Energy regulatory panel wants increased enforcement power

Commission often criticized for weak response to abuses

September 07, 2004|By Jonathan Peterson | Jonathan Peterson,LOS ANGELES TIMES

WASHINGTON - The Federal Energy Regulatory Commission, long derided as a paper tiger by West Coast critics, wants to put some teeth into its enforcement efforts.

At a recent meeting, two members - clearly outraged by tape recordings of Enron Corp. employees boasting about gouging California consumers - made an unexpected public plea for new powers to clamp down on abusive trading and other bad conduct by energy companies.

"It's clear that we have to have stronger civil penalties and criminal penalties, and only Congress can do that," said Commissioner Joseph T. Kelliher, a Republican.

Or, as Commissioner Suedeen G. Kelly, a Democrat, put it: "There is a will, but there is no way."

Such talk is encouraging to officials who have been frustrated by what they see as the commission's tepid response to evidence of widespread "gaming" in Western power markets during the energy crisis of 2000-2001.

But questions remain about what the nation's energy cop would do if it suddenly were given more potent weapons - and whether it makes the most of the law enforcement tools it already has. Many argue that the 1935 Federal Power Act gives the panel all the authority it needs to protect the public by conferring on the commission the authority to keep electricity rates "just and reasonable."

Yet many politicians, including some who have not hesitated to criticize the energy commission, are joining in the appeal to give the regulators more muscle. Otherwise, they warn, the long-term consequences could prove dire.

"I am deeply concerned that unless California acts to take control of its energy future and the Federal Energy Regulatory Commission receives additional authority to more effectively combat energy market manipulation," said Sen. Dianne Feinstein, a California Democrat, "the energy crisis could be repeated, and Californians could again face rolling blackouts and skyrocketing utility bills."

The problem, some say, is that the Federal Power Act is an outdated law more suited to a time when old-line utilities controlled the marketplace than to an era when wholesale competition can unleash chaos.

Commission members also contend that current laws don't give the panel the enforcement tools granted to other regulatory agencies.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are authorized to slap violators with fines amounting to triple the damages for certain offenses. Those regulators also can impose lifetime bars on defendants - in effect banishing them from the industries and activities in which they misbehaved.

Advocates for strengthening the commission say the threat of much larger penalties - going far beyond the return of disputed profits - would be a more intimidating weapon to hold over wayward energy suppliers.

"If it's important enough for pork bellies, and whatever commodities are traded, I think it's important enough for FERC" to have greater authority to penalize wrongdoers, Kelliher said, alluding to powers held by the commodity futures commission.

Feinstein is backing a proposal that would give the commission the ability to impose civil penalties of as much as $1 million a day and increase the punishment for defying the panel's rulings to $25,000 a day from the current daily limit of $500. However, these and other commission-related proposals are included in an energy bill that is bogged down in Congress; its prospects are uncertain.

As long as questions linger about wrongdoing in the marketplace, the commission will face pressure to flex its power.

In June, Feinstein wrote to Chairman Patrick H. Wood III to express her dismay about the behavior of Enron, urging the panel to punish devious energy traders and to push forward with the $8.9 billion recompense that California officials have sought for years.

"I understand your sense of frustration," Wood said, while noting that there were limits to his agency's enforcement tools.

The Los Angeles Times is a Tribune Publishing newspaper.

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