FERC's Market Design: The End of a 'Noble Dream'

How state opposition cowed the feds and turned a powerful rule into just a set of talking points.

A funny thing happened on the way to a standard market design (SMD). What began as a full-fledged rulemaking-with the Federal Energy Regulatory Commission (FERC) giving instructions and imposing deadlines on the electric utility industry-now has degenerated into little more than a set of talking points.

Talk about cold feet.

After first asking for industry reaction by Nov. 15 and weathering a storm of protest, a chastened FERC invited a second round of comments by Jan. 10, and then extended that deadline to Feb. 28. With each round of criticism, the commission seemed to lose just a little more nerve.

One state, Iowa, suggested that the SMD commits such an illegal trespass on state jurisdiction that FERC would get more mileage out of the effort if it would simply cancel the compulsory aspects of the plan. The feds, said Iowa, should convert the docket (RM01-12-000) into a so-called "statement of policy"-offering only guidance to those students who might be interested.

FERC appeared to do exactly that, when, in mid-January, it issued a press release promising yet another white paper and-more than likely-yet another re-evaluation of the plan, followed by additional rounds of constituent feedback.

In short, regulators from more than a dozen states see the plan as dead in terms of regulatory discipline.

"Profound and unjustified," say regulators from Washington state. Solves "problems that do not exist," adds Louisiana. Regulators in Arizona call SMD "a noble dream," yet one that is "unwarranted" in its expansion of federal authority.