Energy Markets:

Concerted Actions Needed by FERC To Confront Challenges That Impede Effective Oversight

GAO-02-656: Published: Jun 14, 2002. Publicly Released: Jun 18, 2002.

Additional Materials:

Contact:

James E. Wells, Jr
(202) 512-6877
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Federal Energy Regulatory Commission (FERC) has not yet adequately revised its regulatory and oversight approach to respond to the transition to competitive energy markets. FERC recognizes that the transition from highly regulated monopolies to competitive markets requires a fundamental change in how it does business. However, it has struggled through various strategic planning and other efforts to define the specific strategies, processes, and activities to regulate and oversee these markets. GAO found that FERC (1) has had difficulty recruiting staff because it has trouble competing with private sector salaries; (2) faces the retirement of more than one-quarter of its employees by 2005; (3) has used recruitment bonuses, retention allowances, tuition reimbursement, and flexible work schedules to attract new staff and to retain current employees but has not taken advantage of the full range of personnel flexibilities and tools available to federal agencies, such as special salary rates; and (4) has not developed a strategic human capital management plan to assess its workforce needs and to develop strategies to address them.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Since GAO issued its report, Congress has held several hearings on FERC and its oversight of wholesale electricity markets. During these deliberations, Congress has given considerable attention to the authorities of FERC and other agencies such as SEC and CFTC that have responsibilities for overseeing aspects of energy markets. In some cases, Congress has proposed changes in FERC's authorities.

    Matter: To help ensure that FERC can effectively carry out its oversight role with respect to energy markets, Congress may wish to convene public hearings to review FERC's authorizing legislation and determine, in consultation with FERC Commissioners, whether FERC's authorities need to be revised in light of the changing energy markets.

  2. Status: Closed - Implemented

    Comments: The Energy Policy Act of 2005 (EPACT 2005) increased criminal penalties for some violations and expanded civil penalty authority for others. Previously, civil penalties were very limited or non-existent for many violations. EPACT 2005, sections 1284 and 332, are the primary source of this increase authority. This added authority can be use by FERC against market manipulation and other violations of its Market Behavior Rules.

    Matter: To helf FERC determine improper market behavior, Congress may also wish to consider providing FERC with the appropriate range of authorities to levy civil penalties against market participants that engage in anticompetitive behavior and violate market rules.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In September 2003, FERC updated its strategic plan to cover fiscal years 2003 through 2008. The updated plan contains several outcome-oriented performance measures and more specific strategies for achieving its goals and objectives. In addition, FERC has developed benchmarks to measure market performance, and begun to report on them with issuance of its State of the Markets report in January 2004. FERC has stated its commitment to continue to work on improving its performance measures and benchmarks. The updated plan also more clearly defines the regional transmission organizations' role and FERC's expectations for them in monitoring electricity markets. FERC has not given final approval to any new regional transmission organizations, but proposals for additional regional organizations are in varying stages of development. FERC has established strong market monitoring requirements that these organizations must meet to be approved.

    Recommendation: To help ensure that FERC can effectively carry out its responsibilities for overseeing interstate wholesale natural gas and electricity markets, the Chairman, FERC, should update FERC's strategic plan to include outcome measures that can be used to assess how well FERC is doing in achieving its strategic goals and objectives for overseeing competitive energy markets. This plan should also include specific strategies for achieving the goals and objectives that set out explicitly how FERC will work with market participants to provide comprehensive oversight of the markets. Because of their significant role in FERC's oversight approach, the plan should set out clear expectations for how transmission organizations will monitor energy markets and how FERC will evaluate the effectiveness of their market monitoring units. These expectations should be made part of FERC's approval of these transmission organizations.

    Agency Affected: Federal Energy Regulatory Commission

  2. Status: Closed - Implemented

    Comments: FERC established a new Office of Market Oversight and Investigations (OMOI) in August 2003, to develop and implement an action plan for overseeing electricity and natural gas markets. This action plan has been set out in the agency's strategic and annual performance plans under FERC's market oversight goal and in the delineation of OMOI's and its divisions' roles and responsibilities. These documents describe how OMOI will work with market monitoring units in areas where regional transmission organizations exist and how it will use its Enforcement Hotline, Market Monitoring Center, and focused audits to oversee markets in areas where regional transmission organizations do not exist. Monitoring the informal markets in areas without transmission organizations is still a challenge. However, FERC has put more emphasis on its Enforcement Hotline, expanded the commercially-available market data available in its Market Monitoring Center, and is conducting more audits.

    Recommendation: To help ensure that FERC can effectively carry out its responsibilities for overseeing interstate wholesale natural gas and electricity markets, the Chairman, FERC, should develop an action plan for overseeing energy markets, in particular for electricity, until the transmission organizations' market monitoring units become fully operational and FERC can implement a comprehensive oversight approach for these markets. In developing the action plan, FERC should examine how it can use the bulk power studies and the data sources currently available through the Market Observation Resource room as more effective market monitoring tools.

    Agency Affected: Federal Energy Regulatory Commission

  3. Status: Closed - Implemented

    Comments: FERC has expanded its use of existing personnel flexibilities and continues to make broader human capital program changes. For example, it has implemented a student loan repayment program and has identified additional flexibilities that could prove useful in attracting and retaining quality employees, including making distinctions between employee performance by using a pay-for-performance system. Performance incentive awards have increased to as much as 17 percent of pay in order to retain individuals with needed expertise. Further, OPM has "certified" that FERC is providing meaningful distinctions in its performance appraisal system and is asking for additional improvements. According to FERC officials, the goal for FERC's human capital program is similar to GAO's human capital efforts--that is, to be exempted from Title V resource regulation in order to more fully implement a pay-for-performance system with broad banding. With regard to identifying and targeting additional training, FERC has implemented an agency-wide markets-oriented training program which is being taught by experts from the different offices. FERC's Division of Human Resources Services and the program offices are analyzing participant feedback and making necessary improvements.

    Recommendation: To help ensure that FERC has the mix of staff skills and expertise that it needs to effectively carry out its regulatory and oversight responsibilities for emerging competitive energy markets, the Chairman, FERC, should identify the personnel tools, flexibilities, and strategies, other than those already in use by FERC, available to federal agencies to recruit and retain employees. A formal internal assessment of the effectiveness and applicability of these to FERC, especially for the new Office of Market Oversight and Investigation, should be conducted. On the basis of this analysis, the Chairman should develop an action plan to use the appropriate tools, flexibilities, and strategies to begin to recruit and hire needed expertise. The Chairman should also develop an action plan to identify and target additional training and development opportunities for current staff involved or potentially involved in carrying out FERC's market oversight functions.

    Agency Affected: Federal Energy Regulatory Commission

  4. Status: Closed - Implemented

    Comments: In February 2003, the Chairman of FERC approved the agency's first strategic human capital management plan that lays the foundation for the agency to strategically manage its workforce. For each FERC office, the plan identifies the current and future skills it needs to achieve FERC's strategic goals. Where gaps existed between current and future skill needs, the offices have developed human capital initiatives to close the gaps.

    Recommendation: In the longer term, the Chairman, FERC, should develop a comprehensive strategic human capital management plan to guide FERC's efforts to recruit, develop, train, and retain staff knowledgeable in regulating competitive markets. The plan should be linked to FERC's strategic and business plans and should include a skills assessment program that would identify gaps in skills currently held by the workforce that are necessary to carry out FERC's evolving regulatory and oversight responsibilities.

    Agency Affected: Federal Energy Regulatory Commission

  5. Status: Closed - Implemented

    Comments: In February 2003, the Chairman of FERC approved the agency's first strategic human capital management plan. This plan lays the foundation for the agency to strategically manage its workforce. Concerning recruitment and retention, the plan establishes attracting and retaining talented, diverse employees capable of maintaining excellence as a human resource goal. To accomplish this goal, the plan identifies various objectives, including implementing recruiting and retention strategies based on the results of a workforce planning process and the offices' hiring plans. The plan also identifies a number of other recruitment and retention initiatives, including an exit interview process to track and document why employees leave. This information will be used to support or modify agency personnel practices in order to improve employee retention.

    Recommendation: In the longer term, the Chairman, FERC, should develop a comprehensive strategic human capital management plan to guide FERC's efforts to recruit, develop, train, and retain staff knowledgeable in regulating competitive markets. The plan should be linked to FERC's strategic and business plans and should include a recruitment and retention initiative, based on priorities for meeting future regulatory and oversight staffing needs, which addresses filling skill gaps in the current workforce.

    Agency Affected: Federal Energy Regulatory Commission

  6. Status: Closed - Implemented

    Comments: In February 2003, the Chairman of FERC approved the agency's first strategic human capital management plan. With respect to training, the plan establishes development opportunities to expand individual and organizational capabilities as a goal. An objective under this goal is to upgrade the effectiveness of the central and individual office training programs. The plan recognizes that FERC needs to implement a revamped energy markets curriculum to ensure that staff, such as those in the Office of Market Oversight and Investigations, have current, market-oriented skills and expertise. One of the next steps in the plan is that the human resources staff will coordinate the offices' efforts to design and offer training for managers and to develop a markets-oriented curriculum to build organizational and staff expertise. FERC is already starting to develop the curriculum called for in the plan.

    Recommendation: In the longer term, the Chairman, FERC, should develop a comprehensive strategic human capital management plan to guide FERC's efforts to recruit, develop, train, and retain staff knowledgeable in regulating competitive markets. The plan should be linked to FERC's strategic and business plans and should include a training effort targeted at increasing staff knowledge in the areas of market functions and market structures, so that FERC staff will be better prepared to regulate and oversee competitive energy markets.

    Agency Affected: Federal Energy Regulatory Commission

  7. Status: Closed - Implemented

    Comments: In February 2003, the Chairman of FERC approved the agency's first strategic human capital management plan. The plan identifies succession planning as a challenge and points out that over half of FERC's workforce will be eligible to retire by 2007. It also sets out the establishment of a leadership succession planning program as an objective under its building leadership goal. To further address this challenge, many of FERC's offices intend to develop their own succession planning strategies.

    Recommendation: In the longer term, the Chairman, FERC, should develop a comprehensive strategic human capital management plan to guide FERC's efforts to recruit, develop, train, and retain staff knowledgeable in regulating competitive markets. The plan should be linked to FERC's strategic and business plans and should include a comprehensive succession plan for solving challenges posed by the large number of impending retirements within FERC, including reliable projections of the number of eligible staff who may actually retire.

    Agency Affected: Federal Energy Regulatory Commission

 

Explore the full database of GAO's Open Recommendations »

Sep 14, 2016

Sep 8, 2016

Aug 11, 2016

Aug 9, 2016

Aug 4, 2016

Jul 15, 2016

Jul 14, 2016

Jun 20, 2016

Mar 3, 2016

Looking for more? Browse all our products here