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Obama has chance to reverse deregulation fiasco


Today’s announcement that Joseph Kelliher, chairman of the powerful Federal Energy Regulatory Commission (FERC) and a commissioner since 2003, is stepping down provides President-elect Barack Obama with an opportunity to fix an agency with a history of promoting deregulation and power company profits at the expense of fair energy prices to American families. Under Kelliher’s watch, FERC continued the failed policy of deregulation, resulting in consumers paying billions of dollars more in home energy costs than if markets under FERC control had been properly regulated.

Kelliher, who served as the Energy Department’s liaison to Vice President Dick Cheney’s infamously corporate-biased Energy Task Force prior to becoming FERC commissioner, consistently overlooked the agency’s top statutory mandate: to ensure that all electric rates be “just and reasonable.”As a result, Kelliher’s FERC has undergone ongoing criticism by states and consumer groups for its backward priorities.

At a time when officials such as former Fed chairman Alan Greenspan have concluded that federal deregulation efforts went too far and resulted in abuses, Kelliher continued to claim that the policy of electricity deregulation – pioneered by Enron – has been a success. In this, he is the last man standing, nearly alone in his obstinate insistence that deregulation worked.

A Public Citizen analysis in October shows that, in states where electricity is deregulated and wholesale markets are under FERC jurisdiction, households pay prices 50 percent higher than in those states that remain fully regulated. FERC’s failure to regulate the electric rates that power plant owners, investment banks and others that buy and sell electricity contracts charge allows these sellers ample opportunities to manipulate markets and price-gouge consumers. As a result, adequate competition does not exist in America’s electricity markets. Many states stopped deregulation or reregulated because of these problems.

Public Citizen urges President-elect Obama to appoint a chairman with consumer advocacy experience who will pledge to end the disastrous deregulation experiment, marking a return to well-regulated markets where all electric rates are “just and reasonable.”

The importance of having a consumer-focused FERC chair not only will ensure that consumers will be free from being price-gouged, but will facilitate the implementation of successful climate change legislation. Some approaches to lowering greenhouse gas emissions rely on market-based approaches such as cap and trade, which requires transparent, competitive wholesale electricity markets to send the correct price signals to reduce carbon emissions. But FERC’s continued promotion of market concentration and stagnation would render any market-based approach to climate change a failure before it starts.

Flickr photo by thorinside