Energy and Policy in

William E. Kovacic U.S. Federal Trade Commission CNE Madrid, 17 February 2009 Overview y Historical Context y Major Policy Challenges y Opportunities for Comparative Work Historical Context y Intensity of Antitrust Scrutiny of Energy Markets y Examples: Standard Oil (1911), Socony Vacuum (1940) y Extensive Regulatory Intervention and Political Oversight y Price and output controls y Repeated studies: pressure guage model y Regulatory Fragmentation: Federal, State, Local y Intersection with National Security y FTC, International Petroleum study (1940s) y Proposed CNOOC/Unocal Transaction (2007) y Social Impact of Relatively Inexpensive Energy Supplies Modern Policy Challenges y Formative Influence of Crisis y Regulatory Archipelago y Petroleum and Natural Gas y Electricity y Supply, Demand, Climate Control Formative Influence of Crisis y Enron (CFTC and FERC) y Madoff (SEC) y Subprime Mortgages (Treasury and Federal Reserve Board) y Perceived Lessons Regulatory Archipelago y Two National Competition Agencies: DOJ and FTC y National Sectoral Regulator: FERC y State Antitrust Offices y State Sectoral Regulators: Public Service Commissions y Local Oversight: E.g., Transmission Line Location Decisions y Private Rights of Action y Optimal Regulatory Design and National Economic Advantage Petroleum and Natural Gas y : 1990s Transactions and GAO (2004) Study y Conduct Inquiries: E.g., Unocal and Standards y Studies: E.g., Katrina Report (2006) y Price Monitoring Project and Raised Expectations y Market Manipulation Statute (2007) y Discussions of Price-Gouging Legislation y Response to Legislative Inquiries y Cases: In re Exxon (1973) y Studies y Hearings: e.g., Majoras confirmation proceedings (2004) Electricity y Shared Authority y Importance of Regulatory Design: Enron y FTC Market Studies: Retail Electricity Competition (2002) y Behavioral Economics and Consumer Choice y Regulatory Simplification y and Green Claims Supply, Demand, Climate Control y Boutique Fuels y Refinery Construction or Expansion y Transmission Siting y Terminal and Pipeline Location Larger Policy Challenges y Public and Political Demands That Energy Supplies Be: y Abundant, cheap, and green y Are US Energy Prices Too High or Too Low? y Educational Role with Legislature? y Staff Morale and Study Fatigue y Is Regulatory Framework Subject to Change? y Crisis as catalyst? Case of electricity transmission y Vulnerability of regulatory controls to manipulation: e.g., land use Future FTC Work Program y Comparative Work: Common Research Projects with y Competition authorities y Energy regulators y Deeper Consultation with y Energy regulators y Environmental protection authorities y Role as Convenor y Evaluation of Mergers and Other Phenomena