Ferc calls for risk manager vigilance

William Hederman, director of the office of market oversight and investigations (OMOI) at the US Federal Energy Regulatory Commission (Ferc), today urged energy risk managers to alert his office to any suspicious market practices.

Speaking at the Energy & Power Risk Management congress in Houston, Hederman told delegates that energy risk managers should take a leading role in helping to “clean up” the battered US energy industry, which has been tainted by market manipulation, Enron’s failure and the Californian power crisis. “If my office at Ferc is to act as the ‘cop on the beat’, then we also need the help of our ‘neighbourhood watch’, which comprises energy firm risk managers,” Hederman said.

Risk managers are already making use of OMOI’s dedicated hotline, alerting the agency to possible instances of price anomalies, Hederman added.

“It is important for Ferc and risk managers to partner to foster a competitive and reliable energy market,” Hederman said. “Competition unleashes amazing creativity where your job is to protect your company and Ferc’s job is to protect the public interest. Our goal is not to stifle creativity but to channel it so it might be useful for all concerned.”

Although Hederman admitted that OMOI had taken a tougher approach lately, the most important aspect of its work lies in compliance agreements rather than levying fines, Hederman said.

In March, for example, Ferc fined Tulsa-based Williams $20 million - the largest levied in Ferc’s history - to resolve anti-competitive allegations against the natural gas pipeline company. The penalty stemmed from allegations that Williams' Houston-based Transcontinental Gas Pipe Line unit violated guidelines that bar it from giving preferential pipeline access to its affiliates. Under the terms of the fine, Williams instituted a number of process changes to address Ferc concerns and agreed to a plan to ensure future compliance.

The OMOI was established in April 2002 by Ferc chairman Pat Wood to oversee and assess the operations of US gas, oil pipeline and electricity markets. Its functions include understanding energy markets and risk management, measuring market performance, investigating compliance violations and analysing market data. The office is made up of a 100-strong multi-disciplinary team of economists, engineers, attorneys, auditors, data management specialists, financial analysts, regulatory policy analysts and energy analysts. Hederman expects to make a further 12 hires in the next few months.