Energy watchdog lacks bite to police new markets.(Federal Energy Regulatory Commission)(Brief Article)

WASHINGTON -- Federal energy regulators failed to set up measures to protect consumers when they approved California's deregulation scheme and are still outgunned by energy traders a year after the energy crisis that hobbled the state, says the Los Angeles Times.

Congressional investigators, in a report released by the General Accounting Office (GAO), generally agree. The Federal Energy Regulatory Commission (FERC), charged with overseeing the transition of nation's regulated energy markets to competitive markets, doesn't have the staff or the authority to respond effectively, they conclude.

Skeptics, such as Sens. Joseph Lieberman (D-CT) and Jean Carnahan (D-MO), who requested the report, were not reassured by the findings. "Given the record of the commission, it's hard to be optimistic," Lieberman told the Austin American-Statesman.

Lieberman and Carnahan warned that FERC remains poorly equipped to prevent similar price increases and supply shortages nationwide, according to the paper.

Part of the problem, the GAO report says, is that the agency is forced to divide its limited resources between its traditional cost-of-service regulation and the emerging competitive markets. Partly because of this FERC has not yet adequately revised its regulatory and oversight process to respond to the new market structure, investigators concluded.

An ambitious two-year restructuring effort begun in 1997 achieved little more than superficial changes, the GAO report said. Called FERC First, the $20 million project did little to improve the agency's ability to monitor or regulate energy markets, according to 74% of employees responding.

To date, the report says, "FERC's initiatives to monitor competitive markets have served more to help educate FERC's staff about the new markets than to produce effective oversight efforts." The agency's Market Observation Research room makes a substantial amount of market data available, but the information has not yet been used to initiate ...