2002-02-13T00:00:00 | 107-82 | MORs computer hardware software and subscription web services give us access to historical and realtime data about energy markets |
2,289 | 2002-02-13T00:00:00 | 107-82 | The Commission has launched several other initiatives within the past year to ensure vigilant and fair oversight of the changing energy markets |
2,291 | 2002-02-13T00:00:00 | 107-82 | The proposal would require all generators public utilities and power marketers to file electronically with the Commission and post on the Internet an index of customers with a summary of the contractual terms and conditions for marketbased power sales costbased power sales and transmission service |
2,292 | 2002-02-13T00:00:00 | 107-82 | These companies would also have to report transaction information for shortterm and longterm marketbased power sales and costbased power sales during the most recent calendar quarter |
2,294 | 2002-02-13T00:00:00 | 107-82 | In September 2001 the Commission proposed in a rulemaking to revise its restrictions on the relationships between regulated transmission providers such as Portland General Electric and their energy affiliates broadening the definition of an affiliate to include newer types of affiliates such as affiliated trading platforms eg EnronOnline |
2,295 | 2002-02-13T00:00:00 | 107-82 | Also in September 2001 the Commission staff began a comprehensive review of the information the Commission needs to carry out its statutory obligations in the current and evolving markets in electricity and natural gas |
2,299 | 2002-02-13T00:00:00 | 107-82 | In December 2001 the Commission proposed in a rulemaking to update the accounting and reporting requirements for jurisdictional public utilities natural gas companies and oil pipelines |
2,302 | 2002-02-13T00:00:00 | 107-82 | It invites comments on whether entities that are currently exempted from these accounting and reporting requirements such as power marketers should be subject to these proposed regulations |
2,303 | 2002-02-13T00:00:00 | 107-82 | While I have an open mind on whether the Commission should continue to exempt power marketers from its accounting requirements our accounting requirements are not aimed at the kind of activities allegedly undertaken by Enron |
2,313 | 2002-02-13T00:00:00 | 107-82 | Historically the Commissions economic regulation has focused on ensuring that energy markets deliver adequate energy at reasonable prices |
2,314 | 2002-02-13T00:00:00 | 107-82 | The demise of Enron has had little or no effect on the supply or price of energy |
2,316 | 2002-02-13T00:00:00 | 107-82 | Since it appears that few of Enrons problems affected the narrow scope of wholesale energy markets it is not clear that giving the Commission additional authority within its current scope would prevent further Enronlike problems |
2,317 | 2002-02-13T00:00:00 | 107-82 | To encourage greater efficiencies in the energy markets and to ensure that wholesale competition expands its ability to deliver reasonably priced adequate energy supplies to more customers the Commission is moving forward to complete its effort to create competitive national wholesale power markets as it did with natural gas markets in the late 1980s and early 1990s |
2,318 | 2002-02-13T00:00:00 | 107-82 | Congress endorsed wholesale power competition in the Energy Policy Act of 1992 and further endorsement of this effort would certainly be helpful |
2,320 | 2002-02-13T00:00:00 | 107-82 | RTOs will broaden regional energy markets allowing greater market efficiencies and limiting possible discrimination in grid operations |
2,321 | 2002-02-13T00:00:00 | 107-82 | Congress should also remove tax disincentives to transferring transmission assets to RTOs and to use of public power transmission lines |
2,322 | 2002-02-13T00:00:00 | 107-82 | Price Transparency Greater price transparency will help improve the efficiency of energy markets by providing buyers and sellers with better information about market conditions |
2,323 | 2002-02-13T00:00:00 | 107-82 | The creation and operation of broad regional energy markets with a widelytraded set of energy products will do much to make this happen |
2,329 | 2002-02-13T00:00:00 | 107-82 | Creditworthiness The responsibility for ensuring creditworthiness of participants in wholesale energy trades lies primarily with the parties involved in those trades |
2,333 | 2002-02-13T00:00:00 | 107-82 | For example shortly after Enron declared bankruptcy the Participants Committee of the New England Power Pool NEPOOL sought to implement alternative payment and financial assurance arrangements with Enron Power Marketing Inc Enron Energy Marketing Corporation and Enron Energy Services Inc |
2,335 | 2002-02-13T00:00:00 | 107-82 | I do not think there is any need to legislatively address creditworthiness issues specific to energy markets |
2,354 | 2002-02-13T00:00:00 | 107-82 | Futures contracts based on nonagricultural physical commodities like metals or energy products and on financial commodities such as interest rates foreign currencies and stockmarket indexes now serve the riskmanagement needs of businesses in virtually every sector of our economy |
2,359 | 2002-02-13T00:00:00 | 107-82 | We oversee onexchange trading of futures and options contracts based on such things as crude oil natural gas heating oil propane gasoline and coal |
2,361 | 2002-02-13T00:00:00 | 107-82 | The CFTC does not regulate trading of energy products on either the spot or rather the cash markets or the forward markets which are excluded from our jurisdiction by the Commodity Exchange Act |
2,375 | 2002-02-13T00:00:00 | 107-82 | With respect to contracts based on energy products and certain other nonagricultural and nonfinancial commodities the CFMA amended the Act to exempt two types of markets from much of the CFTCs oversight |
2,379 | 2002-02-13T00:00:00 | 107-82 | Other types of bilateral energy trades are beyond the scope of our authority under the Commodity Exchange Act by virtue of the statutory exclusions of forward contracts and swap contractions |
2,407 | 2002-02-13T00:00:00 | 107-82 | And while contracts based on agricultural products are traded as actively today as ever a great many futures contracts are now based on nonagricultural physical commodities like precious metals or energy products and on financial commodities like interest rates foreign currencies or stock market indices |
2,411 | 2002-02-13T00:00:00 | 107-82 | And electric power generators can use futures contracts to secure stable pricing for their coal and natural gas needs |
2,414 | 2002-02-13T00:00:00 | 107-82 | For example a power generators obligation to purchase natural gas will be covered by its ability to use that natural gas in its electricity generation |
2,420 | 2002-02-13T00:00:00 | 107-82 | This is particularly important in many agricultural markets where no other means of price discovery exists outside of the quoted futures prices but it is also true in other sectors including many energy markets |
2,430 | 2002-02-13T00:00:00 | 107-82 | For contracts which at expiration are settled through physical delivery such as in the energy futures complex staff carefully analyze the adequacy of potential deliverable supply |
2,434 | 2002-02-13T00:00:00 | 107-82 | At least one energy product market is usually discussed and officials from the Energy Information Administration of the Department of Energy periodically attend such meetings |
2,462 | 2002-02-13T00:00:00 | 107-82 | The CFTCs Role in the Energy Markets and Our Response to the Enron Situation The Commission oversees onexchange trading of energyrelated futures and options contracts based on such things as crude oil natural gas heating oil propane gasoline and coal |
2,463 | 2002-02-13T00:00:00 | 107-82 | Several US exchanges are designated to trade energy product futures and options but the overwhelming majority of onexchange transactions are executed on New York Mercantile Exchange the NYMEX where contracts in each of the products I mentioned are actively traded |
2,464 | 2002-02-13T00:00:00 | 107-82 | The CFTC does not regulate trading of energy products on spot cash markets or forward markets which are excluded from our jurisdiction by the CEA |
2,469 | 2002-02-13T00:00:00 | 107-82 | When its financial difficulties became known and Enron voluntarily closed out its positions energy futures markets showed remarkably little reaction |
2,485 | 2002-02-13T00:00:00 | 107-82 | For contracts based on energy products and certain other nonagricultural and nonfinancial commodities the CFMA added a new Section 2h to the Act that exempted two types of markets from much of the CFTCs oversight |
2,522 | 2002-02-13T00:00:00 | 107-82 | As long as electric and gas utilities continue to function as monopolies there will be a need to protect against crosssubsidization |
2,527 | 2002-02-13T00:00:00 | 107-82 | What may not be as clear is why Enrons power marketing activities did not subject it to PUHCA and why Enron is an exempt public utility holding company |
2,528 | 2002-02-13T00:00:00 | 107-82 | In 1994 Enron Power Marketing Inc a subsidiary of Enron received a noaction letter from the staff in the SECs Division of Investment Management in which the staff agreed not to recommend enforcement action against that subsidiary if it engaged in power marketing activities without it or Enron itself registering under the Act |
2,529 | 2002-02-13T00:00:00 | 107-82 | In its request for noaction relief the subsidiary argued that the contracts books and records and other materials underlying its power marketing activities were not facilities used for the generation transmission or distribution of electric energy or sale |
2,530 | 2002-02-13T00:00:00 | 107-82 | Accordingly Enron argued that the power marketing subsidiary was therefore not an electric utility company for purposes of PUHCA and therefore Enron was not a utility holding company for purposes of PUHCA |
2,532 | 2002-02-13T00:00:00 | 107-82 | Moreover in 1997 the Commission after public notice and comment adopted Rule 58 that permits registered holding companies to engage in the brokering and marketing of energy commodities as permitted nonutility activities |
2,533 | 2002-02-13T00:00:00 | 107-82 | In July 1997 Enron acquired Portland General Electric and claimed an exemption to PUHCA registration under Rule 2 as intrastate public utility holding company |
2,535 | 2002-02-13T00:00:00 | 107-82 | Enron recently agreed to sell Portland General to Northwest Natural Gas a transaction that is subject to Commission approval under PUHCA |