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The Commission has authorized staff of the Bureau of Economics and of Policy Planning to submit an advocacy comment to the U.S. Department of Energy (DOE) regarding its proposal to impose mandatory reliability standards on the electric power industry that would be enforced by the Federal Energy Regulatory Commission (FERC). DOE is concerned that the existing voluntary, self-regulatory approach to electric power reliability, which is administered by the North American Electric Reliability Council (NERC), is at risk as competition intensifies under a variety of federal and state regulatory reforms.

The FTC has a longstanding interest in regulation and competition in energy markets, including proposals to reform regulation of the electric power and natural gas industries. The staff has submitted numerous comments concerning these issues at both the federal and state levels, and the FTC has reviewed proposed mergers of electric power companies with natural gas utility companies.

The staff comment explains that in a restructured electric power industry, reliability and competition issues are linked due to the need to match supply and demand instantaneously and continuously, given the fact that electric power cannot be stored. The comment then discusses three issues that DOE may wish to consider when deciding how best to ensure the continued reliability of electric power. First, the comment notes that efforts to address reliability in isolation from competition aspects of the economic performance of the power industry may not be successful, given the technological and market conditions that link these issues. Instead of limiting its concerns to reliability, DOE may wish to broaden its proposal to consider elements of comprehensive regulatory reform.

Second, if DOE does choose to restrict its proposal to reliability concerns, the comment suggests that the agency may wish to explicitly recognize that competition policy instruments are likely to have such an impact on reliability that they should be included in the flexible array of reliability policy instruments considered by FERC and state regulators. Finally, the comment notes that DOE may wish to consider whether, and under what circumstances, the formation of regional transmission organizations (RTOs) subsumes the present proposal.

This comment represents the views of the staff of the Bureau of Economics and of Policy Planning of the Federal Trade Commission. They are not necessarily the views of the Federal Trade Commission or any individual Commissioner. The Commission vote authorizing staff to file the comment was 5-0. The complete comment is available on the FTC Web site, as detailed below. (File No. V000016; staff contact is Michael S. Wroblewski, 202-326-2155.)

Copies of the documents mentioned in this release are available from the FTC's Web site at http://www.ftc.gov  and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the online complaint form. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

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