FERC

And where the trouble spots lie in FERC's grid plan.

The mood appeared calm on June 26 in Washington, D.C., at the regular bi-weekly meeting of the U.S. Federal Energy Regulatory Commission (FERC). Key officials from various regional transmission organizations (RTOs) had gathered before chairman Pat Wood and the other commissioners to brief them on progress over the past year in reforming wholesale electric markets, and on what the FERC might expect in the summer at hand.

Have they gone too far? Have ratings agencies become overzealous in their efforts to rein in energy merchants? Many in the industry are coming to that belief after Aquila, one of the industry's most respected companies and leaders, announced it would exit the merchant energy trading sector in late July. It said it could no longer meet the credit requirements imposed by ratings agencies to maintain that business.

Texas wins raves from the big players for its rules and systems, but the small consumer, as in other states, sees little reason to switch.

Six months into the opening of the restructured Texas electric market, industry players are generally pleased with the results, but the jury is still out, as the state's vaunted system design has shown some cracks, and consumers still see little reason to switch their energy supplier.

No one has yet quantified or qualified the devastation to industry reputation, electric competition, or energy companies' future earnings power caused by the current round of energy trading scandals that is shaking the industry to its core.

Economists sometimes get confused - especially when the real world doesn't fit into their neat boxes.

Network industries like telephone and electricity are today's case in point. Economists have viewed these parts of the economy as requiring special attention from regulatory authorities. They're viewed as "natural" monopolies displaying "economies of scope" and characterized by risky "lock-in" or "path dependency" features. That supposedly makes them prone to abuse by their free-market owners, and therefore in need of impartial regulatory oversight.