Lieberman, Carnahan Release GAO Report
Saying FERC Failed to Protect Energy Consumers

June 18, 2002

              WASHINGTON – The Federal Energy Regulatory Commission failed to effectively police deregulated energy markets in Western states to protect consumers from unreasonable rates, according to a General Accounting Office (GAO) report released today by Senate Governmental Affairs Committee Chairman Joe Lieberman (D-CT) and Senator Jean Carnahan (D-MO).  By failing to update its regulatory approach to keep up with the transition to competitive energy systems, FERC gave Enron and other energy companies greater latitude to take advantage of energy customers.

Noting that the report said that the California energy crisis in 2000 and 2001 was FERC’s wake-up call, Lieberman said the crisis “should not have only awakened FERC – it should have grabbed the Commission by the neck and shook it up.  But how many times did FERC hit the snooze button before opening its eyes?  It shouldn’t have taken the nightmare of sky-high rates and rolling blackouts to shake FERC out of its slumber.”

“FERC is responsible for ensuring that energy is available to consumers at ‘just and reasonable’ prices,” Carnahan said.  “All the evidence suggested that FERC was failing the consumers of California.  This report suggests that all Americans are vulnerable to another energy crisis like the one endured in California.”

GAO’s report concluded that FERC “recognizes that the change from highly regulated monopolies to competitive markets requires it to fundamentally change how it does business.”  However, it has struggled to define its regulatory approach and lacks the skilled personnel, computer capability, and organizational structure to carry out that mission.  Furthermore, FERC still does not have a credible plan for monitoring energy markets, the report said, and has still not even decided what information it believes is crucial to its monitoring function.  The full text of the report can be found at: http://www.gao.gov/new.items/d02656.pdf

Lieberman and Carnahan requested the report in April 2001 after FERC failed to ensure fair electricity prices during last year’s California energy crisis.  They noted today that FERC Chairman Pat Wood acknowledged the agency’s shortcomings and earlier this year established a new Office of Market Oversight and Investigations, and pledged to ask GAO to monitor FERC’s efforts to set up the new office and report back to them within a year.