Whither the FERC

Overcoming the Existential Threat to Its “Magic Pricing Formula” through Prudent Regulation

A research paper by Dr. Carl Pechman, Director of NRRI

NRRI is pleased to share this important work by Dr. Pechman. In order to ensure the broadest review and to open a discussion of the topics presented here, we encourage readers and reviewers to provide their thoughts and questions about the paper using NRRI’s new Learning Management System.

To join the discussion, download the paper and follow the steps below.

  1. Ensure you have a “MyNARUC” account by visiting and logging in or signing up for an account.
  2. Visit NRRI’s Regulatory Training Initiative LMS and log in using your MyNARUC username and password. [If you have just come from the MyNARUC site, your credentials may be “saved” and no further login will be required.]
  3. Click on “Discussion Forum” in the top navigation bar.
  4. Click on the “Whither FERC Discussion Board” and read the “Guidelines and Rules of Engagement” thread.
  5. Contribute to the discussion, and while you’re there, check out our course offerings!

By regulating our nation’s wholesale electric and natural gas markets, the FERC plays a critical role in the health of the US economy.  It will also play a vital role in the success or failure of efforts to reduce greenhouse gas emissions by crafting a regulatory environment in which various options will either flourish or wither and die.  Central to FERC’s role is its consumer protection mandate to ensure that wholesale electricity rates are “just and reasonable.”  It does this by overseeing the rates, operations, and design of what is frequently referred to as ‘the grid.’  This paper addresses the emerging issue of how to regulate the complex electric market, which has both a growing mandate to decarbonize and a need to accommodate the changing role of the customer from “load” to producer-consumer, or “prosumer.”   This paper asks a key question: “Does FERC’s reliance on a ‘magic pricing formula’ artificially and possibly incorrectly limit the regulatory choices that it considers as options when it thinks about the future, and if so, what might replace that formula?”

The recent NRRI Insights paper, Rethinking FERC, is an excerpt from Dr Pechman’s forthcoming publication, “Whither the FERC: Overcoming the Existential Threat to the Magic Pricing Formula through Prudent Regulation.”