Nominee’s lack of policy experience seen as asset after Binz collapse

Source: Hannah Northey, E&E reporter • Posted: Wednesday, February 12, 2014

President Obama’s pick to lead the Federal Energy Regulatory Commission, Norman Bay, offers the administration what many FERC watchers say it needed after the failed nomination last year of former Colorado utility regulator Ron Binz.

A clean slate.

Bay, 53, a former law professor and U.S. attorney in New Mexico, is known for cracking down on Wall Street banking giants in the gas and power markets as the director of FERC’s Office of Enforcement, his post since 2009.

But there’s little known about Bay’s views on FERC’s hot-button issues: gas exports, integration of renewables and the need for more oil and gas pipelines. He’s never been a state utility commissioner, so many of Bay’s views on energy policy will remain a mystery until he appears in a confirmation hearing before the Senate Energy and Natural Resources Committee.

“I guess if you go back the last few decades, it’s hard to find someone about whom we know so little in terms of their policy, in terms of their beliefs and knowledge of industry,” said former FERC Chairman Jim Hoecker, who worked for the agency before serving as chairman. “He hasn’t left a lot of footprints outside the enforcement environment.”

It’s unclear how that’s going to play with senators who’ll vote on Bay’s confirmation.

Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska), for one, questioned why Obama bypassed those with a working knowledge of the agency — Democratic FERC Commissioner John Norris and acting Chairwoman Cheryl LaFleur.

“What is up with this?” Murkowski asked in an interview yesterday. “And why is it that you just automatically bypass everybody who has experience on the committee and elevate him to chair? What’s going on?”

Sen. Joe Manchin (D-W.Va.) said at the National Association of Regulatory Utility Commissioners’ winter meeting in Washington, D.C., today that he didn’t know about Bay, yet indicated concerns. “I had concerns about the last one, I’m sure I’ll have concerns about this one,” Manchin told reporters. “You have a lady right in there who it sounds like has the chops to get the jobs done,” he added, pointing to NARUC President Colette Honorable.

Others point out that Bay has provided no fodder for conservative and fossil groups that attacked Binz’s nomination.

“He doesn’t seem to have much history on energy policy matters — that may bode well for a smooth confirmation process,” one source said. “We don’t know much about him, but he’s been at FERC a number of years, he’s well-regarded, has worked with the law.”

Others said Bay was an ideal candidate.

“Frankly, if you went through what they did with Binz, wouldn’t you want to pick someone as noncontroversial as possible?” asked Susan Court, Bay’s predecessor as director of FERC’s Office of Enforcement from 2005 to 2009 and now principal of her own consultancy, SJC Energy Consultants LLC.

Binz drew heavy fire from the right, with fossil-fuel interests arguing that the nominee was part of the administration’s plans to tackle climate change through regulatory actions that end-run Congress. With the Senate Energy panel deadlocked, Binz asked Obama to withdraw his nomination last fall (Greenwire, Oct. 1, 2013).

Tyson Slocum, director of the energy program at the watchdog group Public Citizen, said Bay’s enforcement experience would serve the commission well.

“Some have said, ‘We don’t know where he stands on energy policy,’ but that reflects a misunderstanding of FERC,” Slocum said. “FERC is not DOE, it’s not an energy-policy-setting agency per se, it essentially operates like five judges presiding over evidence in a complex rate proceeding.”

What’s also unclear is whether Bay’s nomination signals the White House’s interest in stepped-up enforcement in gas and electricity trading.

Former FERC Commissioner Marc Spitzer said during an interview on “Platts Energy Week TV” last weekend that Bay was not political when they worked together — and that the nomination doesn’t indicate a change in direction for FERC.

“I’m not sure it’s a message other than Norman was involved in the Office of Enforcement after the Energy Policy Act of 2005, which greatly expanded FERC’s authority over market manipulation,” Spitzer said.

Focus on enforcement?

Bay has overseen efforts that led to multimillion-dollar fines against major financial players like JPMorgan Chase & Co., Deutsche Bank AG and Barclays PLC while serving as the head of enforcement at FERC. Before joining the agency, he was a law professor at the University of New Mexico School of Law from 2002 to 2009.

In 2000, President Clinton appointed Bay to serve as the U.S. attorney for New Mexico, where he led the case against Wen Ho Lee, a scientist at the Los Alamos Nuclear Laboratory who was indicted on charges of stealing secrets about the U.S. nuclear arsenal for China. The government later dropped the case for Lee’s guilty plea to a single count of improperly handling of restricted data.

Bay, born in Urbana-Champaign, Ill., is the son of Chinese immigrants. He studied at Dartmouth College before earning a law degree from Harvard Law School. He has also worked at the State Department before serving as an assistant U.S. attorney in Washington, D.C., and Albuquerque, N.M., where he prosecuted violent crime.

Despite his beefed-up resume, FERC’s enforcement has also been criticized for being too opaque under Bay’s watch.

William Scherman, FERC’s former general counsel and a partner with Gibson, Dunn & Crutcher LLP, last year criticized FERC for not providing clear rules about what constitutes market manipulation and said the agency appears to be setting new definitions and standards as it goes along (Greenwire, Nov. 19, 2013).

Under the Energy Policy Act of 2005, Congress directed FERC to detect, prevent and appropriately sanction the gaming of energy markets. FERC in turn crafted an anti-manipulation rule that some legal experts say is broadly written and appears to take a “we know it when we see it” approach.

Harvard University energy policy professor and economics expert William Hogan, a key architect of electricity deregulation theory in the 1990s, has warned that FERC is extending the definition of market manipulation in dangerous ways that could unravel the market, and he said only agency officials really know what’s going on.

In an interview, Hogan said FERC is active in the Enforcement Office, but much is done in secret. “By which I mean they are proposing enforcement actions through confidential processes and they’re arriving at settlements,” he said. “Whatever you think of the merits of the process, it does have the troubling characteristic of being opaque. People aren’t sure what the rules are.”

Former FERC Chairman Hoecker dismissed the notion that Bay’s nomination translates into a White House desire for stepped-up market oversight.

“I think they found somebody who’s a first-rate professional, a smart guy, somebody who knows something about FERC operations and someone who doesn’t have the vulnerabilities and public pronouncements like Ron Binz had,” Hoecker said.

Hoecker also said Bay has an energy policy, it’s just not clear what it is. “I have to say it’s highly unusual for someone to step into the chairman’s slot with so little on the scoreboard already, so it’ll be interesting,” he said.

Court, the former FERC enforcement chief, also rejected any sign of stepped-up oversight.

“I don’t think the White House wants more emphasis on enforcement because frankly, how much more could you have?” she said. “They think he’s right for the job, he was part of the Clinton administration, he has some Democratic credentials, he’s been a law professor and he’s intelligent.”