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Report to Congressional Requesters:

United States General Accounting Office:

GAO:

June 2003:

Electricity Restructuring:

Action Needed to Address Emerging Gaps in Federal Information 
Collection:

GAO-03-586:

GAO Highlights:

Highlights of GAO-03-586, a report to Congressional Requesters 

Why GAO Did This Study:

The ongoing transition (or restructuring) of electricity markets from 
regulated monopolies to competitive markets is one of the largest 
single industrial reorganizations in the history of the world. While 
information is becoming more critical for understanding how well 
restructuring is working, there are troubling indications that some 
market participants deliberately misreported information to manipulate 
prices. GAO was asked to describe (1) the electricity information 
collected, used, and shared by key federal agencies in meeting their 
primary responsibilities and (2) the effect of restructuring on these 
federal agencies’ collection, use, and sharing of this information.

What GAO Found:

Federal agencies collect, use, and share a wide variety of electricity-
related information to carry out their respective missions. Federal 
agencies have three principal sources of information: (1) routine 
formal data collection instruments sent to industry participants to 
report on operations and other industry-related activities, (2) third 
parties such as energy news services that package federally collected 
information as well as collect original information some of which 
reflects current market conditions, and (3) individual companies under 
investigation. Agencies use the information that they collect to carry 
out their respective missions—ranging from Federal Energy Regulatory 
Commission’s (FERC) monitoring of electricity markets to Energy 
Information Administration’s dissemination of information about the 
electricity sector and Environmental Protection Agency’s pollution 
monitoring. Agencies share electricity-related information through a 
variety of means, such as using the Internet to distribute published 
reports and access their databases, interagency meetings, and other 
means. In addition, most federally collected information is made 
ublicly available, although it is sometimes subject to delayed release 
or released in aggregated form in order to protect business-sensitive 
information.

Restructuring has substantially changed the collection, use, and 
sharing of electricity information at some agencies and has exposed 
gaps in the federal government’s collection of this information. 
Restructuring has affected FERC dramatically by changing how FERC 
performs its mission of assuring just and reasonable prices and by 
shifting its focus from periodic review of cost information to 
monitoring current market conditions. To monitor these conditions, 
FERC needs to access market information on wholesale transactions; 
however, no federal agency, including FERC, has access to complete and 
timely information on electricity markets and market participants, 
exposing gaps in key information. Such information gaps exist 
primarily because FERC is limited in its authority to collect 
information for full and effective market oversight and it lacks 
specific authority to collect current information which may lead to 
market participants challenging these collection activities. For 
example, FERC authority does not generally extend to non-
jurisdictional entities such as the power marketing administrations, 
other non-utilities, and North American Electric Reliability Council. 
As long as these information gaps persist, FERC will be unable to 
oversee electricity markets in a comprehensive manner.

Restructuring’s effects on the sharing of electricity information, 
coupled with recent national security concerns, have highlighted the 
sensitive nature of some information that federal agencies collect or 
need. Because of the importance of having timely, reliable, and 
complete information, we are recommending that FERC take action to 
resolve its information gaps. As part of this action, we are 
recommending that FERC present its findings to the Congress because 
information-related issues—raised by restructuring—may require 
Congressional action to ultimately resolve.

what GAO Recommends: 

Effective oversight of evolving electricity markets requires the 
acquisition of and access to timely, reliable, and complete 
information, therefore, we recommend that the Chairman, FERC (1) 
demonstrate what information it needs, (2) describe the limitations 
resulting from not having this information, and (3) ask the Congress 
for sufficient authority to meet its information collection needs and 
responsibilities. FERC generally agreed with the conclusions, 
specifically that its authority to collect information has not kept 
pace with the changing electricity market, and added that it will have 
the results from its information assessment at the end of the year.

Contents:

Letter:

Results in Brief:

Background:

Agencies Collect, Use, and Share Electricity-Related Information to 
Meet Missions:

Restructuring Has Exposed Gaps in Agencies' Electricity Information and 
Has Affected How This Information Is Shared:

Conclusions:

Recommendations for Executive Action:

Agency Comments:

Objectives, Scope, and Methodology:

Appendix I: Description of Data Collection Forms and Legislation 
Authorizing Collections for FERC and EIA:

Appendix II: Third-Party Data Sources:

Appendix III: EIA Confidentiality Elements:

Appendix IV: Comments from the Federal Energy Regulatory Commission:

Appendix V: Comments from the Department of Energy:

Appendix VI: GAO Contact and Staff Acknowledgments:

Figure:

Figure 1: Major Federal Collectors of Electricity Information:

Abbreviations:

DOE: Department of Energy:

EIA: Energy Information Administration:

EPA: Environmental Protection Agency:

EPACT: Energy Policy Act:

FERC: Federal Energy Regulatory Commission:

FPA: Federal Power Act:

ISO: independent system operator:

NERC: North American Electric Reliability Council:

OMB: Office of Management and Budget:

OMOI: Office of Market Oversight and Investigation:

PUHCA: Public Utility Holding Company Act:

PURPA: Public Utility Regulatory Policies Act:

RTO: regional transmission organization:

RUS: Rural Utilities Service:

SEC: Securities and Exchange Commission:

United States General Accounting Office:

Washington, DC 20548:

June 30, 2003:

The Honorable Peter DeFazio 
The Honorable Jay Inslee 
The Honorable Adam Smith 
House of Representatives:

Industry experts have described the ongoing transition (or 
restructuring) of electricity markets from regulated monopolies to 
competitive markets as one of the largest single industrial 
reorganizations in the history of the world. Proponents of 
restructuring expect it to lead to a range of benefits for consumers, 
including lower prices and a wider array of retail electricity services 
than had previously been available. However, opponents have raised 
concerns about restructuring in light of recent events, such as the 
extremely high electricity prices and market manipulation during the 
electricity crisis in California in 2000 and 2001.

In this changing and uncertain environment, accurate information on 
electricity trading and pricing is becoming more critical for not only 
evaluating the potential benefits and risks of restructuring, but also 
monitoring market performance and enforcing market rules. Information 
on the cost of electricity, for example, is critical in determining 
whether restructuring is achieving lower prices. Information on 
existing and new generating plants is critical in determining whether 
electricity supply will be sufficient to ensure reliable supplies. In 
addition, information is critical to monitor emissions and comply with 
air quality standards in the future. While information is becoming more 
critical for understanding how well restructuring is working, there are 
troubling indications that the quality of some information may be 
suspect. For example, we recently reported[Footnote 1] 
that participants at a Federal Energy Regulatory Commission (FERC) 
conference raised concerns about the quality of price information due 
to the low volume of trading activity in some markets and to some 
market participants making inaccurate information available to 
the public.

In response to the growing importance of electricity information and 
concerns about its quality, you asked us to describe (1) the 
electricity information collected, used, and shared by key federal 
agencies in meeting their primary responsibilities and (2) the effect 
of restructuring on these federal agencies' collection, use, and 
sharing of this information. In addressing these objectives, we 
primarily examined the information activities of FERC and the Energy 
Information Administration (EIA) within the Department of Energy (DOE). 
We focused on FERC because it bears the main responsibility for 
monitoring electricity markets, is undergoing major organizational 
changes caused by restructuring, and has faced significant challenges 
in responding to restructuring, as we have described in previous 
reports.[Footnote 2] We focused on EIA because it is the main U.S. 
statistical agency with responsibility for providing data and analysis 
covering the energy sector. In addition to FERC and EIA, we examined 
electricity-related activities at the Office of Fossil Energy within 
DOE, the Environmental Protection Agency (EPA), the Rural Utilities 
Service (RUS) at the U.S. Department of Agriculture, the Securities and 
Exchange Commission (SEC), the Department of Justice, the Federal Trade 
Commission, and the Commodity Futures Trading Commission. Due to 
limitations in the time frame for our review, we did not perform a 
detailed evaluation of these agencies' missions to determine whether 
information and data available to them was sufficient to meet 
their responsibilities.

Results in Brief:

Federal agencies collect, use, and share a wide variety of electricity-
related information to carry out their respective missions. Federal 
agencies have three principal sources of information: (1) routine 
formal data collection instruments sent to industry participants to 
report on operations and other industry-related activities, (2) third 
parties such as energy news services that package federally collected 
information as well as collect original information, some of which 
reflects current market conditions, and (3) individual companies under 
investigation. Agencies use the information that they collect to carry 
out their respective missions--ranging from FERC's monitoring of 
electricity markets to EIA's dissemination of information about the 
electricity sector and EPA's pollution monitoring. Agencies share 
electricity-related information through a variety of means, such as 
using the Internet to distribute published reports and access their 
databases, interagency meetings, and other means. For example, EIA 
serves as a repository of historical industry information and makes it 
accessible for other agencies to use through the Internet. In addition, 
most federally collected information is made publicly available, 
although it is sometimes subject to delayed release or released in 
aggregated form in order to protect business-sensitive information.

Restructuring has substantially changed the collection, use, and 
sharing of electricity information at some agencies and has exposed 
gaps in the federal government's collection of this information. 
Restructuring has most profoundly affected FERC by dramatically 
changing how FERC performs its mission of ensuring fair and reasonable 
prices and by shifting its focus from periodic reviews of cost 
information to monitoring current market conditions. In order to 
monitor current market conditions, FERC needs to access market 
information on wholesale transactions; however, no federal agency, 
including FERC, has access to complete and timely information on the 
operations of electricity markets and market participants, exposing 
gaps in key information. For example, complete and timely information 
on the operation of electric generating plants is not generally 
accessible to federal agencies, although this information is generally 
deemed important to evaluate reliability of the electricity system as 
well as to monitor the behavior of electricity generating companies. 
Such information gaps exist primarily because FERC is limited in its 
authority to collect information for full and effective market 
oversight and because it lacks specific authority to collect current 
information that may lead to market participants challenging these 
collection activities. As long as these information gaps persist, FERC 
will be unable to oversee electricity markets in a comprehensive 
manner.

Restructuring's effects on the sharing of electricity information, 
coupled with recent national security concerns, have highlighted the 
sensitive nature of some information that federal agencies collect or 
need. For example, electricity generating plant owners consider 
information regarding the operation of their plants to be commercially 
sensitive and thus are reluctant to provide such information without 
assurances that the information will remain confidential.

Because of the importance of having timely, reliable, and complete 
information, we are recommending that FERC take action to resolve 
its information gaps. As part of this action, we are recommending that 
FERC present its findings to the Congress because information-related 
issues--raised by restructuring--may require congressional action to 
ultimately resolve. FERC generally agreed with the conclusions, 
specifically that its authority to collect information has not kept 
pace with the changing electricity market, and added that it will have 
the results from its information assessment at the end of 2003.

Background:

The overall transition known as "restructuring" in the electricity 
industry reflects a shift from a monopolistic to a more competitive 
industry. The electric utility industry was considered one of the 
nation's most regulated industries, with states regulating utilities' 
retail or intrastate activities and the federal government regulating 
utilities wholesale or interstate transactions. In the past, 
electricity service providers enjoyed a natural monopoly, providing 
electricity generated by their plants, transmitted over their power 
lines, and distributed to their customers. Two key factors led that 
monopolistic structure to move toward a more competitive marketplace. 
First, new technologies reduced the cost and size of generating 
electricity effectively. Currently, there is a preference for 
small-scale production facilities that can be brought on-line more 
quickly and cheaply with fewer regulatory impediments. Second, federal 
changes were made in the industry's regulation. Specifically, the 
enactment of the Public Utility Regulatory Policies Act (PURPA) of 1978 
initiated the process for a transition or restructuring to a freer 
electric power market by requiring utilities to buy electricity 
produced by nonutility producers. Then in 1992, the Energy Policy Act 
(EPACT) was enacted and removed several regulatory barriers to entry 
into electricity generation and promoted further competition.

Restructuring is underway for wholesale markets, which involve the 
sale of electricity for resale. It is also underway for some retail 
sales to end users, which include residential, commercial, industrial, 
and other consumers. Federally regulated wholesale power markets 
already provide market-based prices. States, however, vary greatly in 
their response to restructuring: some states have introduced 
competition to the retail markets in their states, others have begun to 
restructure but then delayed or suspended these efforts, and others 
still have taken no steps to restructure their markets. As the industry 
adapts to restructuring, many utilities are facing greater competition 
from nonutilities and other new entities such as power marketers. The 
introduction of competition has considerably expanded the number and 
types of business arrangements involving generation and transmission of 
electricity. In addition, proposals for new regulatory structures to 
oversee the new industry are emerging.

FERC and EIA are the two leading entities for the collection, analysis, 
and evaluation of electric power information. FERC collects information 
to assure just and reasonable rates on the basis of costs. FERC also 
collects and obtains information from other federal and nonfederal 
sources to monitor and regulate competitive markets for wholesale 
electricity to similarly determine if these prices are just and 
reasonable. EIA is mandated to collect, assemble, evaluate, analyze, 
and disseminate energy data and energy information for the Congress, 
the federal government, the states, and the public.

The Federal Power Act (FPA) of 1935, PURPA, and EPACT drive 
FERC's information collection activities. FPA authorizes FERC to 
collect and record information to the extent it deems necessary and to 
prescribe rules and regulations concerning accounts, records, and 
memoranda. In general, FPA provides for federal oversight of interstate 
transmission and wholesale sales by public utilities. Forty-three years 
later, the Congress enacted PURPA in response to the unstable energy 
climate of the late 1970s. PURPA authorizes FERC to collect information 
on the basic cost and quality of fuels at electric generating plants. 
FERC uses such data to conduct fuel reviews and rate investigations and 
to track market changes and trends. In addition, PURPA requires public 
utilities to report on electric energy shortages and contingency plans 
to FERC and appropriate state agencies. In 1992, the Congress enacted 
EPACT. EPACT created a new category of power sellers called exempt 
wholesale generators that are not subject to regulation under the 
Public Utility Holding Company Act (PUHCA), which governs how utilities 
can be legally organized. These power sellers must apply to FERC for 
PUHCA exemption.

Legislation created EIA and defined its information collection 
activities. In 1974, the Congress enacted the Federal Energy 
Administration Act that created the Federal Energy Administration. The 
act mandated the Federal Energy Administration to collect, assemble, 
evaluate, and analyze energy information for the federal government, 
state governments, and the public and provided it with information 
collection enforcement authority for gathering information from energy 
producing and consuming firms. Two years later, the Energy Conservation 
and Production Act established the Office of Energy Information and 
Analysis, mandating it to operate a comprehensive National Energy 
Information System; possess expertise in energy analysis and 
forecasting; coordinate information activities with federal agencies; 
promptly provide upon request any energy information to any duly 
established committee of the Congress; and make periodic reports on the 
energy situation and trend to the Congress. In 1977, by enacting the 
Department of Energy Organization Act, the Congress established EIA as 
the federal authority for energy information. This act gave EIA 
independence to collect energy data and report energy information, 
including all the provisions of its predecessor, and established an 
annual survey to gather and report detailed energy industry financial 
data. In 1992, EPACT required EIA to expand its data gathering and 
analysis in several areas, including energy consumption, alternative-
fueled vehicles, greenhouse gas emissions, fossil fuel transportation 
rates and distribution patterns, electricity production from renewable 
energy sources, and foreign purchase and imports of uranium.

Federal agencies' information collection activities are subject to the 
Paperwork Reduction Act. The purpose of the Paperwork Reduction 
Act is to minimize the paperwork burden for all individuals and 
entities that must report information to the federal government. The 
Office of Management and Budget (OMB) oversees governmental initiatives 
to reduce the paperwork burden and improve the management of 
information resources. The Paperwork Reduction Act requires federal 
agencies to submit their data collection tools to OMB for review. OMB 
is also responsible for the implementation of the Government Paperwork 
Elimination Act, which requires federal agencies, by October 21, 2003, 
to allow individuals, or entities that interact with the agencies, the 
option of submitting information to agencies electronically, 
whenever practicable.

The North American Electric Reliability Council (NERC) is one of the 
most important nonfederal entities that collect data from the 
electricity industry. NERC, formed as a result of a devastating outage 
in the northeast during November 1965, was established to promote the 
reliability of the interconnected electric power system. NERC 
membership is voluntary, consists of representatives from utilities 
across North America, and provides a forum for the electric utility 
industry to develop policies, standards, and guidelines designed to 
ensure reliability. One of its key functions is to collect information 
from its members, among other things, on power plant operations and 
outages. NERC reports information in an aggregated format to protect 
information its members consider sensitive.

Agencies Collect, Use, and Share Electricity-Related Information to 
Meet Missions:

Federal agencies collect three types of electricity-related information 
for widely varying purposes in accordance with their different 
missions. Some agencies such as FERC, EIA, RUS, SEC, and EPA collect 
information on an ongoing, regular basis, using forms or form-like 
surveys. However, there is a time differential between the reporting 
period, when the information is collected and when an agency reports 
the information. As a result, the information usually does not reflect 
current market conditions. Restructuring has led to a greater need for 
a second type of information, focusing on current activities, for 
purposes of monitoring by FERC in particular. Third-party sources, such 
as Bloomberg's Professional Services, provide current and historical 
information on regional electricity and gas markets, including spot and 
future prices, market commentary, plant outage information, and energy 
news. Investigations create a need for a third type of information, 
when an agency such as the Department of Justice gathers information 
mainly in conjunction with specific company criminal investigations. To 
meet their missions, agencies collect a wide variety of electricity-
related information. FERC and EIA are the primary gatherers of such 
information while other agencies, such as the Federal Trade Commission, 
have gathered information only for occasional reports.

As shown in figure 1, FERC, DOE's EIA and Office of Fossil Energy, 
RUS, and EPA specifically collect information related to generation, 
transmission, and/or distribution functions of electric power. FERC, 
EIA, and RUS collect information related to all three of these 
functions. In addition, EIA collects end-user information such as 
residential, commercial, and industrial usage. Additionally, DOE's 
Office of Fossil Energy is the only office that collects information 
related to electricity imports and exports. Finally, EPA collects 
emissions information related to the generation of power. The following 
graphic depicts federal agency information collections within 
these functions.

Figure 1: Major Federal Collectors of Electricity Information:

[See PDF for image]

[End of figure]

FERC Collects Form-Based and Current Information to Oversee 
Electricity Markets:

FERC, an independent regulatory agency, was established in 1977 as a 
successor to the Federal Power Commission. In addition to regulating 
and overseeing the interstate transmission and interstate wholesale 
sales of natural gas and electricity, FERC regulates the interstate 
transmission of oil by pipeline; licenses and inspects private, 
municipal, and state hydroelectric projects; and approves site choices 
as well as decisions to abandon interstate pipelines and related 
facilities no longer in use. In responding to this mission, FERC stated 
that it chooses regulatory approaches that foster competitive markets 
whenever possible, assures access to reliable service at a reasonable 
price, and gives full and fair consideration to environmental and 
community impacts in assessing the public interest of energy projects. 
Among its other duties, it reviews the rates set by the four federal 
power marketing administrations.[Footnote 3] FERC does not have 
legislative authority over electricity generation siting, construction 
of transmission lines, intrastate transmission, or retail sales, all of 
which fall under state or local jurisdiction. FERC also has no direct 
authority over system reliability--that is, ensuring that consumers can 
obtain electricity from the system, when, and in the amount, they want. 
Furthermore, FERC's jurisdiction extends primarily to investor-owned 
utilities. FERC generally does not have jurisdiction over federally 
owned utilities, publicly owned utilities, or most cooperatively owned 
utilities. In 2000, FERC created the Office of Markets, Tariffs, and 
Rates, which was until recently responsible for regulating and 
overseeing competitive energy markets. In 2002, FERC created the Office 
of Market Oversight and Investigation (OMOI), which is still under 
development, to actively monitor developing competitive 
electricity markets.

FERC collects information from the electricity industry, among 
other energy industries. According to a 2002 FERC memorandum regarding 
current information collections, FERC has 19 information collection 
activities that apply specifically to the electricity industry. 
This information generally focuses on activities related to generation 
and fuel, transmission, energy sales and purchases, consumption and 
distribution, and financial information. In addition, it has three 
other information collection activities that relate to all three energy 
industries (electric, natural gas, and oil pipeline). These collection 
activities generally focus on information needed to conduct financial 
and compliance audits, preservation of records, and complaint 
procedures. Various legislative authorities authorize FERC's 
information collection activities and compliance is mandatory.

The Office of Markets, Tariffs, and Rates uses the information from 
these collection activities to provide historical context and assist it 
in regulating and overseeing the terms and conditions for energy 
transactions regulated under the traditional cost-of-service basis, and 
more recently, approval of electricity company mergers. Additionally, 
other offices, such as the Office of Administrative Litigation, which 
is responsible for litigating or resolving cases set for hearings, use 
the information as the basis for hearings. Traditionally, FERC 
primarily relied on standardized forms to routinely collect 
information, authorized by the statute and/or regulation, from entities 
within the electric sector. In the past, most of the information for 
these forms was submitted on paper, but FERC is currently moving toward 
electronic submissions for all of its information collection 
activities. FERC also has established reporting requirements where 
entities must make specific information available to it; however, these 
requirements are reported using a mix of standardized forms or formats. 
As with the forms, reporting requirements are submitted on paper and/or 
electronically. (See app. I for a summary of FERC's forms.):

OMOI uses FERC's traditional information collection activities, 
mentioned above, to provide historical context to assist in 
understanding company activities and during investigations of specific 
companies. However, in light of evolving electricity markets, OMOI also 
subscribes to both commercial and proprietary information services to 
access information related to current market activities. Such services 
provide electricity market information such as prices on the spot 
market and futures contracts, plant outage information, and historical 
trend analysis. OMOI uses this information to oversee electricity 
markets and ensure market participants are not manipulating these 
markets. (See app. II for FERC's third-party sources of current 
market information.):

DOE Organizations Use Forms to Gather a Variety of Electricity 
Information for Analyses, Forecasts, Dissemination, and 
Other Purposes:

Two organizations within DOE are primarily responsible for collecting 
electricity-related information. These organizations, EIA and the 
Office of Fossil Energy (Fossil Energy), rely on forms to collect an 
enormous amount of information at regular intervals. EIA collects this 
information for a wide variety of statistical analyses and may assume 
responsibility for gathering the lesser amount of information for which 
Fossil Energy has been responsible.

EIA is the principal source of comprehensive energy information for 
the Congress, the federal government, the states, and the public. 
According to EIA' s strategic plan, its mission is to provide high 
quality, policy-independent energy information to meet the requirements 
of government, industry, and the public in a manner that promotes sound 
policymaking, efficient markets, and public understanding. The plan 
further states that EIA's sole purpose is to provide reliable and 
unbiased energy information. To meet its goal of providing high-quality 
energy information, the plan states that EIA will provide comprehensive 
information (data, analyses, and forecasts) for all energy types 
(including electricity), stages (production, conversion, distribution, 
supply, consumption, and price) and impacts (technical, economic, 
and environmental).

EIA currently uses about 75 different forms to collect information on 
all aspects of energy, but only 9 of these forms focus on electricity. 
(See app. I for a summary of these forms.) All EIA forms are mandatory, 
with the exception of one part of one specific form as noted in the 
appendix. Information is collected annually or monthly. For its monthly 
surveys, EIA collects information from a sample of electricity 
entities, while the full universe is surveyed annually. In commenting 
specifically on its electric power information collection program, EIA 
notes that its information can be categorized into four broad 
information classes: physical systems, operational statistics, 
financial statistics, and organizational information. Physical system 
information provides the technical specifications for the generators, 
boilers, pollution control equipment, and transmission lines that make 
up the industry. Operational statistics provide the monthly and annual 
details of how the physical plant is operated to satisfy customer 
demand. Financial statistics consist of balance sheets, income 
statements, and supporting account information to determine the cost of 
producing electricity and providing related service. Organizational 
information describes the basic characteristics of the entities that 
comprise the electric power industry, including ownership and control, 
affiliations, and identification and geographical information.

EIA and its customers use the information it collects for a variety of 
purposes. These include monitoring of market trends in supply, demand, 
and prices; analytical activities such as short-and long-term 
forecasting; and inputs to special studies, such as responses to 
congressional inquiries. EIA is also responsible for making sure its 
data are available to the public in easily accessible and user-
friendly formats.

Among its other responsibilities, Fossil Energy is responsible for the 
federal international electricity program, which consists of two 
elements: (1) granting presidential permits for the construction and 
operation of electric transmission lines that cross the U.S 
international border and (2) authorizing exports of electric energy to 
foreign countries. Fossil Energy collects information on electric power 
imports and exports from both presidential permit and authorized export 
holders. The mandatory information is used in an annual report that 
summarizes the electricity trade between the United States and Mexico 
or Canada during each calendar year. A Fossil Energy official told us 
that EIA will eventually take over the responsibility of collecting 
information on imports and exports of electricity.

EPA Uses a Form-Like Survey to Collect Information on Emissions for 
Monitoring Air Quality:

EPA's mission requires it to collect electricity-related information 
for regulatory purposes. In this regard, one of EPA's most important 
initiatives is its Acid Rain Program implemented in 1995. The program 
specifies that all existing utility units serving generators with an 
output capacity of greater than 25 megawatts and all new utility units 
must report their emissions. The emissions that must be reported 
include sulfur dioxide, nitrogen oxide, and carbon dioxide. While not 
an emission, the unit heat input (the caloric value of the fuel burned) 
must also be reported. The program's overall goal is to achieve 
significant environmental and public health benefits through reductions 
in emissions of sulfur dioxide and nitrogen oxide, the primary causes 
of acid rain. In most cases, utility units use a continuous emission 
monitoring system. Units report hourly emissions information to EPA on 
a quarterly basis. The information for the three types of emissions and 
the unit heat input is then recorded in the Emissions Tracking System, 
which serves as a repository of information on the utility industry. At 
the end of each calendar year, EPA uses this information to compare the 
tons of actual emissions reported with each company's authorized 
emissions. If a company exceeds its limits, then it will be penalized 
in accordance with the rules of the program. The tracking system is 
EPA's primary, electricity-related database used for regulatory 
purposes. It represents a significant commitment of personnel with 
about 40 full-time-equivalent staff currently assigned to its 
maintenance and use.

In addition to the three emissions included in the Emissions Tracking 
System, EPA has focused particular attention on mercury emitted by 
coal-fired electric utilities. An EPA report in February 1998[Footnote 
4] identified mercury emissions from coal-fired plants as the toxic air 
pollutant of greatest concern for public health from these sources. 
This report and collected data were used to call for additional 
monitoring of mercury emissions so that a regulatory control strategy 
could be developed. Then, in November 1998, the agency announced its 
decision to require coal-fired electricity generating plants to collect 
and report such information for 1 year. The agency collected detailed 
information on mercury during 1999. It obtained information on 
(1) every coal-fired boiler in the United States, (2) mercury in 
samples of coal used by boilers, and (3) actual mercury emissions 
from the stacks of a randomly selected group of coal-fired boilers. 
The information, which was used to estimate 1999 nationwide 
and plant-by-plant mercury emissions from coal-fired boilers, 
confirmed that coal-fired plants are the largest source of human-caused 
mercury emission in the United States--about 43 tons of mercury each 
year. Further, in December 2000, the agency announced its decision to 
propose regulations to control mercury emissions from coal-and oil-
fired plants by December 2003.

EPA has also developed the Emissions and Generation Resource Integrated 
Database, the first complete database of emissions and resource mix for 
virtually every power plant and company that generates electricity in 
the United States. The Emissions and Generation Resource Integrated 
Database does not collect original information but assembles 
information already collected by EPA's Emissions Tracking System, 
EPA's 1999 mercury study, FERC, and several EIA forms.[Footnote 5] 
Taking advantage of previously confidential information on nonutility 
generators, the Emissions and Generation Resource Integrated Database 
reports its information for all U.S. power plants, including nonutility 
plants. The information, which encompasses more than 4,600 power plants 
and nearly 2,000 generating companies, is used to provide plant-
specific analyses of emissions. It can also be aggregated at various 
levels, for example, individual states and larger regions, to provide 
more comprehensive analyses of issues relating to air quality.

RUS Uses Forms to Collect Information Relating to Its Loans:

RUS officials told us that RUS has a different responsibility from 
other agencies that also collect information on electricity. RUS is a 
lending agency whereas EIA is a statistical agency and FERC and EPA are 
regulatory agencies. For this reason, according to these officials, 
there are distinct differences in the nature of the information 
collected. Because RUS is a lending agency, it seeks information 
primarily to determine the financial status of the entities wanting 
loans. As part of this effort, officials are interested in obtaining 
information on the sale and purchase of electricity and especially in 
determining whether their borrowers are buying and selling power from 
each other.

RUS officials told us that it provided about $4 billion in loans during 
2002 and has a total of about $34 billion in outstanding funds plus new 
loans. Potential borrowers have to meet RUS's criteria as serving rural 
consumers and also criteria for financial viability. In reviewing new 
loan requests for generating plants, these officials use their database 
to identify the need for and viability of each new plant. They analyze 
the ability of the prospective borrower to function in competitive 
markets. They told us that 45 percent or more of the electricity sold 
by rural electricity cooperatives comes from outside sources and that, 
almost without exception, they depend on transmission from outsiders. 
Some loans to nonprofit cooperatives are for facilities that may become 
part of a transmission system operated by an independent system 
operator (ISO) or a regional transmission organization (RTO).[Footnote 
6]

RUS uses two main forms to collect the relevant information. Both forms 
state their purpose as being to review an applicant's financial 
situation. These forms collect information about the financial 
condition, assets, and operations of rural cooperatives.

SEC Uses Forms to Collect Information on Companies to 
Protect Investors:

The SEC was established under the Securities Exchange Act of 1934 as an 
independent, nonpartisan, quasi-judicial regulatory agency charged 
with administering federal securities laws. SEC's mission is to protect 
investors in securities markets that operate fairly and to ensure that 
investors have access to all material information concerning publicly 
traded securities. SEC also regulates firms engaged in the purchase or 
sale of securities, people who provide investment advice, and 
investment companies. To promote the disclosure of important 
information, enforce securities laws, and protect investors, SEC 
requires companies under its jurisdiction to file transactional, 
periodic, and annual reports using standardized data collection forms.

SEC was charged with administering PUHCA, which defines a 
holding company as any company that directly or indirectly owns, 
controls, or holds with power to vote, 10 percent or more of the 
outstanding voting securities of a public-utility company. Intrastate 
holdings and holdings meeting certain corporate standards may be 
exempted from the requirements of the act. Under the act, SEC regulates 
public utility holding companies. As of October 31, 2002, there were 
18 electricity-and-gas and 7 electricity-only, registered holding 
companies. SEC collects information from exempted and registered public 
utility holding companies through its general filing requirements and a 
set of forms designed with the sole purpose of enforcing the act. The 
registered holding companies engaged, through subsidiaries, in the 
electric utility business are subject to more rigorous reviews for 
transactions that might affect their financial and corporate structure. 
The collection of information from such holding companies registered 
under PUHCA ensures that SEC has comprehensive information on holding 
companies conducting substantial activities in more than one state.

Other Agencies Have No Ongoing, Regular Collection of Electricity-
Related Information:

Other agencies, including the Department of Justice, the Federal Trade 
Commission, and the Commodity Futures Trading Commission, do not 
collect information on an ongoing, regular basis. Both the Department 
of Justice and the Federal Trade Commission have responsibilities to 
enforce antitrust laws, among others. According to an official in the 
Department of Justice's Antitrust Division, the Division gathers 
electricity-related information for an informal investigation that may 
evolve into a case or a formal investigation associated with a specific 
case. The impetus for these investigations may come from the trade 
press and other news sources reviewed by the Department of Justice, a 
complaining party (a customer or competitor, for example), a request by 
FERC, or congressional inquiries. Referring to the informal type of 
investigation, the official said that reviews of the trade press or 
other news sources sometimes suggest a potential problem. If a trend 
emerges, additional general information is gathered on the issue. This 
may lead to a finding that there is no further ground for concern or to 
the opening of a formal investigation. The official added that 
companies are obligated to file information about transactions related 
to mergers or acquisitions subject to premerger notification 
requirements. If further information is needed to assess the effects of 
the transaction on competition, the Department of Justice can make a 
second request for more detailed information.

The Federal Trade Commission is also responsible for enforcing a 
variety of federal antitrust and consumer protection laws and seeks to 
ensure that the nation's markets function competitively. According to 
testimony provided by one of the Federal Trade Commission 
Commissioners, the application of federal antitrust laws can help in 
this transition to competition by making sure that mergers do not 
aggravate market power problems or shield incumbent companies from new 
competition. A Federal Trade Commission assistant general counsel 
stated, however, that the Federal Trade Commission's current 
involvement with electricity markets is minimal and that it has no 
ongoing information collection or standardized forms to obtain 
information on electricity markets. He also noted that the agency's 
activity was largely confined to two reports and some comments on other 
federal and state agencies' proposed rulemakings. The first report 
focused on features of competition in electricity markets that would 
benefit consumers, and the second updated the first with a greater 
focus on retail competition.[Footnote 7] In preparing the second 
report, the Federal Trade Commission issued a notice seeking comments 
and looked at 10 representative states for which information was 
obtained from state Web sites and state regulatory commission 
personnel. The second report identified "trouble spots" in developing 
competitive markets and recommended steps for states to take in 
addressing problems. It also identified the barriers for entry into 
these markets by new suppliers and the conditions conducive for new 
suppliers to enter into these markets, but it did not conclude that 
such conditions by themselves would cause new suppliers to not enter 
the market. With its reports completed, the Federal Trade Commission 
has discontinued its information collection on electricity markets. In 
addition, the Federal Trade Commission's role in reviewing mergers, 
including those involving the electricity industry, has declined. The 
assistant general counsel commented that the Federal Trade Commission 
shares with the Department of Justice and FERC the responsibility for 
reviewing information relating to mergers. According to the official, 
the Federal Trade Commission's role in reviewing such information, 
however, has decreased because the rate of mergers has 
diminished recently.

The Commodity Futures Trading Commission, an independent agency created 
by the Congress in 1974, regulates commodity futures and option markets 
in the United States. The agency protects market participants against 
manipulation, abusive trade practices, and fraud. Initially, agency 
officials stated that the agency had essentially no role in collecting 
information on electricity at present. An agency official said that, 
for a period starting in 1996 and ending in 2000, the agency received 
information on trading in electricity futures conducted through the New 
York Mercantile Exchange, but this trading was discontinued because its 
participants found that electricity futures failed to provide an 
adequate "hedge" or protection against intermittent price volatility. 
However, according to an agency official, the New York Mercantile 
Exchange has since introduced several new electricity contracts, and 
the Commodity Futures Trading Commission will obtain information on 
these contracts. Such information will include, for example, contract 
details on prices, trading volume (purchases and sales), and 
descriptions of large trades.

Agencies Share Some of the Information They Collect:

Restructuring, which has led to increasingly complex market activities 
with greater need for oversight, has highlighted the need for sharing 
information. Agencies are increasingly using the Internet and a mix of 
other methods to enhance their ability to share information with other 
agencies and the public.

In the past, agencies provided paper copies of published reports 
through their public reference rooms and upon request. However, since 
the advent of the Internet, most federal agencies are using it to allow 
access to publicly available documents. For example, EIA regularly 
publishes reports providing electricity-related statistics and now uses 
its Web site to allow easy access to current and past reports. FERC 
also makes publicly available information accessible through its Web 
site using its Federal Energy Regulatory Records and Information 
System, which contains over 20 years of documents submitted to and 
issued by FERC. Despite the increased use of the Internet, agencies 
also maintain public reference rooms where paper copies of documents 
are made available.

Although federal agencies make extensive amounts of information 
available on their Internet Web pages, they share information using 
a combination of other methods such as meetings, investigations, 
conferences, and workshops. Specifically, a FERC official stated that 
FERC currently holds quarterly meetings with the Federal Trade 
Commission and the Department of Justice to discuss overlapping 
issues, specifically focusing on antitrust and market manipulation 
practices. The official added that FERC has met with EIA to coordinate 
and share information on information collection issues. Another FERC 
official stated that FERC does not have formal protocols to interact 
with other agencies such as SEC, the Commodity Futures Trading 
Commission, and the Federal Bureau of Investigations; however, FERC 
also interacts with these agencies on an ad hoc basis to assist them 
with their information needs and use "shared access letters" to request 
information from other agencies' files. For example, FERC staff 
coordinated closely with the Department of Justice, SEC, the Commodity 
Futures Trading Commission, and the Department of Labor during their 
investigation of Enron. Recently, FERC cosponsored a technical 
conference with the Commodity Futures Trading Commission to discuss 
energy market credit issues and potential solutions to problems and 
their implementation. Some agencies, such as Justice and the Federal 
Trade Commission, use formal approaches such as interagency agreements 
and established protocols to coordinate their work and 
share information.

Restructuring Has Exposed Gaps in Agencies' Electricity Information and 
Has Affected How This Information Is Shared:

Of the eight federal agencies included in our review, we found that 
restructuring has significantly affected FERC while other agencies 
were affected to a lesser extent. To respond to competitive markets, 
FERC has made important changes, for example, creating a new office 
to actively monitor markets to ensure they are competitive. These 
changes have affected its organizational structure and information 
collection activities. However, FERC is limited in the information it 
is allowed to collect, primarily because of limitations in its 
authority. To diminish gaps in its information, FERC relies on 
information from third-party sources, some of which is suspect. 
Although less affected than FERC by restructuring, EIA has also made 
some changes to its information collection activities. For example, it 
has increased the number of entities it reports on and the amount of 
information collected and changed how it uses this information. 
Restructuring has affected other agencies' collection of electricity 
information to a more limited extent but has raised other issues that 
affect how they share information.

FERC's Changing Information Needs Have Affected Its Collection and Use 
of Electricity Information, but Gaps Remain:

Over the past year, FERC has changed the way it performs market 
oversight from one that reacts to electricity market events to one that 
monitors markets on a day-to-day basis. This change has caused FERC to 
reassess the information it needs to monitor these markets. During 
2002, FERC created a new office to actively monitor competitive 
electricity markets and undertook efforts to identify sources of market 
information and better understand its own information needs. 
Nonetheless, we found that FERC has gaps in the information it is 
allowed to collect, primarily because of limitations in authority. 
Consequently, FERC has increased its reliance on information from 
third-party sources in order to supplement the information it collects. 
However, this third-party information also has gaps, and we question 
the reliability of some of this information, as have others. 
Additionally, FERC plans to have RTOs and ISOs assist it by monitoring 
and routinely collecting information on electricity markets, but the 
formation of these organizations remains in question.

FERC Is Reorganizing and Assessing Its Information Needs:

In response to the evolving electricity markets, FERC realized that it 
needed to reorganize and created OMOI in fiscal year 2002 to monitor 
increasingly competitive electricity markets. OMOI's mission is to 
guide the evolution and operation of energy markets to ensure effective 
regulation and consumer protection through understanding markets and 
their regulation, timely identification and remediation of market 
problems, and compliance with FERC rules and regulations.

To carry out its monitoring mission, OMOI uses its Market Monitoring 
Center that was patterned after market operation centers or rooms of 
ISOs and major energy trading companies. The Market Monitoring Center 
relies on computers and various software packages to make large amounts 
of information on electricity available in a usable format. The center 
uses both commercial and proprietary information services to access 
current market activities. Electricity market information provided by 
these services includes prices on the spot market and futures 
contracts, plant outage, and historical information for trend analysis. 
FERC also subscribes to another new service provider that offers 
current information on the status and output of some generating units. 
OMOI also uses the historical information from the traditional FERC 
data collection activities to assist in its work. For example, during 
investigations, FERC's forms for routine information collection provide 
historical baseline information that may be critical in determining 
possible market manipulations and/or unjustified prices. Appendix II 
contains information on the commercial and proprietary information 
services FERC uses and descriptions of the types of 
information provided.

In fiscal year 2002, FERC completed studies to take stock of the 
agency's current and future market information needs. As a part of this 
effort, FERC formed teams that were to identify information that FERC 
currently collects and additional information that it might need. The 
study on current information needs identified 19 active information 
collection and reporting requirements for the electric energy sector 
and three that relate to all three energy sectors (electric, natural 
gas, and oil pipeline). The study on future information needs 
identified a core body of information FERC must know to adequately 
understand how it might exercise its oversight authority and 
information needs to accommodate a range of regulatory approaches. The 
core body of information includes eight categories and the specific 
data elements, descriptions, and potential sources of this information. 
The categories are demand for electric power, supply, operations and 
congestion management, market participants, transmission transactional 
information, market design and rules, and traditional regulatory 
functions. FERC's intention was to make the information catalogues a 
"wish list" of every conceivable type of information FERC might ever 
want or need.

According to OMOI, it is using the information from these two studies 
as a baseline to assess FERC's overall market information needs. OMOI 
hired an energy industry analyst to continue with the information 
assessment project. The project's mission statement focuses on 
information needs both in the near term and long term. The near-term 
objective is to ensure FERC has the information most necessary to 
perform its duties in restructured energy markets.

FERC Has Information Gaps Primarily because of Limitations 
in Authority:

FERC's current information collection activities do not provide 
sufficient information to fully monitor electricity markets. First, the 
historical information FERC collects has deteriorated in quality, in 
part, because of declines in power plant information reporting. 
Specifically, FERC has found that some of the data fields that 
companies are required to fill out are left blank in some cases. To 
improve data quality, FERC officials stated that FERC recently improved 
its error checking capability for one of its recently developed 
electronic reports. In addition, some companies have aggregated sales 
transactions data on the forms in a way that makes it impossible to 
determine specific prices and quantities sold. Further, FERC's coverage 
of power plant operational information has diminished because some 
plants formerly owned by utilities are now owned by nonutilities that 
are not required to report to FERC. Prior to restructuring, FERC 
specifically used the information reported on power plant fuel costs 
and quality as a factor to determine electricity rates. Under 
restructuring, FERC uses power plant information to understand power 
production and available capacity in specific markets, and to 
understand what is normal or anomalous. According to FERC, power 
outages could be used as strategies to reduce supply and thereby raise 
market prices. In June 2002,[Footnote 8] we reported that California 
power supplier behavior described in other studies we reviewed was 
consistent with the exercise of market power, because the prices 
charged did not reflect the marginal costs of generating additional 
megawatt-hours of electricity. Rather, the behavior reflected an 
ability to charge higher prices by waiting to commit the generation to 
a time when buyers were willing to pay more.

Second, according to FERC and as we previously reported,[Footnote 9] 
FERC generally has no jurisdiction over power sales by federally owned 
entities, publicly owned utilities, and most cooperatively owned 
utilities. These nonjurisdictional utilities own 27 percent of the U.S. 
electric transmission system and are also smaller than investor-owned 
utilities; however, they serve large areas of the country and provide 
service in conjunction with about 25 percent of the nation's demand for 
electricity. FERC officials note that they have little data and 
information on these areas of the country. However, according to FERC 
officials, information about the operations of these nonjurisdictional 
entities is important to understand these entities' impact on 
generation and transmission activities in a given market. For example, 
the Tennessee Valley Authority operates a large power system and serves 
many nonjurisdictional entities covering a large geographical area 
across the southeastern United States located between several FERC 
jurisdictional entities. According to FERC, the lack of detailed 
information about the operations of the Tennessee Valley Authority 
system limits its ability to assess the performance of the markets 
surrounding this network. Similarly, FERC officials noted that they 
also need information on electricity imports from neighboring 
countries, particularly Canada, because they participate in and affect 
prices of electricity in U.S. markets.

Third, according to FERC officials, they have limited up-to-the-minute 
market information needed to monitor electricity markets. FERC does 
not collect price information, for example, on up-to-the-minute 
electricity prices, fuel costs, and spot and futures contract prices. 
In June 2002,[Footnote 10] we reported that the Market Monitoring 
Center did not include detailed information about energy prices on 
"exempt" commercial markets, including the Intercontinental Exchange, a 
"multilateral" electronic trader, which invites and matches buy and 
sell orders for other customers. According to FERC, it now has access 
to Intercontinental Exchange but no longer has access to other 
Internet-based trading systems such as UBS Warburg and Dynegydirect, 
both of which were "bilateral"[Footnote 11] electronic traders because 
they have ceased operations. Such systems have and continue to provide 
an important market for both physical energy (electricity and gas 
products) as well as energy derivatives[Footnote 12] to be bought and 
sold. In commenting on a draft of this report, FERC stated that because 
its authority is ambiguous relative to the trade of electricity-based 
derivatives, its ability to collect information on this part of the 
market is limited. Additionally, FERC officials said that they have 
limited operational information, such as power plant outages and 
availability of capacity on transmission lines. Price and transaction 
information, as well as operational information, is important in order 
for FERC to be able to detect changes in the market, determine the 
legitimacy of market outcomes, and if needed, take corrective action.

Finally, FERC officials told us that FERC cannot access other 
nonfederal information it needs to assess reliability of the power grid 
and monitor overall electricity market performance. Specifically, NERC 
collects current electricity market information such as operations of 
power plants, flows on key transmission lines, transmission between two 
parties, and system frequency (that is, a measure of how well the 
system is balancing electricity demand and supply and other reliability 
information). FERC officials pointed out that because market 
performance and electricity system reliability are mutually dependent, 
such reliability information would help them to determine whether 
market participants are behaving in an anticompetitive manner. While 
NERC officials agreed that this information might be valuable to FERC 
in determining whether power plant outages are justifiable, they stated 
that NERC is prohibited from disseminating such information without 
obtaining the companies' permission--which companies are reluctant to 
grant due to the business-sensitive nature of the information. Further, 
NERC officials told us that their database is deteriorating in quality 
because companies are increasingly concerned about sharing detailed 
information, for fear that competitors may gain an undue advantage. In 
particular, many new market entrants to the electricity generating 
industry have not joined NERC or provided NERC with information about 
their plant operations. In commenting on a draft of this report, FERC 
stated that language in proposed legislation creating FERC jurisdiction 
over a designated electric reliability organization should assist in 
addressing issues related to access to NERC information.

As we previously reported,[Footnote 13] FERC lacks authority to gather 
all the information it needs from all segments of wholesale electricity 
markets primarily because it derives much of its legislative authority 
from mandates that were enacted over 75 years ago--when the industry 
was structured as regulated monopolies and rates were based on the cost 
of service. Further, we reported,[Footnote 14] FERC lacks regulatory 
authority over all entities in wholesale electricity markets and is 
therefore unable to gather all of the information it needs to 
understand markets across the nation. Specifically, section 309 of the 
Federal Power Act provides FERC with the authority to prescribe the 
forms of all reports to be filed with it and the information to be 
reported.[Footnote 15] This authority does not generally extend to 
nonjurisdictional entities such as the power marketing administrations, 
other nonutilities, and NERC. For example, FERC has identified problems 
in getting data on individual power plant operations that it needs in 
order to evaluate the functioning of the transmission system. 
Information on nonjurisdictional entities is important because they 
also participate in the same electricity markets as jurisdictional 
entities and directly influence market activities, including prices. 
Senior FERC officials told us that, in general, FERC's authority to 
collect information from nonjurisdictional market participants is 
predicated on developing a specific legal argument that the information 
supports a specific investigation, rather than for more general 
monitoring of market performance. Furthermore, regarding entities 
within FERC's jurisdiction, FERC does not have specific authority to 
collect up-to-the-minute detailed information on market activities. 
While long-standing general authority may enable FERC to collect the 
information it needs, the lack of specific authority for obtaining this 
information may lead to challenges from market participants. In this 
same vein, FERC officials added that FERC also faces challenges 
related to the Paperwork Reduction Act in terms of the long lead time 
and the level of effort necessary to obtain OMB's approval for 
additional information collections.

Additionally, FERC's legislative framework does not allow it to levy 
a meaningful range of penalties against companies that choose to 
intentionally underreport or misreport required information. Although 
the Federal Power Act allows FERC to levy criminal fines and civil 
penalties against market participants, they are insufficient to 
discourage underreporting or misreporting information. Thus, FERC's 
traditional legislative authority may no longer be in sync with today's 
developing competitive electricity markets. In competitive energy 
markets, adequate and reliable information is important to FERC's 
ability to fulfill its regulatory mandate and ensure the market 
participants are not engaging in anticompetitive behavior. In 
commenting on a draft of this report, FERC stated that market 
transparency provisions in proposed legislation prohibits the filing of 
false information and increases FERC's criminal penalty authority for 
noncompliance.

FERC Increasingly Relies on Third-Party Information, but Gaps Remain 
and Some Information Is Suspect:

FERC increasingly relies on third-party information to help offset its 
limited authority to collect all of the information it needs to monitor 
electricity markets. OMOI subscribes to several energy-related services 
to increase its access to current markets and make key decisions 
related to market performance. (See app. II for a complete listing and 
description of information that third parties provide to FERC to assist 
its monitoring of electricity markets.) While these third-party sources 
fill some of FERC's information gaps, they do not have full or complete 
coverage of the information FERC needs but lacks. For example, while 
Genscape measures power plant operations for some power plants, it does 
not have full coverage of the electricity system. Moreover, OMOI does 
not have access to a third-party source for price or quantity 
information on most bilateral transactions of wholesale electricity. In 
addition, FERC and others have raised concerns about the quality of the 
published price information these third parties provide. Specifically, 
FERC reported that published prices are subject to manipulation and 
cannot be independently validated. FERC surveyed reporting firms for 
both natural gas and electricity and found that these firms lacked 
formal verification or corroboration and sufficient internal controls 
to ensure information reported to them was reliable. FERC also found 
that these entities relied instead on traders or bid/ask prices 
reported by traders and other market participants. As a result, FERC 
reported that this lack of verification allowed an opportunity for 
entities to deliberately misreport information in order to manipulate 
prices and/or volumes in electricity.

In at least one recent instance, FERC used such third-party information 
as a basis of a key decision regarding California's electricity market-
-the information, however, later turned out to be inaccurate. 
Specifically, in 2002, FERC instructed an administrative law judge, who 
was considering a request for refunds related to the western 
electricity crisis, to use a methodology that relied on third-party 
data for natural gas prices. The methodology, developed by FERC staff, 
was intended to set a proxy for market prices that would have been 
produced had the western market been competitive. The methodology 
estimated the cost of producing electricity for key generators based on 
operating cost, including fuel. Using this methodology, the judge 
ordered refunds of about $1.8 billion to the state of California. 
Subsequent to the order, FERC found, in August 2002, that the natural 
gas prices underlying the methodology had been subject to erroneous 
reporting and manipulation. In March 2003, FERC presented an 
alternative methodology for determining refunds, which is expected to 
substantially increase the previous award.

In commenting on a draft of this report, FERC stated that it is working 
on options--based on staff recommendations and through a docket 
proceeding--to improve third-party data. FERC added that market 
transparency provisions in proposed legislation allow for establishing 
an electronic system that provides information about prices in 
electricity markets, in addition to the prohibition for filing false 
information and increased criminal penalty authority noted in the 
previous section.

FERC Plans to Use RTO/ISO Information, but RTO Formation 
Remains Incomplete:

In addition to the third-party information, FERC plans to rely 
extensively on RTOs and ISOs to assist in its monitoring efforts. FERC 
plans to use the market monitors, created as part of ISOs, to perform 
up-to-the-minute market monitoring activities and routinely collect 
information on their electricity markets. FERC officials stated that 
the market monitors have a better ability to understand and observe 
market changes, can react more quickly to changing market conditions, 
and can take stronger corrective action than FERC. In addition, as part 
of the rules sanctioning these entities, FERC officials said they 
expect to have access to all the data collected by the market monitors, 
which FERC views as considerable. According to FERC, it currently 
obtains timely information from some existing RTO and ISO monitors to 
help support its market oversight processes. However, FERC officials 
said that, relative to the Paperwork Reduction Act, they are not sure 
whether the market monitors will be able to collect information on 
FERC's behalf that FERC itself has not been authorized to collect. In 
commenting on a draft of this report, FERC stated that it is mindful of 
the potential burden imposed by additional information collections. 
FERC added that it has been inventive in developing ways to monitor 
markets, particularly restructured markets with RTOs and ISOs, using 
data generated as an integral part of market operations.

Further, as we previously reported, several of the market monitors rely 
on different methods to evaluate market power, there is a lack of 
uniformity in what information is collected, how it is analyzed, and 
what is reported, making potential cross-market comparisons difficult 
at this time. More importantly, FERC's effort to expand the number and/
or market coverage of RTOs as well as standardize electricity market 
rules has met with resistance from the Congress, state commissions, and 
others. At present, according to FERC, two organizations have been 
approved as RTOs while five others have been conditionally approved. 
Overall, even if these additional RTOs are fully approved, FERC's 
coverage will not extend to markets outside of its jurisdiction. Thus, 
FERC's reliance on RTOs to help it diminish data gaps, particularly in 
the next several years, will likely provide only limited help. In 
commenting on a draft of this report, FERC believes that market 
transparency provisions in proposed legislation will address issues 
related to jurisdictional entities that do not participate in RTOs.

Restructuring Has Affected Other Agencies to a Lesser Extent:

Among the other agencies, EIA has been the most affected by 
restructuring while the remaining agencies have been affected only 
slightly. At EIA, restructuring has led to changes in the number of 
entities from which EIA collects data, the volume of data collected on 
electricity markets, and the way in which EIA uses the data to complete 
its mission of examining the energy sector. EIA officials recognized 
that restructuring could affect them and examined the potential 
implications in two reports.[Footnote 16]

According to a senior EIA official, the first, and most important 
effect of restructuring on EIA was its revision of its forms to require 
the same information from utilities and nonutilities. Historically, 
nonutilities were exempt from many of EIA's reporting requirements. 
Adding these new entities has expanded EIA's database by about 2,000 
new sources of information and has nearly doubled its database. The 
second effect of restructuring on EIA is the increase in the volume of 
information that it collects and provides because restructuring has 
significantly expanded the role of wholesale markets in providing 
electricity. For example, EIA now posts electricity prices for several 
of the largest markets on its Web site and reports more detailed 
information about the aggregate activities of these markets in 
its publications. The third effect of restructuring on EIA is to 
significantly alter the way that EIA examines energy sectors and 
electricity in particular. In order to meet one of its missions of 
examining and forecasting energy consumption and use, EIA has had to 
revise its energy models to accommodate restructuring because of 
changes in the way that electricity is supplied and distributed. For 
example, in March 2003, EIA reported that it reviewed and revised how 
it collects, estimates, and reports fuel use for facilities producing 
electricity. According to EIA, the review addressed inconsistent 
reporting of fuels for electric power by combined heat and power plants 
and changes in the electric power marketplace that have been 
inconsistently represented in various EIA survey forms and 
publications. EIA regards these efforts as complex and substantial and 
expects them to continue as the electricity sector evolves.

EIA also encountered problems such as maintaining the quality of 
information. The Director of EIA's Electric Power Division said that 
the Department of Energy's Secretary has made the quality of 
information one of the department's top priorities. However, 
maintaining this quality at EIA is a challenge because there has been a 
substantial increase in the number of sources of information 
(especially the nonutilities) resulting from restructuring while EIA 
has also experienced substantial budget cuts. The Director estimated 
that there has been a 50 percent increase in the overall volume of 
data. In addition, the Director said that, while omission of 
information by companies responding to EIA's data collection efforts is 
not a common problem, in the past, some companies failed to answer a 
question about the delivered fuel price on EIA's Form 423. The Director 
added that the companies' decision not to disclose information about 
fuel prices could have been attributed to the sensitive nature of this 
particular item.

Restructuring has had little direct effect on SEC's overall information 
collection activities. As such, according to SEC officials, the SEC 
continues to carry out its oversight of securities laws and its 
administration of PUHCA. However, the Congress is considering 
repealing or modifying PUHCA because the emergence of nonutilities 
reflects the fact that utilities are no longer the sole source of 
electricity energy. FERC and SEC officials acknowledge that since 
nonutilities are not covered by PUHCA, registered holding companies may 
engage in nonutility activities that are not regulated by the act. SEC 
has stated that it supports the repeal of PUHCA as long as repeal is 
accomplished in a way that gives FERC and state regulators sufficient 
authority to protect utility consumers.[Footnote 17] FERC has stated 
that PUHCA, as it currently exists, may actually impede competitive 
markets and appropriate competitive market structures.

Recent events such as the collapse of Enron Corporation have 
accelerated reforms affecting SEC that aim at improving the quality and 
reliability of financial information. SEC plays a vital role in 
ensuring that meaningful and intelligible information is disclosed to 
investors. Such disclosures are particularly important as corporate 
structures of new and old electricity market participants continue to 
change. The Sarbanes-Oxley Act of 2002 has established the legal 
framework to address some of the concerns related to corporate 
disclosure, accountability, and transparency.

Restructuring has not had significant effects on the collection of 
electricity information by the other agencies included in our review. 
Some agencies, such as the Federal Trade Commission and the Commodities 
Futures Trading Commission, may become more involved in collecting 
electricity information as competitive markets develop. For example, 
the number of electricity entity mergers has slowed down, but should 
these mergers increase, Justice may need to increase its information 
collections for merger investigations accordingly. In addition, a 
Commodities Futures Trading Commission official initially told us that 
electricity futures trading had been discontinued because the market 
participants found that electricity futures failed to provide an 
adequate hedge against intermittent price volatility. However, since 
our initial discussion, the New York Mercantile Exchange has introduced 
several new electricity contracts, and the Commodities Futures Trading 
Commission has reinstated its practice of collecting information on 
these trades.

Despite the more limited impacts of electricity restructuring on many 
of these agencies to date, some jurisdictional issues have been raised 
about their respective roles in helping to oversee electricity markets 
more generally. Events such as the collapse of Enron Corporation bring 
to light the importance of clarifying jurisdiction across the federal 
government as restructuring progresses. As noted in a recent Senate 
Governmental Affairs report and memorandum,[Footnote 18] and other 
congressional hearings, both FERC and SEC have been questioned about 
their lack of diligence in following through on Enron's activities--
even though they had indications of improper conduct. The report 
commented that effective coordination between agencies prevents 
companies from exploiting the lack of oversight in areas where neither 
agency may have taken full responsibility--as Enron did with FERC and 
SEC in the case of its investments in wind farms. Officials at both 
FERC and SEC told us that they had performed their jobs and had no 
reason to check with the other agency about Enron's actions. However, 
Enron took advantage of jurisdictional gaps between the two agencies 
that enabled it to earn tens of millions of dollars above what it would 
have otherwise earned from its wind farms.

FERC and the Commodity Futures Trading Commission provide a 
second example of problems resulting from jurisdictional 
uncertainties. The Senate memorandum (noted previously) on FERC pointed 
out that FERC did not initially determine whether it had jurisdiction 
over on-line trading platforms such as Enron Online, although it was 
FERC's expectation that these electronic trading platforms would become 
a dominant way to trade both electricity and gas. Furthermore, this 
memorandum concluded that both FERC and the Commodity Futures Trading 
Commission had some regulatory responsibility for on-line trading. 
Until Enron's collapse, however, the two agencies did not participate 
in meaningful discussions to identify and coordinate their respective 
roles. Effective coordination would have helped to clarify the 
jurisdictional boundaries between FERC and the Commodity Futures 
Trading Commission regarding energy trading activities and products, 
including on-line trading, and to define the two agencies' respective 
monitoring responsibilities in these developing markets. Both agencies 
have recently taken steps to improve their coordination. Because these 
jurisdictional issues remain unresolved, however, it is unclear whether 
these problems are limited to a few examples or are potentially 
more widespread.

Changes in Industry Caused by Restructuring and National Security 
Concerns Have Affected How Information Is Shared:

Restructuring has made the issue of confidentiality concerning 
electricity information more prominent. On the one hand, the need to 
access key information now is greater in evaluating the benefits and 
risks of restructuring. On the other hand, the sensitivity of this 
information, according to the companies asked to provide it, is also 
greater because of fears that other companies could use it to seek 
competitive advantages. This dilemma has led to controversy about the 
electricity information that is to be made publicly available and 
shared with other federal agencies. Both EIA and FERC have procedures 
regarding restrictions on access to information and have modified these 
procedures, as appropriate. For example, EIA faced considerable protest 
for its proposal to restrict access to the information that it collects 
but updated its procedures to resolve some of the concerns raised. By 
contrast, public disclosure laws and confidentiality pledges to protect 
information also affect information sharing and collection of other key 
information at both federal and nonfederal levels. For example, NERC's 
information collected from the electricity industry remains 
unavailable to FERC and other federal agencies because of its 
sensitivity. In addition, the quality of the information being 
submitted to NERC has declined as companies have become increasingly 
concerned about providing it. In addition to the confidentiality 
issues, the events of September 11, 2001, have heightened national 
security concerns about protecting the nation's energy.

EIA Has Taken Steps to Resolve Confidentiality Issues:

In 2001, EIA faced a major controversy over confidentiality of 
electricity information, which it was able to resolve. The controversy 
pitted certain companies that feared potential competitive harm from 
the release of sensitive information, against agency and public 
interest in maintaining access to electricity data. Federal agencies 
and a private sector group provided extensive comments on EIA's 
proposal to broaden the information it considered confidential. EPA, 
for example, objected to EIA's proposed confidential treatment of fuel 
consumption, fuel quality, fuel type, thermal output, and retail sales. 
EPA officials noted that EPA makes extensive use of these data elements 
in monitoring emissions. In general, it maintained that EIA's proposal 
went far beyond what was reasonably necessary to protect competitors 
from the release of sensitive data. The American Public Power 
Association, which represents the nation's 2,000 nonprofit, publicly 
owned electric utilities, described itself as "deeply troubled" by 
EIA's proposal. It stated that EIA had provided no evidence that the 
public availability of specific data items would harm the filing 
companies and no evidence on how EIA balanced the public's need for 
information against any potential harm to these companies. By contrast, 
the Edison Electric Institute, which represents shareholder-owned 
electric companies, cited potential harm to companies, for example, 
information in the hands of a competitor that could allow the 
competitor unfairly to undercut another company's bid strategy.

In response to these disagreements over confidentiality, EIA issued a 
policy statement that made two general changes to its procedures. 
First, it reported that some data elements that were not considered 
confidential in the past would now be treated as confidential. Second, 
it reported that some data collected from unregulated companies that 
were formerly treated as confidential would now be made publicly 
available. Discussing the eventual resolution of the controversy, the 
Director of EIA's Electric Power Division told us that EIA adopted two 
strategies to achieve this balance. These strategies involve 
(1) requiring essentially the same information from all companies, 
including utilities and nonutilities, and (2) identifying appropriate 
time frames for retaining and releasing sensitive data. The details of 
the data remaining confidential are presented in appendix III.

FERC and Other Nonfederal Sources of Information Face Challenges that 
Affect Both Information Collection and Sharing:

FERC recognizes the need of utilities to compete in the electric market 
and understands their desire to keep confidential some of the 
information it collects through its forms. However, FERC's policy 
requires respondents who request confidentiality to show that potential 
harm outweighs the need for public access to the information. According 
to FERC, the courts have, through a considerable body of case law, 
clearly stated that the company bears the obligation, in this case the 
electric utility, to prove release of information would cause harm. 
FERC officials told us that Freedom of Information Act requirements 
raise concerns among utilities about FERC's ability to protect 
commercially sensitive information. The act requires FERC to disclose 
information to the public unless specific exemption categories are met, 
which FERC officials told us, is often difficult to do. According to 
FERC officials, while FERC may be willing to share exempted information 
with state regulatory bodies, states have similar public disclosure 
laws that do not always guarantee their ability to protect this 
information. FERC officials added that RTOs will also face similar 
challenges in sharing commercially sensitive information. While RTOs 
could benefit by sharing information about entrants from other markets 
who are interested in entering their own markets, protecting the 
confidentiality of this information will be an issue. In commenting on 
a draft of this report, FERC stated that proposed legislative language 
provides a clear confidentiality standard, exempting "from disclosure 
information FERC determines would, if disclosed, be detrimental to the 
operation of an effective market or jeopardize system security." 
Finally, FERC also faces challenges creating ways to obtain and share 
information from Canada and Mexico, since they also affect U.S. 
electricity markets.

NERC is hesitant to share information with FERC that its members 
feel would cause them competitive harm if released in the public 
domain. According to a NERC official, companies are increasingly 
reluctant to provide commercially sensitive information, causing a 
decline in information quality. Therefore, NERC has pledged not to 
divulge information on a company-specific basis and will release it 
only in aggregate form in hopes of getting the information it needs. 
NERC collects current electric market information such as flows on key 
transmission lines, transmission between two parties, and system 
frequency (an indicator of how well the system is balanced) that 
FERC is interested in obtaining from NERC, but, according to both 
FERC and NERC officials, confidentiality pledges inhibit this sharing 
this information.

National Security Concerns Affect Information Sharing:

Since September 11, 2001, the federal government has taken steps to 
protect the nation's critical infrastructures, including the energy 
infrastructure. FERC has taken steps to remove information it considers 
to be critical to protecting the nation's power grid from the public 
domain. Specifically, it has removed information such as oversized maps 
that detail the specifications of existing and proposed energy 
facilities that were once publicly available from its Internet site, 
public reference rooms, and databases. For example, FERC removed the 
information its collects from the Form 715, Annual Transmission 
Planning and Evaluation Report, from the public domain. Additionally, 
EIA removed power plant latitude and longitude information from the 
public domain. While steps have been taken to better protect 
information, federal officials at both FERC and EPA raised concerns 
about the increasing difficulty of accessing information on power plant 
locations and related data.

Conclusions:

Given FERC's predominant role in overseeing evolving electricity 
markets, FERC needs information on a regular basis regarding 
reliability, supply and demand, transmission, purchase and sale of 
electricity commodities, and market participants--much of the needed 
information has not previously been collected. Consequently, FERC is 
currently missing some of these key pieces of information or is relying 
on third parties such as energy news services for related information 
to assist in meeting its market monitoring and oversight 
responsibilities. Without access to this key information, FERC will not 
be able to fully understand the performance of specific electricity 
markets across the country. In addition, FERC will be less prepared to 
identify potential market manipulation that may affect competitive 
markets. FERC's existing authority is not adequate to collect all the 
information it needs, resulting in these gaps of key information. 
Moreover, legislation does not allow FERC to levy meaningful criminal 
fines and civil penalties against market participants to ensure that 
companies report accurate and reliable information, further diminishing 
its ability to identify potential market manipulation. For these 
reasons, the Congress may need to make decisions regarding the scope of 
information collection at FERC and other agencies.

Recommendations for Executive Action:

Given that effective oversight of evolving electricity markets requires 
the acquisition of and access to timely, reliable, and complete 
information, we recommend that the Chairman, FERC (1) demonstrate what 
information FERC needs, (2) describe the limitations resulting from not 
having this information, and (3) ask the Congress for sufficient 
authority to meet its information collection needs and 
responsibilities. Additionally, we recommend that FERC consider the 
cost and potential reporting burden associated with additional 
information collection, since market participants will incur 
additional costs and burden hours, and where possible, explore creative 
ways to obtain information.

Agency Comments:

We provided a draft of this report to FERC and DOE for their review 
and comment. In its written comments, FERC generally agreed with the 
report's conclusions, specifically that its authority to collect 
information has not kept pace with the changing electricity market and 
that its ability to penalize noncompliance is severely limited. 
Regarding our recommendation that FERC take action to resolve its 
information gaps, FERC commented that it is in the process of 
conducting an internal information assessment and the results will be 
provided at the end of 2003. This assessment should provide a first 
step toward implementing our recommendations. However, in a related 
point, FERC also noted that whatever information gaps exist with 
electricity supply, much greater deficiencies exist on the demand side 
of the market, which is largely beyond its jurisdiction but also 
important to understanding the entire market.

FERC also noted that it must be mindful of the potential burden 
imposed by additional information collections, and it has been 
inventive in developing ways to monitor markets, particularly those 
operating under its restructuring rules. FERC also provided several 
small corrections to the draft report language and added other 
clarifications that we incorporated into the draft where appropriate. 
The complete text of FERC's comments is included in appendix IV.

In its written comments, DOE agreed that the report generally 
characterizes the current state of electricity data collection and 
dissemination at EIA accurately and that it provides a balanced set of 
recommendations on improving the timeliness of data dissemination in 
the electricity industry's restructured environment. DOE also 
commented about our characterization of EIA's mission and how EIA's 
information is used, as well as provided further clarification on the 
coverage of EIA and RUS information collections and EIA's resolution of 
data quality issues on its Form 423. We incorporated EIA's suggested 
information in these areas along with previously provided technical 
corrections into the draft where appropriate. The complete text of 
DOE's written comments is included in appendix V.

Objectives, Scope, and Methodology:

To determine what electricity information is collected, used, and 
shared by key federal agencies in meeting their primary 
responsibilities, we first identified federal agencies using specific 
forms and form-like surveys for collecting electricity information. 
These agencies included FERC, EIA and Fossil Energy within DOE, RUS, 
SEC, and EPA. We obtained these forms and form-like surveys and 
analyzed their contents, as summarized in appendix I. We also 
identified third-party sources of information used by federal agencies. 
These included the 13 companies identified in appendix II. We analyzed 
this third-party information through a review of Web-based materials 
and interviewed officials at Genscape, Edison Electric Institute, and 
NERC. We also identified federal agencies that collect, or have 
collected, electricity information for investigations and interviewed 
officials at these agencies that included the Department of Justice, 
the Federal Trade Commission, and the Commodity Futures Trading 
Commission. For all federal agencies included in our review, we 
obtained information on their missions by examining mission statements 
on their Web sites. To understand how federal agencies use and share 
electricity information, we interviewed federal officials at the 
federal agencies mentioned above.

To determine the effect of restructuring on federal agencies' 
collection, use, and sharing of this information, we focused primarily 
on FERC because it bears the main responsibility for monitoring 
electricity markets, is undergoing major organizational changes caused 
by restructuring, and has shown serious deficiencies in responding to 
restructuring. Within FERC, we met with officials from OMOI and from 
its Office of Markets, Tariffs, and Rates. To understand the gaps in 
FERC's electricity information resulting from restructuring, we 
interviewed officials at FERC and NERC, reviewed information from 
third-party sources, and identified federal authority contributing to 
these gaps. Although restructuring has affected other federal agencies 
to a lesser extent, we identified the relevant effects, if any, in 
these other agencies by interviewing officials and reviewing pertinent 
documents. Among these other agencies, EIA has been the most affected 
by restructuring. We examined specific impacts at EIA that included 
increases in the number of entities from which EIA collects data and 
the volume of information collected. We also examined jurisdictional 
issues posed about FERC and SEC, and FERC and the Commodity Futures 
Trading Commission. To understand how restructuring has affected the 
way in which federal agencies share this information, we examined 
concerns about confidentiality, particularly as they related to EIA's 
development of its current confidentiality policy and FERC's lack of 
access to NERC information because of NERC's concerns about the 
potential sensitivity of the information. In addressing the second 
objective, we also relied on a broad range of our previously issued 
reports on electricity restructuring and FERC's oversight of 
electricity rates.

We conducted our work from June 2002 to May 2003 in accordance with 
generally accepted government auditing standards.

As arranged with your offices, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
14 days after the date of this letter. At that time, we will send 
copies to appropriate congressional committees, the Chairman of the 
Federal Energy Regulatory Commission, the Secretary of the Department 
of Energy, the Administrator of the Environmental Protection Agency, 
the Secretary of the Department of Agriculture, the Chairman of the 
Securities and Exchange Commission, the Attorney General of the United 
States, the Chairman of the Federal Trade Commission, the Chairman of 
the Commodity Futures Trading Commission, the Director of the Office of 
Management and Budget, and other interested parties. We will make 
copies available to others on request. We will also make copies 
available to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please 
contact me at (202) 512-3841. Key contributors to this report are 
listed in appendix VI.

Jim Wells 
Director, Natural Resources and Environment:

Signed by Jim Wells: 

[End of section]

Appendix I: Description of Data Collection Forms and Legislation 
Authorizing Collections for FERC and EIA:

[See PDF for image]

Source: GAO analysis of FERC's and EIA's survey forms.

[A] If the information requested in FERC's forms is not reported, the 
criminal penalties are as follows: --16 U.S.C. 825o(a) statutory 
violations up to a $5,000 fine or imprisonment of not more than --
2 years --16 U.S.C. 825o(b) rules violations not to exceed $500 per day 
during the time the offense occurs.

[B] The timely submission of these forms by those required to report is 
mandatory under section 13(b) of the Federal Energy Administration Act 
(FEAA) (Public Law 93-275), as amended. Failure to respond may result 
in a penalty of not more than $2,750 per day for each civil violation 
or a fine of not more than $5,000 per day for each criminal violation. 
The government may bring a civil action to prohibit reporting 
violations, which may result in a temporary restraining order or a 
preliminary or permanent injunction without bond. In such civil action, 
the court may also issue mandatory injunctions commanding any person to 
comply with these reporting requirements.

[C] According to EIA's Electric Power Annual 2001 report, beginning 
with data collected from the year 2000, the Forms EIA 860A and 860B are 
obsolete. The infrastructure data collected on those forms are now 
collected on the Form EIA-860 and the monthly and annual versions of 
the Form EIA-906.

[D] EIA 906 superseded Forms EIA-900--Monthly Nonutility Power Plant 
Report--and EIA-759--Monthly Power Plant Report.

[End of table]

[End of section]

Appendix II: Third-Party Data Sources:

Data Source: FriedWire; Description: FriedWire is an energy information 
provider, specializing in Web-based data collection and integration. 
Its Traffic Report is a real-time visual monitoring system covering 
electric power grid operations in North America. Its Powersurge is a 
real-time monitoring system for Northeastern and Canadian electric 
power markets. Its WestDesk provides similar information for western 
electric power markets. Its Analyst Edge is an on-line energy database 
created to support the needs of energy market analysts. Its Data Feed 
Service and Energy Data Warehouse provide updates of energy market 
information and historical information.

Data Source: Genscape; Description: Genscape provides current 
information related to generation and transmission of some fossil and 
nuclear power plants in the United States. Genscape guarantees accuracy 
of 90 percent or better based on its direct, physical monitoring of 
power plant outputs.

Data Source: Electric Power Research Institute; Description: Electric 
Power Research Institute has developed an on-line, Web-based display of 
power market transactions and includes information on schedules and 
congestion. The data are useful for transmission planning.

Data Source: Bloomberg; Description: Bloomberg's PowerLines is a trade 
press publication providing electricity news. Bloomberg's Professional 
Services provides current and historical data on regional electricity 
and gas markets, including spot and future prices, market commentary, 
plant outage information, and energy news.

Data Source: NERC; Description: NERC provides real-time information on 
transmission constraints in the northeast. Its Flow Impacts Study Tool 
provides information about the real-time flow and expected flow for the 
next 36 hours for specific transactions.

Data Source: Open Access Technology International; Description: Open 
Access Technology International provides information on electricity 
transmission useful for scheduling and meeting electricity deliveries.

Data Source: EarthSat; Description: EarthSat provides weather forecasts 
and historical weather data for selected cities.

Data Source: Energy Argus; Description: Energy Argus provides news 
concerning electricity and gas operations and prices.

Data Source: InterContinental Exchange; Description: InterContinental 
Exchange provides information on over-the-counter energy 
transactions.

Data Source: PowerWorld Corporation; Description: PowerWorld 
Corporation's Simulator is an interactive package designed to simulate 
high voltage power system operation. It gives an analyst a 
comprehensive look at issues surrounding electrical power flows in a 
transmission grid.

Data Source: Resource Data International Data Resources via Platt's: 
Description:

Data Source: (1) PowerDat; Description: (1) Historical data related to 
electric industry.

Data Source: (2) GasDat; Description: (2) Historical data related to 
gas industry.

Data Source: (3) NewGen; Description: (3) Database consists of new 
proposed generation.

Data Source: (4) PowerMap; Description: (4) Tool to generate maps, 
including transmission lines, gas pipelines, and generation.

Data Source: Platt's; Description: Through publications such as 
Megawatt Daily and Gas Daily, Platt's provides daily energy news 
related to electric and gas issues.

Data Source: Cambridge Energy Research Associates; ; Description: 
Cambridge Energy Research Associates provides various services related 
to regional electric, gas, and transmission issues. These include, for 
example, its North American Electric Power Advisory Service, which 
focuses on the future of the power sector and the forces affecting the 
market, prices, and emerging trends and technology. Other services 
include its North American Natural Gas Advisory Service, its Electric 
Transmission Advisory Service, and its Western North America Energy 
Advisory Service.

Source: GAO analysis of information provided through third-party data 
sources' Web sites and FERC.

[End of table]

[End of section]

Appendix III: EIA Confidentiality Elements:

Elements: Costs of fuel for unregulated plants; Forms affected: * EIA-
423--costs of coal, natural gas, and petroleum at an unregulated power 
plant.

Elements: Tested heat rates; Forms affected: * EIA-411--tested heat 
rate under full load; * EIA-860--tested heat rate under full load.

Elements: Fuel inventory--stocks; Forms affected: * EIA-906--end-of-
month coal and petroleum stocks.

Elements: Plant costs and expenses for unregulated plants; Forms 
affected: * EIA-412--generator plant cost and expenses for unregulated 
plants.

Elements: Monthly electricity sales information reported for energy-
only service; Forms affected: * EIA-826--monthly electric sales, 
revenue, and number of customers reported for energy-only service.

Elements: Latitude and longitude; Forms affected: * EIA-411--latitude 
and longitude; * EIA-767--latitude and longitude; * EIA-860--latitude 
and longitude.

Source: EIA.

Note: Other elements collected in the electric power surveys are not 
treated as confidential.

[End of table]

[End of section]

Appendix IV: Comments from the Federal Energy Regulatory Commission:

FEDERAL ENERGY REGULATORY COMMISSION WASHINGTON, DC 20426:

June 12, 2003:

OFFICE OF THE CHAIRMAN:

Mr. Jim Wells:

Director, Natural Resources and Environment 
United States General Accounting Office 
Room 2T23:

441 G Street, NW Washington, DC 20548:

Dear Mr. Wells:

Thank you for your letter of May 22, 2003, enclosing your draft report, 
Electricity Restructuring: Action Needed to Address Emerging Gaps in 
Federal Information Collection. I congratulate you on your effort and 
appreciate the opportunity to comment on this report.

In general, I agree with GAO's conclusions, namely that FERC's 
authority to collect information has not kept pace with the changing 
electricity market and that our ability to penalize non-compliance is 
severely limited.

Regarding the recommendations that FERC "(1) demonstrate what 
information FERC needs, (2) describe the limitations resulting from not 
having this information, and (3) ask the Congress for sufficient 
authority to meet its 
information collection needs and responsibilities" (p. 32), we are in 
the process of conducting an internal Information Assessment, which 
will provide results by the end of 2003.

The report's recommendations continue, "Additionally, we recommend that 
FERC consider the cost and potential reporting burden associated with 
additional information collection, since market participants will incur 
additional costs and burden hours, and where possible explore creative 
ways to obtain information" (p. 32).1 agree that, within the context of 
identifying additional data collection needs, we must carefully measure 
the costs against the benefits derived from improved access to that 
information. FERC is mindful of the potential burden imposed by 
additional information collections, and we have been inventive in 
developing ways to monitor markets-particularly those operating under 
our restructuring rules-using data generated as an integral part of 
market operations.

There are three small factual errors in the draft report to which I 
would like to bring your attention:

1. "FERC has no jurisdiction over power sales by ... new market 
participants such as exempt wholesale generators" (p. 21). Most new 
market participants, including exempt wholesale generators, are subject 
to FERC jurisdiction, and must be authorized to sell power in 
jurisdictional markets as "public utilities." They are also subject to 
many of our information collection requirements.

2. "FERC now has access to [the Intercontinental Exchange] but 
continues not to have access to other Internet-based trading systems 
such as UBS Warburg and Dynegydirect, both of which are `bilateral' 
electronic traders" (p. 22). FERC did have access to UBS Warburg's 
ubswenergy.com (formerly EnronOnline) and Dynegydirect, but both have 
ceased operations. UBS Warburg suspended ubswenergy.com on December 10, 
2002, for the firm to move its trading operations to Connecticut; it 
has not begun operating again. Dynegydirect closed its online service 
as of June 19, 2002. With the collapse of Enron, the "bilateral" model 
for trading platforms, where the operator of the platform acts as 
counterparty to all trades, has largely been discredited.

3. "[T]rading in electricity futures conducted through the New York 
Mercantile Exchange ... was discontinued because its participants found 
that electricity futures failed to provide an adequate `hedge' or 
protection 
against intermittent price volatility" (p. 16). NYMEX has reinstated 
its futures contract for the Pennsylvania/New Jersey/Maryland hub.

There are a few other points to which I would like to add 
clarification. Specifically:

1. FERC's rules for restructured electric markets (i.e., RTOs/ISOs), 
where instituted, create conditions where considerable information is 
available to perform the oversight function. While FERC is monitoring 
electric markets to the extent possible, enactment of the market 
transparency provisions in legislation currently before Congress (S.B. 
14 and H.R. 6) would resolve many of the particularly problematic 
issues noted in the report relative to jurisdictional entities that do 
not participate in RTOs.

2. FERC's rules for restructured electric markets, where instituted, 
create independent Market Monitoring Units (MMUs) that provide detailed 
market-specific oversight and support FERC's own oversight processes 
through data analysis, distillation, and close coordination with FERC 
staff.

3. FERC's rules for restructured electric markets, where instituted, 
create an environment requiring public access to large quantities of 
specific market data involving pricing, load and congestion. With all 
that information available to the market, third parties must compete on 
the quality and reliability of the data services they perform rather 
than on development of the data itself. For example, because all 
parties have equal access to prices in NYISO's day-ahead market, third 
parties compete to re-package that data with the market disciplining 
the quality of their offerings.

4. The report notes, "FERC and others have raised concerns about the 
quality of the published price information" provided by third parties 
and notes our concerns about the lack of independent verifications and 
the potential for manipulation (p. 24). As a result of our 
investigation into manipulation of Western markets (Docket No. PA02-2), 
we received several recommendations from FERC Staff regarding actions 
we can take to improve the quality of price indices. We are currently 
considering our options through a docketed proceeding (Docket No. AD03-
7) where we have received the active participation of the energy 
industry. Moreover, the market transparency rules in S.B. 14 and H.R. 6 
provide for the FERC to issue rules establishing an electronic system 
that provides information about prices in electric markets and 
prohibits the filing of false information. The bill also adds to FERC's 
ability to penalize non-compliance.

5. The availability of energy derivatives (such as futures, swaps and 
options) affects the motivation of participants in competitive energy 
markets. Whatever FERC's access to information regarding physical 
trades is, ambiguity and limitations in our jurisdiction over 
electricity-based financial products retards our ability to oversee 
electric markets.

6. In the restructured electric market, FERC has weighed the interest 
and the ability of customers to perform oversight on their own against 
the benefits of protecting market innovation with confidentiality for 
commercially sensitive information. Language in S.B. 14 and H.R. 6 
provides useful standards for us to apply regarding the confidentiality 
of market-critical data.

7. As the report's information summary shows, whatever the information 
gaps are associated with electricity supply, much greater deficiencies 
exist on the demand side of the market. While retail energy efficiency, 
demand 
response, and distributed generation are largely beyond the 
jurisdiction of the FERC, there is a clear national need to have high 
quality information about energy use and efficiency because they affect 
wholesale and retail energy market health and security.

I elaborate further on these seven points below.

FERC has used its existing authority to create market rules that 
provide readily accessible flows of information that enable effective 
market oversight. In Order 889, all public utilities that own, control 
or operate facilities used in the 
transmission of electric energy in interstate commerce were required to 
create or participate in an Open Access Same-Time Information System 
(OASIS) that provides existing and potential transmission customers the 
same access to transmission information. In Order 2000 and subsequent 
orders regarding RTOs, FERC defined a market environment that 
inherently entails broad dissemination of market information. Where 
participants in the electric industry have agreed to be subject to 
those rules in order to operate in a restructured, competitive electric 
market, significant information is readily available to perform 
oversight. Where FERC's market rules are not in place, that information 
is not available.

Legislation currently before Congress (S.B. 14 and H.R. 6) addresses 
the issues that limit our ability to require the availability of 
minimum levels of publicly available market information from 
jurisdictional entities not participating in an RTO. S.B. 14 in 
particular requires FERC to establish "an electronic information system 
to provide the Commission and the public with access to such 
information as necessary or appropriate to facilitate price 
transparency and participation in markets subject to the Commission's 
jurisdiction." FERC supports the enactment of the provisions.

A key component of our market rules is the creation of Market 
Monitoring Units (MMUs). MMUs were created to provide independent, 
ongoing, focused, real-time oversight of the open, functioning and 
competitive markets. The MMUs have real-time access to minute details 
of market operations. As such, they augment the oversight capabilities 
of FERC staff. In the course of ongoing market operations, FERC and 
MMUs are working together to ensure open fair competition. In the event 
of a market anomaly, FERC oversight staff and the affected MMU are in 
early and frequent contact. Where FERC's market rules are not in place, 
similar independent oversight is not possible and does not exist.

As indicated in the report, there is "a lack of uniformity in what 
information is collected, how it is analyzed, and what is reported, 
making potential cross market comparisons difficult at this time." FERC 
and the MMUs have been working since December 2002 to create standard 
market metrics that will allow comparison across RTOs. This effort is 
expected to provide a set of descriptive metrics this fall and 
additional normative metrics this winter.

FERC has used its existing authority to create market rules that, in 
practice, necessitate that certain minimum levels of information are 
disclosed publicly. Several third party vendors collect that 
information, distill and re-package it.

Because the data are accessible to all, competition raises the quality 
and reliability of the third-party services.

In the cases cited in the report such as published market indices for 
bilateral trades, it is market information developed outside FERC's 
market rules for which coverage and/or quality is suspect. This does 
not mean that FERC must collect the data ourselves, but rather, that 
where we set the parameters for information availability, data tends to 
be more reliable.

Looking at energy price indices in general (i.e., for both gas and 
electricity), FERC Staff's "Final Report on Price Manipulation in 
Western Markets: Fact-Finding Investigation of Potential Manipulation 
of Electric and Natural Gas Prices" (Docket No. PA02-2, March 2003) 
provides concrete recommendations setting minimum standards for price 
indices. As noted above, we have an ongoing proceeding on market price 
formation with many similar issues and many of the same parties (AD03-
7), and we have held one technical conference with the active 
participation of industry and have scheduled another. Several 
innovative solutions have been proposed.

Specifically, S.B. 14 instructs the FERC to "issue rules establishing 
an electronic information system... [that provides] information about 
the availability and market price of wholesale electric energy and 
transmission services" (S.B. 14 at § 1171) and prohibits parties 
"willfully and knowingly to report any information relating to the 
price of electricity sold at wholesale" S.B. 14 at § 1172). H.R. 6 
contains comparable language. Additionally, FERC's ability to impose 
criminal fines would be increased significantly under the legislation. 
We are optimistic that this legislation in conjunction with our efforts 
on this issue will allow us to move toward greater integrity in energy 
pricing data.

Regarding the specific case of access to NERC data for monitoring 
purposes, language in S.B. 14 and H.R. 6 creating FERC jurisdiction 
over a designated Electric Reliability Organization should assist in 
addressing the issues regarding information access.

FERC's authority is, at best, ambiguous relative to the trade of 
electricity-based derivatives. Our ability to collect information in 
this part of the market is, therefore, limited. Market participants 
should not be deterred from entering into agreements that limit their 
price risk in the volatile electric market. FERC, nonetheless, needs to 
be able to identify whether particular hedges are being used to the 
benefit of customers and when they are a component of a plan to 
manipulate the market. As the report notes, FERC and the Commodity 
Futures Trading Commission "have recently taken steps to improve ... 
coordination" (p. 29), but the lack of clear jurisdiction over the 
trade of energy derivatives, both on and off 
exchanges, limits our ability to collect information that allows us to 
oversee the whole market.

In considering data submitted to FERC, we must balance customers' 
interests against market efficacy in matters of confidentiality. 
Traditionally, FERC has given special consideration to the customers' 
side of the scale favoring broad disclosure of information. S.B. 14 
provides a clear confidentiality standard, exempting "from disclosure 
information [FERC] determines would, if disclosed, be detrimental to 
the operation of an effective market or jeopardize system security." 
Similar language is in H.R. 6. FERC supports this standard as being 
consistent with competitive energy markets.

Beyond FERC's jurisdiction, I would like to note the imbalance in 
information availability between the supply and demand sides of the 
market. Looking at Appendix A in the report, one notices the dearth of 
national data collections concerning electricity demand. Particularly 
in the areas of energy efficiency, demand response, and distributed 
generation, policy makers must have access to richer and clearer 
information for better decision-making about competitive energy 
markets, energy adequacy, and national energy security. FERC cannot 
collect these data due to jurisdictional considerations, but the 
resulting information is critical to understanding the entire market.

We appreciated the opportunity to work with your staff in reviewing the 
information requirements in restructured electricity markets. Thank you 
again for the opportunity to comment on your report.

Best regards,



Pat Wood, III Chairman:

Signed by Pat Wood, III: 

[End of section]

Appendix V: Comments from the Department of Energy:

Department of Energy Washington, DC 20585:

JUN 11 2003:

Jim Wells:

Director, Natural Resources and Environment General Accounting Office:

441 G Street NW Washington, DC 20548:

Dear Mr. Wells:

The Energy Information Administration (EIA) appreciates the opportunity 
to comment on the General Accounting Office (GAO) draft report 
"Electricity Restructuring: Action Needed to Address Emerging Gaps in 
Federal Information Collection," Report No. GAO-03-586. We agree that 
the report generally characterizes the current state of electricity 
data collection and dissemination at EIA accurately, and that it 
provides a balanced set of recommendations on improving the timeliness 
of data dissemination in the electricity industry's restructured 
environment. We have previously provided you with a set of informal 
comments, including those dealing with minor issues of fact about our 
surveys. This letter reiterates our major comments concerning the 
draft.

* The discussion of EIA's mission on page 10 differs from that in our 
Strategic Plan (see http://www.eia.doe.gov/neic/aboutEIA/
strategy.htm). As stated there, our mission is to be "a leader in 
providing high quality, policy-independent energy information to meet 
the requirements of Government, industry, and the public in a manner 
that promotes sound policymaking, efficient markets, and public 
understanding." Although our analyses and forecasts often include an 
assessment of energy adequacy as well as other issues,.we believe that 
our Strategic Plan provides the best and most accurate description of 
our mission.

The discussion of EIA's use of its information on page 11 is somewhat 
narrow. Although we have in the past evaluated many of the issues 
discussed in the paragraph, a more general statement of EIA's use of 
the data is as follows: "EIA and its customers use the information it 
collects for a variety of purposes. These include monitoring of market 
trends in supply, demand, and prices; analytical activities such as 
short-and long-term forecasting; and inputs to special studies, such as 
responses to Congressional inquiries. EIA is also responsible for 
making sure its data are available to the public in easily accessible 
and user-friendly formats.":

* The discussion of information "gaps" on page 20 should acknowledge 
that some gaps are being filled by other agencies. For example, the 
FERC Form 1 goes only to Investor Owned Utilities (IOUs). However, the 
Rural Utility Service collects 
some similar data for cooperatives, as does the EIA for public power 
producers and some other entities through the EIA-412 survey. The FERC 
423 covers fuel cost and quality for IOUs; the EIA-423 covers other 
entities. These activities are worth noting in the report.

* The discussion of the quality of EIA's data on page 27 states that 
some companies have chosen not to submit information on delivered fuel 
prices on their EIA-423 submissions. Although this has been a problem, 
EIA has made a successful effort recently to greatly reduce the number 
of non-respondents. This is a mandatory form, and respondents are not 
free to choose which elements of the data they will or will not report. 
We suggest including mention of this successful effort in the report.

Overall, we believe this report makes a significant contribution to 
public understanding of the challenges that electricity restructuring 
has generated for data collection and dissemination. Again, thank you 
for the opportunity to comment.

Sincerely,

Guy F. Caruso 
Administrator 
Energy Information Administration:

Signed by Guy F. Caruso: 

cc: H. Gruenspecht, EI-1 S. Sitzer, EI-50:

R. Schnapp, EI-53 D. Pritchett, EI-20 D. Williams, ME-1.1:

[End of section]

Appendix VI: GAO Contact and Staff Acknowledgments:

GAO Contact:

Dan Haas (202) 512-9828:

Acknowledgments:

In addition to the individual named above, Angelia Kelly, Dennis 
Carroll, Jose Martinez-Fabre, Jon Ludwigson, Jonathan McMurray, Frank 
Rusco, and Barbara Timmerman made key contributions to this report.

FOOTNOTES

[1] U.S. General Accounting Office, Lessons Learned From Electricity 
Restructuring: Transition to Competitive Markets Underway, but Full 
Benefits Will Take Time and Effort to Achieve, GAO-03-271 (Washington, 
D.C.: Dec. 17, 2002).

[2] U.S. General Accounting Office, Energy Markets: Concerted Actions 
Needed by FERC to Confront Challenges That Impede Effective Oversight, 
GAO-02-656 (Washington, D.C.: June 14, 2002) and Lessons Learned From 
Electricity Restructuring: Transition to Competitive Markets Underway, 
but Full Benefits Will Take Time and Effort to Achieve, GAO-03-271 
(Washington, D.C.: Dec. 17, 2002).

[3] The Bonneville Power Administration, the Western Area Power 
Administration, the Southwestern Power Administration, and the 
Southeastern Power Administration.

[4] EPA, Study of Hazardous Air Pollutant Emissions from Electric 
Utility Steam Generating Units--Final Report to Congress, EPA-453/R-98-
004, February 1998.

[5] EIA Survey Forms 767, 860, 861, and 906 are included in appendix I.

[6] An ISO is an entity encouraged by FERC to manage the transmission 
system as the electric industry in the United States restructures. An 
ISO is to control the power system or grid without special interest, 
and is to own no generation, transmission, or load. FERC Order 888, 
which was issued in 1996, encouraged utilities to form ISOs to which 
they could transfer operating control (but not ownership) of their 
transmission facilities. FERC Order 2000, issued in 1999, encouraged 
transmission utilities to join the larger RTOs that would cover the 
entire nation and supplant ISOs.

[7] Federal Trade Commission, "Competition and Consumer Protection 
Perspectives on Electric Power Regulatory Reform" (Washington, D.C.: 
July 2000) and "Competition and Consumer Protection Perspectives on 
Electric Power Regulatory Reform: Focus on Retail Competition" 
(Washington, D.C.: Sept. 2001).

[8] U.S. General Accounting Office, Restructured Electricity Markets: 
California Market Design Enabled Exercise of Market Power, GAO-02-828 
(Washington, D.C.: June 21, 2002).

[9] GAO-02-656 and GAO-03-271.

[10] GAO-02-656.

[11] Bilateral energy trades involve two parties (for example, a 
generator and a supplier) entering into a contract to deliver 
electricity at an agreed time in the future.

[12] Derivatives are financial products--for example, options, futures, 
and other contracts--the value of which are derived from underlying 
instruments, such as company stocks, electricity and natural gas 
commodities, or other financial instruments.

[13] GAO-02-656.

[14] GAO-02-656 and GAO-03-271.

[15] §16 U.S.C. 825h. FERC also has authority in sections 311 (§16 
U.S.C. 825j) and 304 (§16 U.S.C. 825c) of the Federal Power Act and 
section 133 (§16 U.S.C. 2643) of PURPA.

[16] EIA's two reports were (1) "Effects of Electric Power Industry 
Restructuring on EIA Data Collection," March 1997 and (2) "Electric 
Power Restructuring--A Focus Group Summary: Implications for Data 
Collection, Analysis, and Reporting on the Electric Power Industry by 
the Energy Information Administration." No date was given for the 
second report, which was based on a series of eight focus groups 
between July and October 1997.

[17] Issac C. Hunt, Jr., Former Commissioner, SEC, Testimony 
Concerning: S. 1766 and Repeal of the Public Utility Holding Company 
Act of 1935, before the Senate Committee on Energy and Natural 
Resources, 107th Congress, February 6, 2002.

[18] Report of the Staff to the Senate Committee on Governmental 
Affairs, Financial Oversight of Enron: The SEC and Private-Sector 
Watchdogs, October 8, 2002, and a Majority Staff Memorandum to the 
Committee on Governmental Affairs, Subject: Committee Staff 
Investigation of the Federal Regulatory Commission's Oversight of Enron 
Corp., November 12, 2002.

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