CERAWeek: FERC's Kelliher says dereg isn't national policy

Competitive wholesale power markets are working very well, said Joseph Kelliher, chairman of the Federal Energy Regulatory Commission. Natural gas and coal are driving up some prices, but deregulation of wholesale power prices is not the government policy.
Deregulation means an absence of regulation, which he would call similar to a “Clint Eastwood movie with a shootout in the streets.”
It’s more about competition, perfect competition, which probably only exists in a textbook.
How to measure success in policy? Not movements in retail prices, since those are driven by fuel costs. A true measure is what would prices be versus a regulated situation, which is “impossible to prove to anyone’s satisfaction,” he said.
Higher fuel prices have led some to question if competition is the right course. FERC is “resisting the siren song of re-regulation.”
What would re-regulation actually mean? Kelliher said he doesn’t really know because its proponents don’t explain it well, so he’s setting up what sounds like a worst-case-scenario description:
A complete reliance on regulation, a total absence of competition in wholesale prices, a situation where the independent power producers who built most of the power plants in 25 years and an end to interstate power.
Kelliher said he thinks the call for re-regulation is a “pure call for lower fuel prices,” which is something regulators can’t change.
Kelliher thinks the U.S. reserve margins – the difference between demand and power plant capacity available — will be adequate but tight but climate change concerns will lead to not enough power plants being built.
What will we build? More gas than is probably ideal. Nuclear will be significant addition but not available in the next 10 years. And new coal plant role? 54 percent of new coal capacity ordered since 2000 has been cancelled, so it will be a smaller part of the mix.
So natural gas will be relied on more in the next 10 years, which will keep the prices up.

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