June 20, 2002 — A General Accounting Office (GAO) report issued recently underscores the need for legislation to enhance the ability of the Federal Energy Regulatory Commission (FERC) to oversee the nation’s natural gas and electricity markets and prevent and punish price manipulation.
The Coalition for Energy Market Integrity and Transparency, representing some 5,000 municipal and rural cooperative utilities, oil and gas producers and consumer groups, cited the GAO report as further evidence that energy market reforms are needed now to prevent merchants such as Enron from “rigging the system through bogus trades and other manipulative practices designed to rob consumers of billions of dollars.”
Coalition President Arthur Corbin said, “The very energy merchants who manufactured California’s 2000-2001 energy crisis are now challenging FERC’s authority to restore fairness and transparency to the market. Congress needs to provide FERC the authority and the funding to ensure that energy markets are open and transparent and to penalize energy merchants who break the rules. Sadly, many of the abuses that have occurred are not necessarily illegal under federal statutes. That needs to change.” Corbin also serves as president and general manager of the Municipal Gas Authority of Georgia.
The coalition praised FERC Chairman Pat Wood III for leading the only comprehensive federal investigation into energy market abuses, and agrees with the GAO findings that the agency lacks both the resources and the enforcement powers to adequately regulate an energy market in crisis.
Bob Cave, President of the American Public Gas Association and a member of the coalition, added that the GAO report “is but the latest in a series of revelations indicating systemic market problems that go far beyond abuses by one rogue company. This is not just an Enron problem.
“While the stock market appears to be penalizing the energy merchants who violated public confidence, we need a permanent solution. With an energy bill in conference, Congress now has the opportunity to provide FERC with greater oversight and enforcement powers to help protect the public from future abuses,” Cave said.
The Coalition for Energy Market Integrity and Transparency is a nonprofit organization whose mission is to reform energy markets to ensure their fairness, transparency and openness in order to provide adequate, reliable and affordable energy supplies for America. Its goals include:
* Eliminate the potential for market manipulation that results in unwarranted price volatility in energy markets or consumer abuses;
* Ensure that energy markets are open and transparent to the timely disclosure of prices, supply, demand, storage, market transactions, and other relevant information to all market participants;
* Require that traders in over-the-counter markets and online trading platforms have the ability to perform and fulfill their contractual obligations;
* Assure that the affiliates of energy companies, regulated by the Federal Energy Regulatory Commission or their state counterparts, are effectively separated from their unregulated affiliates in their decision-making and actions;
* Reform the accounting methods for energy transactions, including mark- to-market, to ensure that the accounting techniques used by energy traders accurately represent themselves to their investors and other participants in energy markets.