FERC Nominee Spitzer Cautions Against Dependence on LNG

FERC nominee Marc Spitzer Wednesday cautioned against the nation's growing reliance on liquefied natural gas (LNG), saying the United States shouldn't put all of its "eggs in one basket."

"I'm not naysaying LNG as a natural gas alternative. But again to put all you eggs in one basket doesn't seem to me to be the right choice," the Arizona regulator said during a brief confirmation hearing before the Senate Energy and Natural Resources Committee. Spitzer has been tapped for a five-year term on the Federal Energy Regulatory Commission expiring June 30, 2011. If confirmed by the Senate, he would replace outgoing Commissioner Nora Mead Brownell, who is expected to leave FERC in early August.

"My experiences in Arizona suggested that LNG can be problematic. There were tankers that were headed toward the United States that, based on price volatility, changed direction when there was a crisis in Europe and made deliveries to England. So we were without supply in that circumstance," Spitzer told the Senate panel.

"In the case of long-term fixed contracts [for LNG], some of the producers in very volatile, turbulent parts of the world are requiring 20-year fixed term contracts, the consequence [of which] would be trillions of dollars leaving the United States to foreign countries," he said.

Spitzer believes the key is "diversity" of natural gas supply. The same can be said for electricity -- diversity of fuel for power generation, he said.

Sen Lisa Murkowski (R-AK) echoed that sentiment. We do need to have a diversified portfolio of our energy [fuels] and, more importantly, we must focus on the domestic side first so that we don't have that exposure, that vulnerability that we have seen certainly with oil," she said.

The bulk of the hearing focused on electric issues, with senators seeking Spitzer's views on the use of alternative fuels (wind and solar) to power electric generation, how he would address regional flexibility with respect to reliability standards, promote greater investment in transmission facilities, and prevent cross-subsidization between utilities and non-utility affiliates in cases of mergers and acquisitions.

Sen. Jeff Bingaman of New Mexico, the ranking Democrat on the Senate panel, expressed concern that FERC is not properly carrying out a provision in the Energy Policy Act of 2005 (EPAct), which requires the agency to assess whether mergers or acquisitions would result in the cross-subsidization of utility assets with non-utility affiliates. He noted that Congress in EPAct, in imposing that requirement, tried to replace the protections for utility customers and competitive markets that were lost with the repeal of the Public Utility Holding Company Act.

Spitzer said that Arizona and other state commissions have been sensitive to the problem. He noted that state regulators have the ability to carry out ring-fencing, which prevents the earnings of a utility company from being diverted to a non-utility affiliate. This "should give the senator some comfort."

But "my view [is] that in some of the mergers and acquisitions that are likely to move ahead in coming years the ability of some states to properly monitor and properly protect consumers may not be adequate," Bingaman said. The Commission needs to be "sufficiently focused and energized" on this issue.

Spitzer told senators that he would work to assure greater access to the transmission grid for generators who use renewable fuels, such as wind and solar energy, in power generation. It is "important from a philosophical point of view that wind have equal access" to the grid, he said. Spitzer also signaled that he would work to promote regional transmission groups.

In addition, he noted it was imperative for FERC to work with the states in a cooperative fashion to provide some regional flexibility with respect to the reliability standards governing the transmission grid. Spitzer further proposed to work with communities and other stakeholders to overcome the "hostility" to siting new transmission facilities in some parts of the country.

Spitzer has been a commissioner on the Arizona Corporation Commission (ACC) since 2000. He had been chairman of the state commission from 2003-2005, and prior to that was a state senator.

If confirmed by the Senate, Spitzer, a Republican, would join Jon Wellinghoff, a Democrat, and Philip D. Moeller, a Republican, as new members at FERC. Wellinghoff, a partner with the law firm of Beckley Singleton in Nevada, and Moeller, executive director of the Washington office for Wisconsin-based Alliant Energy Corp., were nominated by the White House in March. The Senate energy panel last week approved their nominations to the full Senate, where confirmation could be challenging due to the abbreviated legislative session and crowded agenda (see Daily GPI, June 22). The committee is expected to vote out Spitzer's nomination in short order.

With the addition of the new commissioners, FERC could have a much closer link to western energy markets, given that all three nominees have ties to the West and existing Commissioner Suedeen Kelly is from New Mexico.

The political makeup of the Commission would consist of three Republicans and two Democrats if the new nominees are confirmed. FERC Chairman Joseph Kelliher is a Republican, while Commissioner Kelly is a Democrat.

Spitzer is a native of Pittsburgh, PA, and grew up in Philadelphia. After graduating from Dickinson College in Carlisle, PA, he attended the University of Michigan School of Law.

Copyright 2006 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.


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