oversight

Electricity Restructuring: Action Needed to Address Emerging Gaps in Federal Information Collection

Published by the Government Accountability Office on 2003-06-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to Congressional Requesters




June 2003
             ELECTRICITY
             RESTRUCTURING
             Action Needed to
             Address Emerging
             Gaps in Federal
             Information
             Collection




GAO-03-586
                                                June 2003


                                                ELECTRICITY RESTRUCTURING

                                                Action Needed to Address Emerging
Highlights of GAO-03-586, a report to           Gaps in Federal Information Collection
Congressional Requesters




The ongoing transition (or                      Federal agencies collect, use, and share a wide variety of electricity-related
restructuring) of electricity                   information to carry out their respective missions. Federal agencies have
markets from regulated                          three principal sources of information: (1) routine formal data collection
monopolies to competitive                       instruments sent to industry participants to report on operations and other
markets is one of the largest                   industry-related activities, (2) third parties such as energy news services
single industrial reorganizations
in the history of the world. While
                                                that package federally collected information as well as collect original
information is becoming more                    information some of which reflects current market conditions, and
critical for understanding how                  (3) individual companies under investigation. Agencies use the information
well restructuring is working, there            that they collect to carry out their respective missions—ranging from
are troubling indications that some             Federal Energy Regulatory Commission’s (FERC) monitoring of electricity
market participants deliberately                markets to Energy Information Administration’s dissemination of
misreported information to                      information about the electricity sector and Environmental Protection
manipulate prices. GAO was                      Agency’s pollution monitoring. Agencies share electricity-related information
asked to describe (1) the electricity           through a variety of means, such as using the Internet to distribute published
information collected, used,                    reports and access their databases, interagency meetings, and other means.
and shared by key federal                       In addition, most federally collected information is made publicly available,
agencies in meeting their primary
responsibilities and (2) the effect
                                                although it is sometimes subject to delayed release or released in aggregated
of restructuring on these federal               form in order to protect business-sensitive information.
agencies’ collection, use, and
sharing of this 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
Effective oversight of evolving                 just and reasonable prices and by shifting its focus from periodic review of
electricity markets requires the
                                                cost information to monitoring current market conditions. To monitor
acquisition of and access to timely,
reliable, and complete information,             these conditions, FERC needs to access market information on wholesale
therefore, we recommend that the                transactions; however, no federal agency, including FERC, has access to
Chairman, FERC (1) demonstrate                  complete and timely information on electricity markets and market
what information it needs, (2)                  participants, exposing gaps in key information. Such information gaps exist
describe the limitations resulting              primarily because FERC is limited in its authority to collect information for
from not having this information,               full and effective market oversight and it lacks specific authority to collect
and (3) ask the Congress for                    current information which may lead to market participants challenging
sufficient authority to meet its                these collection activities. For example, FERC authority does not
information collection needs and                generally extend to non-jurisdictional entities such as the power marketing
responsibilities. FERC generally                administrations, other non-utilities, and North American Electric Reliability
agreed with the conclusions,
                                                Council. As long as these information gaps persist, FERC will be unable to
specifically that its authority to
collect information has not kept                oversee electricity markets in a comprehensive manner.
pace with the changing electricity
market, and added that it will have             Restructuring’s effects on the sharing of electricity information, coupled
the results from its information                with recent national security concerns, have highlighted the sensitive
assessment at the end of the year.              nature of some information that federal agencies collect or need. Because
                                                of the importance of having timely, reliable, and complete information, we
www.gao.gov/cgi-bin/getrpt?GAO-03-586.
                                                are recommending that FERC take action to resolve its information gaps.
To view the full product, including the scope   As part of this action, we are recommending that FERC present its
and methodology, click on the link above.       findings to the Congress because information-related issues—raised by
For more information, contact Jim Wells at
(202) 512-3841 or wellsj@gao.gov.
                                                restructuring—may require Congressional action to ultimately resolve.
Contents


Letter                                                                                       1
               Results in Brief                                                              2
               Background                                                                    4
               Agencies Collect, Use, and Share Electricity-Related Information to
                 Meet Missions                                                               7
               Restructuring Has Exposed Gaps in Agencies’ Electricity
                 Information and Has Affected How This Information Is Shared               18
               Conclusions                                                                 33
               Recommendations for Executive Action                                        34
               Agency Comments                                                             34
               Objectives, Scope, and Methodology                                          35

Appendix I     Description of Data Collection Forms and Legislation
               Authorizing Collections for FERC and EIA             38



Appendix II    Third-Party Data Sources                                                    62



Appendix III   EIA Confidentiality Elements                                                63



Appendix IV    Comments from the Federal Energy Regulatory
               Commission                                                                  64



Appendix V     Comments from the Department of Energy                                      70



Appendix VI    GAO Contact and Staff Acknowledgments                                       72



Figure
               Figure 1: Major Federal Collectors of Electricity Information                 8




               Page i                                     GAO-03-586 Electricity Restructuring
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




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Page ii                                             GAO-03-586 Electricity Restructuring
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 reported1
                                   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.




                                   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).



                                   Page 1                                           GAO-03-586 Electricity Restructuring
                   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.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.


                   Federal agencies collect, use, and share a wide variety of electricity-
Results in Brief   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


                   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).




                   Page 2                                           GAO-03-586 Electricity Restructuring
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


Page 3                                      GAO-03-586 Electricity Restructuring
             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.


             The overall transition known as “restructuring” in the electricity industry
Background   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.




             Page 4                                      GAO-03-586 Electricity Restructuring
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


Page 5                                      GAO-03-586 Electricity Restructuring
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.




Page 6                                       GAO-03-586 Electricity Restructuring
                      Federal agencies collect three types of electricity-related information
Agencies Collect,     for widely varying purposes in accordance with their different
Use, and Share        missions. Some agencies such as FERC, EIA, RUS, SEC, and EPA collect
                      information on an ongoing, regular basis, using forms or form-like surveys.
Electricity-Related   However, there is a time differential between the reporting period, when
Information to        the information is collected and when an agency reports the information.
                      As a result, the information usually does not reflect current market
Meet Missions         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.




                      Page 7                                     GAO-03-586 Electricity Restructuring
Figure 1: Major Federal Collectors of Electricity Information




Page 8                                           GAO-03-586 Electricity Restructuring
FERC Collects            FERC, an independent regulatory agency, was established in 1977 as a
Form-Based and Current   successor to the Federal Power Commission. In addition to regulating
Information to Oversee   and overseeing the interstate transmission and interstate wholesale sales
                         of natural gas and electricity, FERC regulates the interstate transmission
Electricity Markets      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.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.



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




                         Page 9                                           GAO-03-586 Electricity Restructuring
                             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        Two organizations within DOE are primarily responsible for collecting
Forms to Gather a Variety    electricity-related information. These organizations, EIA and the Office
of Electricity Information   of Fossil Energy (Fossil Energy), rely on forms to collect an enormous
                             amount of information at regular intervals. EIA collects this information
for Analyses, Forecasts,     for a wide variety of statistical analyses and may assume responsibility
Dissemination, and           for gathering the lesser amount of information for which Fossil Energy has
Other Purposes               been responsible.




                             Page 10                                      GAO-03-586 Electricity Restructuring
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.




Page 11                                     GAO-03-586 Electricity Restructuring
                             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         EPA’s mission requires it to collect electricity-related information for
Survey to Collect            regulatory purposes. In this regard, one of EPA’s most important
Information on Emissions     initiatives is its Acid Rain Program implemented in 1995. The program
                             specifies that all existing utility units serving generators with an output
for Monitoring Air Quality   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




                             Page 12                                     GAO-03-586 Electricity Restructuring
coal-fired electric utilities. An EPA report in February 19984 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.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.




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.




Page 13                                                GAO-03-586 Electricity Restructuring
RUS Uses Forms to       RUS officials told us that RUS has a different responsibility from other
Collect Information     agencies that also collect information on electricity. RUS is a lending
Relating to Its Loans   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). 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.




                        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.




                        Page 14                                             GAO-03-586 Electricity Restructuring
SEC Uses Forms to Collect   The SEC was established under the Securities Exchange Act of 1934 as an
Information on Companies    independent, nonpartisan, quasi-judicial regulatory agency charged with
to Protect Investors        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              Other agencies, including the Department of Justice, the Federal Trade
Have No Ongoing,            Commission, and the Commodity Futures Trading Commission, do not
Regular Collection          collect information on an ongoing, regular basis. Both the Department of
                            Justice and the Federal Trade Commission have responsibilities to enforce
of Electricity-Related      antitrust laws, among others. According to an official in the Department
Information                 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


                            Page 15                                     GAO-03-586 Electricity Restructuring
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.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


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).




Page 16                                          GAO-03-586 Electricity Restructuring
                      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   Restructuring, which has led to increasingly complex market activities
of the Information    with greater need for oversight, has highlighted the need for sharing
They Collect          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.


                      Page 17                                     GAO-03-586 Electricity Restructuring
                        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.


                        Of the eight federal agencies included in our review, we found that
Restructuring Has       restructuring has significantly affected FERC while other agencies
Exposed Gaps in         were affected to a lesser extent. To respond to competitive markets,
                        FERC has made important changes, for example, creating a new office
Agencies’ Electricity   to actively monitor markets to ensure they are competitive. These
Information and Has     changes have affected its organizational structure and information
                        collection activities. However, FERC is limited in the information it is
Affected How This       allowed to collect, primarily because of limitations in its authority. To
Information Is Shared   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.




                        Page 18                                    GAO-03-586 Electricity Restructuring
FERC’s Changing            Over the past year, FERC has changed the way it performs market
Information Needs          oversight from one that reacts to electricity market events to one that
Have Affected Its          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,
Collection and Use of      FERC created a new office to actively monitor competitive electricity
Electricity Information,   markets and undertook efforts to identify sources of market information
but Gaps Remain            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       In response to the evolving electricity markets, FERC realized that it
and Assessing Its          needed to reorganize and created OMOI in fiscal year 2002 to monitor
Information Needs          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.


                           Page 19                                    GAO-03-586 Electricity Restructuring
                            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        FERC’s current information collection activities do not provide sufficient
Gaps Primarily because of   information to fully monitor electricity markets. First, the historical
Limitations in Authority    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,


                            Page 20                                     GAO-03-586 Electricity 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 2002,8
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,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



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.




Page 21                                           GAO-03-586 Electricity Restructuring
prices, fuel costs, and spot and futures contract prices. In June 2002,10
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”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 derivatives12 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


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.




Page 22                                              GAO-03-586 Electricity Restructuring
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,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,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.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



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.




Page 23                                            GAO-03-586 Electricity Restructuring
                         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        FERC increasingly relies on third-party information to help offset its
Relies on Third-Party    limited authority to collect all of the information it needs to monitor
Information, but Gaps    electricity markets. OMOI subscribes to several energy-related services
                         to increase its access to current markets and make key decisions related
Remain and Some          to market performance. (See app. II for a complete listing and description
Information Is Suspect   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


                         Page 24                                    GAO-03-586 Electricity Restructuring
                       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      In addition to the third-party information, FERC plans to rely extensively
RTO/ISO Information,   on RTOs and ISOs to assist in its monitoring efforts. FERC plans to use
but RTO Formation      the market monitors, created as part of ISOs, to perform up-to-the-minute
                       market monitoring activities and routinely collect information on their
Remains Incomplete     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


                       Page 25                                    GAO-03-586 Electricity Restructuring
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.




Page 26                                      GAO-03-586 Electricity Restructuring
Restructuring Has         Among the other agencies, EIA has been the most affected by
Affected Other Agencies   restructuring while the remaining agencies have been affected only
to a Lesser Extent        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.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.




                          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.




                          Page 27                                           GAO-03-586 Electricity Restructuring
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.17 FERC has stated that PUHCA, as it currently exists,
may actually impede competitive markets and appropriate competitive
market structures.




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.




Page 28                                          GAO-03-586 Electricity Restructuring
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,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


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.




Page 29                                          GAO-03-586 Electricity Restructuring
                            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         Restructuring has made the issue of confidentiality concerning electricity
Caused by Restructuring     information more prominent. On the one hand, the need to access key
and National Security       information now is greater in evaluating the benefits and risks of
                            restructuring. On the other hand, the sensitivity of this information,
Concerns Have Affected      according to the companies asked to provide it, is also greater because of
How Information Is Shared   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


                            Page 30                                    GAO-03-586 Electricity Restructuring
                                 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           In 2001, EIA faced a major controversy over confidentiality of electricity
Resolve Confidentiality Issues   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,


                                 Page 31                                     GAO-03-586 Electricity Restructuring
                              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     FERC recognizes the need of utilities to compete in the electric market
Sources of Information        and understands their desire to keep confidential some of the information
Face Challenges that Affect   it collects through its forms. However, FERC’s policy requires respondents
Both Information Collection   who request confidentiality to show that potential harm outweighs the
and Sharing                   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



                              Page 32                                    GAO-03-586 Electricity Restructuring
                             FERC and NERC officials, confidentiality pledges inhibit this sharing
                             this information.

National Security Concerns   Since September 11, 2001, the federal government has taken steps to
Affect Information Sharing   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.


                             Given FERC’s predominant role in overseeing evolving electricity markets,
Conclusions                  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.




                             Page 33                                     GAO-03-586 Electricity Restructuring
                      Given that effective oversight of evolving electricity markets requires the
Recommendations for   acquisition of and access to timely, reliable, and complete information,
Executive Action      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.


                      We provided a draft of this report to FERC and DOE for their review
Agency Comments       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


                      Page 34                                      GAO-03-586 Electricity Restructuring
                     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.


                     To determine what electricity information is collected, used, and shared
Objectives, Scope,   by key federal agencies in meeting their primary responsibilities, we first
and Methodology      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


                     Page 35                                    GAO-03-586 Electricity Restructuring
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.




Page 36                                    GAO-03-586 Electricity Restructuring
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




Page 37                                     GAO-03-586 Electricity Restructuring
                                            Appendix I: Description of Data Collection
Appendix I: Description of Data Collection  Forms and Legislation Authorizing
                                            Collections for FERC and EIA


Forms and Legislation Authorizing
Collections for FERC and EIA

Form/reporting requirement         Legislation authorizing
by agency                          collections                     Purpose                               Types of data
                                               Federal Energy Regulatory Commissiona
Form 1—Annual Report of            Federal Power Act (FPA)         Used to monitor markets to ensure     Generation, transmission,
Major Electric Utilities,          sections 304 and 309. These     that rates are just and reasonable,   distribution, and sales of
Licenses, and Others               sections authorized the Federal and services are offered in a         electric energy from major
                                   Energy Regulatory Commission nondiscriminatory manner.                electric utilities and
                                   (FERC):                                                               licensees subject to FERC
                                   • to collect and record data to                                       jurisdiction.
                                      the extent it deems
                                      necessary and
                                   • to prescribe rules and
                                      regulations concerning
                                      accounts, records, and
                                      memoranda.
                                   FERC may prescribe a system
                                   of accounts for jurisdictional
                                   companies and after notice and
                                   opportunity for hearing, may
                                   determine the accounts in
                                   which particular outlays and
                                   receipts will be entered,
                                   changed, or credited.




Form 1-F—Annual Report for         Same as above                    Same as above                        Same as above
Non-major Public Utilities,
Licensees, and Other Public
Utilities, Licensees, and Others




                                            Page 38                                            GAO-03-586 Electricity Restructuring
                                          Appendix I: Description of Data Collection
                                          Forms and Legislation Authorizing
                                          Collections for FERC and EIA




Sources of          Voluntary, mandatory, Treatment of          How often captured/     How often   Products issued (if
data                or as needed          data                  collected               reported    applicable)/how used

Major public        Mandatory             Publicly available.   On or before April 30   Annually    • Department of Energy’s
utilities.                                                      of each year for the                  (DOE) Energy Information
                                                                previous calendar                     Administration publishes
                                                                year.                                 Form 1 data in aggregate
                                                                                                      form.
                                                                                                    • The Office of Chief
                                                                                                      Accountant uses the data in
                                                                                                      its audit program and for
                                                                                                      continuous review of the
                                                                                                      financial conditions of
                                                                                                      regulated companies.
                                                                                                    • The Office of Markets,
                                                                                                      Tariffs, and Rates uses the
                                                                                                      data in rate proceedings
                                                                                                      and supply programs.
                                                                                                    • The Office of Economic
                                                                                                      Policy and General Counsel
                                                                                                      use the data in their
                                                                                                      programs.
                                                                                                    • Data from schedules are
                                                                                                      used to compute annual
                                                                                                      charges assessed against
                                                                                                      public utilities.
                                                                                                    • State regulatory
                                                                                                      commissions use the data
                                                                                                      to help satisfy their
                                                                                                      reporting requirements for
                                                                                                      public utilities and licensees
                                                                                                      subject to state jurisdiction.
Nonmajor            Same as above.        Same as above.        Same as above.          Same as     Same as above.
public utilities.                                                                       above.




                                          Page 39                                             GAO-03-586 Electricity Restructuring
                                          Appendix I: Description of Data Collection
                                          Forms and Legislation Authorizing
                                          Collections for FERC and EIA




Form/reporting requirement      Legislation authorizing
by agency                       collections                      Purpose                                   Types of data
                                             Federal Energy Regulatory Commissiona
Form 423—Monthly Report of      FPA sections 205 and 206, as     Collects information on the cost          Cost, price, and quality of
Cost and Quality of Fuels for   amended by section 208 of the and quality of fossil fuels delivered        fuels for generating plants.
Electric Plants                 Public Utility Regulatory        to electric generating plants.
                                Policies Act (PURPA) (Public
                                Law 95-617). FERC is
                                authorized to collect basic cost
                                and quality of fuel data at
                                electric generating plants.




Form 556—Application for        FPA section 3 and sections 201    Filed by owners or operators of          Information related to the
Certification of Qualifying     and 210 of PURPA.                 small power production or                facility’s ownership and
Facility (QF) or CoGen Status   These statutes authorize FERC     cogeneration facilities seeking          technical specifications.
                                to encourage cogeneration and     status as qualifying facility eligible
                                small power production and to     for benefits under PURPA,
                                prescribe such rules as           including exemption from certain
                                necessary in order to carry out   corporate, accounting, reporting
                                these statutory directives.       and rate regulation requirements;
                                                                  certain state laws; and where
                                                                  applicable regulation under FPA.

Form 561—Interlocking           Title II, section 211 of PURPA,   Collects information from individual Information on public
Directorates                    which amended part III, section   public utility directors and officers utilities’ interlocking
                                305, of FPA.                      who hold interlocking directorates. directorates for possible
                                Section 305 defines monitoring                                          conflicts of interest.
                                and regulatory operations
                                concerning interlocking
                                directorate positions held by
                                public utility personnel and
                                possible conflicts of interest.




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                                          Forms and Legislation Authorizing
                                          Collections for FERC and EIA




Sources of          Voluntary, mandatory, Treatment of          How often captured/     How often   Products issued (if
data                or as needed          data                  collected               reported    applicable)/how used

Public utilities    Mandatory             Publicly available.   No later than 45 days   Monthly     FERC uses the data to
who have                                                        after the end of the                conduct authorized fuel
electric                                                        report month.                       reviews, rate investigations,
generating                                                                                          and monitor changes and
plants (see                                                                                         trends in the electric wholesale
EIA-423 for                                                                                         market. Other government
unregulated                                                                                         agencies use the data to track
plants).                                                                                            the supply, disposition, and
                                                                                                    fuel prices on a regional and
                                                                                                    national basis and conduct
                                                                                                    environmental assessments.
                                                                                                    Others use the data to assess
                                                                                                    market competitiveness.

Owners or           As needed.            Publicly available.   Once during a 1-year    As needed. FERC uses the information to
operators of                                                    time period.                       determine whether a facility
small power                                                                                        meets the necessary
production or                                                                                      requirements and is entitled to
cogeneration                                                                                       various PURPA benefits.
facilities.




Approximately       Mandatory             Publicly available.   On or before April 30th Annually    FERC collects this information
1,600 directors                                                 for each preceding                  to monitor public utilities’
and officers of                                                 year.                               interlocking directorates for
public utilities                                                                                    possible conflicts of interest.
or public utility
holding
companies
engaged in the
generation,
transmission,
and sale of
electric power.




                                          Page 41                                             GAO-03-586 Electricity Restructuring
                                       Appendix I: Description of Data Collection
                                       Forms and Legislation Authorizing
                                       Collections for FERC and EIA




Form/reporting requirement   Legislation authorizing
by agency                    collections                     Purpose                                 Types of data
                                         Federal Energy Regulatory Commissiona
Form 566—Top 20 Purchasers   FPA section 305, as amended, Filed by jurisdictional public utilities   Information on the 20
List                         by section 211 of PURPA.        or public utility holding companies     largest purchasers of
                                                             engaged in the generation,              electric energy.
                                                             transmission, and sale of electric
                                                             power to report 20 of the largest
                                                             purchases of electric energy. Lists
                                                             customers and their business
                                                             addresses if they were 1 of the top
                                                             20 largest purchasers of electric
                                                             energy, measured in kilowatt hours
                                                             sold, for purposes other than
                                                             resale, during any of 3 preceding
                                                             calendar years.
Form 580—Interrogatory on    FPA section 205 (f), as         Collects information from               Information on fuel cost and
Fuel and Energy Purchase     amended, by section 208 of      jurisdictional public utilities that    cost recovery practices
Practices                    PURPA.                          own or operate power plants             under fuel adjustment
                             This section authorizes the     generating 50 megawatts or              clauses in cost-based rates.
                             interrogatory established in    greater capacity.
                             Form 580 to take place not less
                             frequently than every 2 years.




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                                       Forms and Legislation Authorizing
                                       Collections for FERC and EIA




Sources of       Voluntary, mandatory, Treatment of          How often captured/      How often    Products issued (if
data             or as needed          data                  collected                reported     applicable)/how used

Approximately    Mandatory             Publicly available.   On March 1 of the        Annually     Used to identify large
175 public                                                   year following the                    purchasers of electric energy
utilities and                                                reporting.                            and possible conflicts of
public utility                                                                                     interest.
holding
companies.




Approximately    Mandatory             Publicly available.   Filed biennially on      Biennially   Used to review public
120 public                                                   June 1st for preceding                utility’s fuel purchase and
utilities.                                                   calendar period.                      cost recovery practices under
                                                                                                   fuel adjustment clauses in
                                                                                                   cost-based.
                                                                                                   Used to evaluate fuel costs
                                                                                                   in individual rate filings, to
                                                                                                   supplement periodic utility
                                                                                                   audits, and to monitor changes
                                                                                                   and trends in the electric
                                                                                                   wholesale market.
                                                                                                   Used by DOE’s EIA to study
                                                                                                   various aspects of coal, oil,
                                                                                                   and gas transportation rates.
                                                                                                   Used by electric market
                                                                                                   participants and the public
                                                                                                   to assess the electric
                                                                                                   marketplace during the
                                                                                                   transition to a competitive
                                                                                                   marketplace.




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                                      Forms and Legislation Authorizing
                                      Collections for FERC and EIA




Form/reporting requirement   Legislation authorizing
by agency                    collections                   Purpose                                 Types of data
                                        Federal Energy Regulatory Commissiona
Form 714—Annual Electric     FPA sections 202, 207, 210,   Collects information from any           Generating plants included
Control and Planning Area    211, 212, and 213, as         public utility or group of public       in the reporting control area;
                             amended, and sections 4, 304, utilities operating as a control area   control area monthly peak
                             309, and 311 of the same act. that has a peak load greater than       demand; control area net
                                                           200 megawatts based on energy           energy for load and peak
                                                           for load. The information collected     demand sources by month;
                                                           allows FERC to analyze power            adjacent control area
                                                           system operations in the course of      interconnections; control
                                                           its regulatory functions. The           area scheduled and actual
                                                           purpose of these analyses is to         interchange; planning area
                                                           estimate the effect of changes in       demand and forecast
                                                           power system operations that            summer and winter peak
                                                           result from the installation of a       demand and annual net
                                                           new generating unit or plant,           energy for load; and control
                                                           transmission facilities, and energy     area hourly system lambda
                                                           transfers between systems and/or        data.
                                                           new points of interconnections.
                                                           The analyses also serve to
                                                           correlate rates and changes;
                                                           assess reliability and other
                                                           operating attributes in regulatory
                                                           proceedings; monitor market
                                                           trends and behaviors; and
                                                           determine the competitive impacts
                                                           of proposed mergers, acquisitions,
                                                           and dispositions.




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                                           Forms and Legislation Authorizing
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Sources of           Voluntary, mandatory, Treatment of          How often captured/    How often   Products issued (if
data                 or as needed          data                  collected              reported    applicable)/how used

A public utility     Mandatory             Publicly available.   On or before June 1    Annually    Used to monitor control area
operating as a                                                   of each year for the               planning hourly demand,
control area or                                                  preceding calendar                 forecast summer and winter
a group of                                                       year.                              peak demand, and annual net
electric utilities                                                                                  energy for load.
that operates
as a control
area.




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




Form/reporting requirement   Legislation authorizing
by agency                    collections                       Purpose                             Types of data
                                         Federal Energy Regulatory Commissiona
Form 715—Annual              FPA section 213 (b), as           Provides information to potential   Potential transmission
Transmission Planning and    amended, by the Energy Policy transmission customers, FERC,           capacity and known
Evaluation Report            Act (Public Law 102-486).         state regulatory authorities, and   constraints.
                             Section 213 (b) requires FERC the public of potential transmission
                             to collect annually from          capacity and known constraints.
                             transmitting utilities sufficient
                             information about their
                             transmission systems to inform
                             potential transmission
                             customers, state regulatory
                             authorities, and the public of
                             available transmission capacity
                             and constraints.




Electric Quarterly Report    FPA section 205(c).              Provides contract and power sales Lists all contracts in effect
                                                              data per Order 2001 issued on        and all power sales made
                                                              April 25, 2002. Public utilities are during the previous quarter.
                                                              required to electronically file
                                                              Electric Quarterly Reports
                                                              summarizing the contractual terms
                                                              and conditions in their agreements
                                                              for all jurisdictional services
                                                              (including market-based power
                                                              sales, cost-based power sales, and
                                                              transmission service) and
                                                              transaction information for short-
                                                              term and long-term market-based
                                                              power sales and cost-based power
                                                              sales during the most recent
                                                              calendar quarter.




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                        Voluntary,
                        mandatory, or as      Treatment of      How often captured/        How often   Products issued (if
Sources of data         needed                data              collected                  reported    applicable)/how used

Approximately           Mandatory             Data are now      On or before April 1 of    Annually    FERC uses the information to
117 respondents                               restricted and    each year for the                      facilitate and resolve
consisting of                                 designated as     preceding calendar                     transmission disputes brought
transmitting utilities                        critical energy   year.                                  before it. State and federal
or a designated                               infrastructure                                           regulatory agencies use the
agent, such as a                              information.                                             information as a part of their
regional transmission                                                                                  oversight functions. Potential
group, North                                                                                           transmission customers use
American Electric                                                                                      the information to determine
Reliability Council                                                                                    transmission availability to or
(NERC) regional                                                                                        from wholesale electric power
reliability council,                                                                                   purchasers and sellers.
formal power pool, or
other group
operating integrated
(nonradial)
transmission facilities
at or above 100
kilovolts.




All public utilities.   Mandatory             Publicly          For the period from        Quarterly   Information is available to the
                                              available.        January 1 through                      public in a variety of formats. It
                                                                March 31, file by April                is used as an electronic
                                                                30; for the period from                repository of all jurisdictional
                                                                April 1 through June                   contracts, to fulfill the FPA
                                                                30, file by July 31; for               requirements to have all rates
                                                                the period July 1                      on file, and to provide price
                                                                through September                      data for market oversight
                                                                30, file by October 31;                purposes.
                                                                and for the period
                                                                October 1 through
                                                                December 31, file by
                                                                January 31.




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                                       Forms and Legislation Authorizing
                                       Collections for FERC and EIA




Form/reporting requirement    Legislation authorizing
by agency                     collections                    Purpose                              Types of data
                                            Energy Information Administrationb
EIA-411—Coordinated Bulk      Federal Energy Administration  Collects information on regional     The information reported
Power Supply Program Report   Act (Public Law 93-275) and    electricity supply and demand        includes (1) peak demand
                              the DOE Organization Act       projections for a 5-year advance     and energy for the
                              (Public Law 95-91).            period and provides information on   preceding year and 5 future
                              These two laws require EIA to  the transmission system and          years, (2) existing and
                              carry out a centralized,       supporting facilities. This          planned generating capacity
                              comprehensive, and unified     information is used to assess the    and the same for demand,
                              energy information program.    adequacy of energy resources to      (3) scheduled capacity
                              EIA is mandated to collect,    meet near and longer-term            purchases and sales,
                              evaluate, assemble, analyze,   domestic demands.                    (4) bulk electric transmission
                              and disseminate information on                                      system maps, and
                              energy resource reserves,                                           (5) existing and proposed
                              production, demand,                                                 transmission lines.
                              technology, and related
                              economic and statistical
                              information.




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                                            Forms and Legislation Authorizing
                                            Collections for FERC and EIA




Sources of          Voluntary, mandatory, Treatment of            How often captured/      How often   Products issued (if
data                or as needed          data                    collected                reported    applicable)/how used

NERC-               Voluntary, except for   Publicly available,   Each NERC Regional       Annually    Used to monitor the current
regulated           Schedule C, which is    except for            Council should file by               status and trends of the
electric power      identical to the Form   information on        April 1 and after                    electric power industry and to
entities and        EIA-860.                plant location        review, NERC should                  evaluate the future of the
other electricity                           (longitude and        file the Form EIA-411                industry.
suppliers.                                  latitude) and         by June 30.                          Primary publication—Electric
                                            tested heat rate.                                          Power Annual
                                                                                                       EIA is required to provide
                                                                                                       company-specific data to the
                                                                                                       Department of Justice, or to
                                                                                                       any other federal agency
                                                                                                       when requested for official
                                                                                                       use, which may include
                                                                                                       enforcement of federal law.
                                                                                                       The information may also be
                                                                                                       made available, upon request,
                                                                                                       to another component of DOE,
                                                                                                       to any committee of Congress,
                                                                                                       the General Accounting Office,
                                                                                                       or to congressional agencies
                                                                                                       authorized by law to receive
                                                                                                       such information. A court of
                                                                                                       competent jurisdiction may
                                                                                                       obtain this information in
                                                                                                       response to an order.




                                            Page 49                                              GAO-03-586 Electricity Restructuring
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                                      Forms and Legislation Authorizing
                                      Collections for FERC and EIA




Form/reporting requirement   Legislation authorizing
by agency                    collections                   Purpose                               Types of data
                                          Energy Information Administrationb
EIA-412—Annual Electric      Same as above.                Collects information on accounting,   The information reported
Industry Financial Report                                  plant statistics, and transmission    includes (1) identification,
                                                           data.                                 (2) electric balance sheet,
                                                                                                 (3) electric income
                                                                                                 statement, (4) electric plant,
                                                                                                 (5) taxes, tax equivalents,
                                                                                                 contributions, and services
                                                                                                 during year, (6) sales of
                                                                                                 electricity for resale,
                                                                                                 (7) electric operation and
                                                                                                 maintenance expenses,
                                                                                                 (8) purchased power and
                                                                                                 power exchanges,
                                                                                                 (9) electric generating plant
                                                                                                 statistics, (10) existing
                                                                                                 transmission lines, and
                                                                                                 (11) transmission lines
                                                                                                 added within last year.




EIA-417R—Electric Power      Same as above.                  Collects information for DOE to     The information reported
Systems Emergency Report                                     monitor electric utility system     includes the type of
                                                             emergencies.                        emergency, cause of
EIA-417—Electric Emergency                                                                       incident, and actions taken.
Incident and Disturbance
Report




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                                        Forms and Legislation Authorizing
                                        Collections for FERC and EIA




Sources of        Voluntary, mandatory, Treatment of          How often captured/    How often    Products issued (if
data              or as needed          data                  collected              reported     applicable)/how used

Completed by      Mandatory             Publicly available,   Accounting data         Annually    Used to compile statistics
approximately                           except for            (Schedules 1 through                on the financial status of the
500 municipally                         Schedule 9, lines     8) of the Form EIA-412              industry and to develop EIA
owned,                                  9 through 34, for     to EIA within 4 months              forecasting models.
federally                               unregulated           following the end of                Primary publications—Electric
owned, and                              entities.             the financial reporting             Power Annual, DOE/EIA-0348;
state-owned                                                   year. All reports,                  State Energy Price and
regulated                                                     including Schedules 9               Expenditure Report,
entities with                                                 through 11, for the                 DOE/EIA-0376; and
approximately                                                 given calendar year                 Annual Energy Outlook,
1,000                                                         must be submitted by                DOE/EIA-0383.
additional                                                    April 30.                           EIA is required to provide
unregulated                                                                                       company-specific data to the
entities filing a                                                                                 Department of Justice, or to
new schedule                                                                                      any other federal agency when
on “Electric                                                                                      requested for official use,
Generating                                                                                        which may include
Plant                                                                                             enforcement of federal law.
Statistics,” and                                                                                  The information may also be
39 cooperative                                                                                    made available, upon request,
borrowers filing                                                                                  to another component of DOE,
transmission                                                                                      to any committee of Congress,
data.                                                                                             the General Accounting Office,
                                                                                                  or to congressional agencies
                                                                                                  authorized by law to receive
                                                                                                  such information. A court of
                                                                                                  competent jurisdiction may
                                                                                                  obtain this information in
                                                                                                  response to an order.




Electric utilities. Mandatory           Publicly available,   As needed.             As needed. DOE uses the information
                                        except for the                                          as the basis for determining
                                        information                                             appropriate federal action to
                                        reported on                                             relieve an electrical energy
                                        Schedule 1, lines                                       supply emergency.
                                        4,5,6,7, and 8.                                         Primary publication—Electric
                                                                                                Power Monthly,
                                                                                                DOE/EIA-0226.




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Form/reporting requirement      Legislation authorizing
by agency                       collections                   Purpose                                Types of data
                                             Energy Information Administrationb
EIA-423—Monthly Cost and        Same as above.                Collects information on cost and       Delivered price of fuel by
Quality of Fuels for Electric                                 quality of fossil fuels delivered to   fossil fuel type and contract,
Plants Report                                                 U.S. electric plants.                  contract type and end date,
                                                                                                     quality of fuel (heat content,
                                                                                                     sulfur and ash content), and
                                                                                                     volume delivered.




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Sources of      Voluntary, mandatory,   Treatment    How often captured/ How often        Products issued (if
data            or as needed            of data      collected           reported         applicable)/how used

Unregulated       Mandatory             Publicly     Filing to be            Monthly/     With the exception of a handful
electricity                             available,   completed within 45     annually.    of state agency reports, the
generating                              except for   days of the close of                 FERC-423 and the EIA-423 are
facility (fossil-                       fuel cost.   the business month.                  the only timely public sources of
fuel plants for                                                                           information of the price of fuel
regulated                                                                                 delivered to electric generating
entities report                                                                           plants. Public agencies and private
on FERC-423).                                                                             analysts seeking to understand the
                                                                                          current and historical fuel
                                                                                          components of power prices and
                                                                                          generating plant operating costs
                                                                                          use the data widely.
                                                                                          Data from this form and the
                                                                                          FERC 423 appear in the
                                                                                          EIA publications—Electric Power
                                                                                          Monthly, Electric Power Annual,
                                                                                          Monthly Energy Review, and
                                                                                          Annual Energy Review.
                                                                                          EIA is required to provide
                                                                                          company-specific data to the
                                                                                          Department of Justice, or to
                                                                                          any other federal agency when
                                                                                          requested for official use, which
                                                                                          may include enforcement of
                                                                                          federal law.
                                                                                          The information may also be
                                                                                          made available, upon request, to
                                                                                          another component of DOE, to
                                                                                          any committee of Congress, the
                                                                                          General Accounting Office, or to
                                                                                          congressional agencies authorized
                                                                                          by law to receive such information.
                                                                                          A court of competent jurisdiction
                                                                                          may obtain this information in
                                                                                          response to an order.




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                                        Forms and Legislation Authorizing
                                        Collections for FERC and EIA




Form/reporting requirement     Legislation authorizing
by agency                      collections                   Purpose                               Types of data
                                            Energy Information Administrationb
EIA-767—Steam-Electric Plant   Same as above.                Collects information on the design    The information reported
Operation and Design Report                                  and operations of organic-fueled or   includes (1) identification,
                                                             combustible, renewable, steam-        (2) plant configuration,
                                                             electric plants, regardless of        (3) plant information
                                                             ownership status, which have a        (a) annual byproduct
                                                             total existing or planned generator   disposition and useful
                                                             rating of 10 megawatts and above      thermal output, (b) financial
                                                             (excluding nuclear power plants).     information, (4) boiler
                                                                                                   information (a) fuel
                                                                                                   consumption and quality,
                                                                                                   (b) air emission standards,
                                                                                                   (c) design parameters,
                                                                                                   (d) nitrogen oxide emission
                                                                                                   controls, (5) generator
                                                                                                   information, (6) cooling
                                                                                                   system information
                                                                                                   (a) annual operations,
                                                                                                   (b) design parameters,
                                                                                                   (7) flue gas particulate
                                                                                                   collector information,
                                                                                                   (8) flue gas desulfurization
                                                                                                   unit information (a) annual
                                                                                                   operations, (b) design
                                                                                                   parameters, and (9) stack
                                                                                                   and flue information—
                                                                                                   design parameters.




                                        Page 54                                          GAO-03-586 Electricity Restructuring
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                                      Forms and Legislation Authorizing
                                      Collections for FERC and EIA




Sources of    Voluntary, mandatory,   Treatment     How often captured/ How often        Products issued (if
data          or as needed            of data       collected           reported         applicable)/how used

Approximately Mandatory               Publicly      To be submitted no       Annually    Data from this form appear in the
1,300 U.S.                            available,    later than April 30                  EIA publications—Electric Power
plants with a                         except for    following the close of               Annual, Annual Energy Review,
total existing or                     information   the reporting year.                  and Carbon Dioxide Emissions
planned                               relating to                                        from the Generation of Electric
organic-fueled                        plant                                              Power in the United States.
or combustible                        locations                                          EIA is required to provide
renewable                             (longitude                                         company-specific data to the
steam-electric                        and                                                Department of Justice, or to
plants that                           latitude).                                         any other federal agency when
have a                                                                                   requested for official use, which
generator                                                                                may include enforcement of
nameplate                                                                                federal law.
rating of 10                                                                             The information may also be
megawatts or                                                                             made available, upon request,
larger.                                                                                  to another component of DOE, to
                                                                                         any committee of Congress, the
                                                                                         General Accounting Office, or to
                                                                                         congressional agencies authorized
                                                                                         by law to receive such information.
                                                                                         A court of competent jurisdiction
                                                                                         may obtain this information in
                                                                                         response to an order.




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                                        Forms and Legislation Authorizing
                                        Collections for FERC and EIA




Form/reporting requirement     Legislation authorizing
by agency                      collections                   Purpose                                   Types of data
                                            Energy Information Administrationb
EIA-826—Monthly Electric       Same as above.                Collects information on the retail        Retail sales of electricity by
Sales and Revenue with State                                 sales and revenue from                    end-user category, revenue,
Distributions Report                                         approximately 400 utilities and           megawatt hours, and
                                                             other energy service providers that       numbers of customers.
                                                             have sales to end-user customers.




EIA-860—Annual Electric        Same as above.                  Collects information on the status      Generating unit name,
Generator Reportc                                              of existing and planned power           ownership, operator,
                                                               plants in the United States,            location, cogeneration
                                                               including those scheduled for initial   status, and industry
                                                               commercial operation within 5           category if a cogenerator,
                                                               years of filing this report. Also       prime mover type,
                                                               tracks planned upgrades to              nameplate and summer net
                                                               existing power plants.                  generating capacity, initial
                                                                                                       commercial operating and
                                                                                                       retirement date, current unit
                                                                                                       status, tested heat rate, fuel
                                                                                                       sources, fuel delivery
                                                                                                       transportation mode, and
                                                                                                       FERC qualifying facility
                                                                                                       information for
                                                                                                       cogenerators.




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                     Voluntary,                     How often
                     mandatory, or   Treatment      captured/       How often
Sources of data      as needed       of data        collected       reported       Products issued (if applicable)/how used

Regulated and          Mandatory     Publicly       Filing should   Monthly        The EIA-826 is the only timely source of
unregulated                          available,     be completed                   information on the price and volume of power
companies that sell                  excluding      by the 10th                    sold to retail customers in the United States.
or deliver electric                  energy         working day,                   Data from this form appear in the EIA
power to end users,                  service        following the                  publications—Electric Power Monthly,
including electric                   provider’s     close of the                   Electric Power Annual, Monthly Energy
utilities, energy                    revenues,      business                       Review, and Annual Energy Review.
services providers,                  megawatt       month.                         EIA is required to provide company-specific
and distribution                     hours sold,                                   data to the Department of Justice, or to any
companies. Data                      and number                                    other federal agency when requested for
collected on this form               of                                            official use, which may include enforcement
include retail sales,                customers.                                    of federal law.
revenue, and number                                                                The information may also be made available,
of customers for all                                                               upon request, to another component of DOE,
end-use sectors                                                                    to any committee of Congress, the General
(residential,                                                                      Accounting Office, or to congressional
commercial,                                                                        agencies authorized by law to receive such
industrial, and other,                                                             information. A court of competent jurisdiction
including public                                                                   may obtain this information in response to
street and highway                                                                 an order.
lighting).

Approximately 3,200 Mandatory        Publicly       On or before    Annually       The EIA-860 is the primary source of
electric generating                  available,     February 15                    information on the inventory of power plants
plants, which have or                except for     of the                         in the United States. As such, it is widely
will have a                          latitude and   reporting                      used by public and private analysts
nameplate rating or 1                longitude of   calendar                       interested in such topics as adequacy of
megawatt (1,000                      plant          year.                          power supplies and air pollution emissions.
kilowatts) or more,                  location and                                  Data from this form appear in the EIA
and are operating or                 tested heat                                   publications—Electric Power Annual and
plan to be operating                 rate.                                         Annual Energy Review.
within 5 years of the                                                              EIA is required to provide company-specific
year of this form.                                                                 data to the Department of Justice, or to any
Also maintains a                                                                   other federal agency when requested for
record of plant                                                                    official use, which may include enforcement
retirements.                                                                       of federal law.
                                                                                   The information may also be made available,
                                                                                   upon request, to another component of DOE,
                                                                                   to any committee of Congress, the General
                                                                                   Accounting Office, or to congressional
                                                                                   agencies authorized by law to receive such
                                                                                   information. A court of competent jurisdiction
                                                                                   may obtain this information in response to
                                                                                   an order.




                                      Page 57                                              GAO-03-586 Electricity Restructuring
                                      Appendix I: Description of Data Collection
                                      Forms and Legislation Authorizing
                                      Collections for FERC and EIA




Form/reporting requirement   Legislation authorizing
by agency                    collections                   Purpose                                Types of data
                                          Energy Information Administrationb
EIA-861—Annual Electric      Same as above.                Collects annual data from the          Collects information
Power Industry Report                                      universe of U.S. utilities and         on system peak, net
                                                           nonutility power producers on retail   generation, energy balance,
                                                           power sales and energy                 demand-side management,
                                                           distribution.                          and the sales and
                                                                                                  distribution of electricity
                                                                                                  in the United States.




                                      Page 58                                           GAO-03-586 Electricity Restructuring
                                           Appendix I: Description of Data Collection
                                           Forms and Legislation Authorizing
                                           Collections for FERC and EIA




                          Voluntary,                    How often
                          mandatory, or   Treatment     captured/       How often
Sources of data           as needed       of data       collected       reported        Products issued (if applicable)/how used

All electric utilities,   Mandatory       Publicly      By April 30,    Annually        The EIA-861 is the primary source of data
including regulated                       available.    following the                   for public and private analysts seeking
and unregulated                                         calendar                        information on electric power sales,
energy service                                          year.                           revenues, and average prices.
providers, in the                                                                       Data from this form appear in the EIA
United States, its                                                                      publications—Electric Power Monthly,
territories, and                                                                        Monthly Energy Review, Electric Power
Puerto Rico. These                                                                      Annual, Annual Energy Outlook, Annual
include about 3,300                                                                     Energy Review, and Financial Statistics for
regulated and 1,500                                                                     Major U.S. Publicly Owned Electric Utilities.
unregulated owner                                                                       EIA is required to provide company-specific
entities.                                                                               data to the Department of Justice, or to any
                                                                                        other federal agency when requested for
                                                                                        official use, which may include enforcement
                                                                                        of federal law.
                                                                                        The information may also be made available,
                                                                                        upon request, to another component of DOE,
                                                                                        to any committee of Congress, the General
                                                                                        Accounting Office, or to congressional
                                                                                        agencies authorized by law to receive such
                                                                                        information. A court of competent jurisdiction
                                                                                        may obtain this information in response to
                                                                                        an order.




                                           Page 59                                              GAO-03-586 Electricity Restructuring
                                          Appendix I: Description of Data Collection
                                          Forms and Legislation Authorizing
                                          Collections for FERC and EIA




Form/reporting requirement       Legislation authorizing
by agency                        collections                   Purpose                              Types of data
                                              Energy Information Administrationb
                             d
EIA-906—Power Plant Report       Same as above.                Collects information on electric     Data on electric power
                                                               power generation, useful thermal     generation, fuel
                                                               output, fuel consumption, the heat   consumption, useful thermal
                                                               content of fuels, and stocks of      output, fuel heat contents,
                                                               fossil fuels from electric power     and stocks.
                                                               plants in the United States.




                                          Page 60                                          GAO-03-586 Electricity Restructuring
                                                             Appendix I: Description of Data Collection
                                                             Forms and Legislation Authorizing
                                                             Collections for FERC and EIA




                                  Voluntary,                                               How
                                  mandatory,   Treatment               How often           often
 Sources of data                  or as needed of data                 captured/ collected reported           Products issued (if applicable)/how used

 Electric power plants            Mandatory              Publicly      For monthly         Monthly/           •   The EIA-906 is the primary source of
 that meet the                                           available,    respondents,        annually.              information on power plant generation, fuel
 reporting                                               excluding     submission is to be                        consumption, and fuel stocks. Data are
 requirements,                                           information   completed by the                           widely used by industry, state government
 regardless of                                           on stocks     10th working day,                          agencies, trade associations, and federal
 ownership type. A                                       at end of     following the close                        agencies for energy analyses and policy-
 monthly sample of                                       reporting     of the month. For                          making decisions.
 1,200 entities with                                     period.       annual respondents,                    •   Data from this form appear in the EIA
 the remainder                                                         submission is to be                        publications—Electric Power Monthly,
 reporting annually,                                                   completed by the                           Electric Power Annual, Monthly Energy
 out of a total                                                        last working day of                        Review, Annual Energy, and Renewable
 universe of                                                           January following                          Energy Annual.
 approximately                                                         the end of year.                       •   EIA is required to provide company-
 2,500 regulated and                                                                                              specific data to the Department of Justice,
 unregulated entities.                                                                                            or to any other federal agency when
                                                                                                                  requested for official use, which may
                                                                                                                  include enforcement of federal law.
                                                                                                              •   The information may also be made
                                                                                                                  available, upon request, to another
                                                                                                                  component of DOE, to any committee of
                                                                                                                  Congress, the General Accounting Office,
                                                                                                                  or to congressional agencies authorized
                                                                                                                  by law to receive such information. A court
                                                                                                                  of competent jurisdiction may obtain this
                                                                                                                  information in response to an order.
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.




                                                             Page 61                                                   GAO-03-586 Electricity Restructuring
                                                                 Appendix II: Third-Party Data Sources
Appendix II: Third-Party Data Sources



 Data Source                                                           Description
 FriedWire                                                             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.
 Genscape                                                              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.
 Electric Power Research Institute                                     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.
 Bloomberg                                                             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.
 NERC                                                                  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.
 Open Access Technology International                                  Open Access Technology International provides information on electricity
                                                                       transmission useful for scheduling and meeting electricity deliveries.
 EarthSat                                                              EarthSat provides weather forecasts and historical weather data for selected cities.
 Energy Argus                                                          Energy Argus provides news concerning electricity and gas operations and prices.
 InterContinental Exchange                                             InterContinental Exchange provides information on over-the-counter energy
                                                                       transactions.
 PowerWorld Corporation                                                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.
 Resource Data International Data Resources
 via Platt’s:
 (1) PowerDat                                                          (1) Historical data related to electric industry.
 (2) GasDat                                                            (2) Historical data related to gas industry.
 (3) NewGen                                                            (3) Database consists of new proposed generation.
 (4) PowerMap                                                          (4) Tool to generate maps, including transmission lines, gas pipelines, and
                                                                       generation.
 Platt’s                                                               Through publications such as Megawatt Daily and Gas Daily, Platt’s provides daily
                                                                       energy news related to electric and gas issues.
 Cambridge Energy Research Associates                                  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.




                                                                 Page 62                                               GAO-03-586 Electricity Restructuring
                                              Appendix III: EIA Confidentiality Elements
Appendix III: EIA Confidentiality Elements



 Elements                                         Forms affected
 Costs of fuel for unregulated plants             • EIA-423—costs of coal, natural gas, and petroleum at an unregulated power plant
 Tested heat rates                                • EIA-411—tested heat rate under full load
                                                  • EIA-860—tested heat rate under full load
 Fuel inventory—stocks                            • EIA-906—end-of-month coal and petroleum stocks
 Plant costs and expenses for unregulated         • EIA-412—generator plant cost and expenses for unregulated plants
 plants
 Monthly electricity sales information reported   •   EIA-826—monthly electric sales, revenue, and number of customers reported for
 for energy-only service                              energy-only service
 Latitude and longitude                           •   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.




                                              Page 63                                                    GAO-03-586 Electricity Restructuring
             Appendix IV: Comments from the Federal
Appendix IV: Comments from the Federal
             Energy Regulatory Commission



Energy Regulatory Commission




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Appendix IV: Comments from the Federal
Energy Regulatory Commission




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Appendix IV: Comments from the Federal
Energy Regulatory Commission




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Appendix IV: Comments from the Federal
Energy Regulatory Commission




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Appendix IV: Comments from the Federal
Energy Regulatory Commission




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Energy Regulatory Commission




Page 69                                  GAO-03-586 Electricity Restructuring
             Appendix V: Comments from the Department
Appendix V: Comments from the Department
             of Energy



of Energy




             Page 70                                    GAO-03-586 Electricity Restructuring
Appendix V: Comments from the Department
of Energy




Page 71                                    GAO-03-586 Electricity Restructuring
                  Appendix VI: GAO Contact and Staff
Appendix VI: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Dan Haas (202) 512-9828
GAO Contact
                  In addition to the individual named above, Angelia Kelly, Dennis Carroll,
Acknowledgments   Jose Martinez-Fabre, Jon Ludwigson, Jonathan McMurray, Frank Rusco,
                  and Barbara Timmerman made key contributions to this report.




(360242)

                  Page 72                                    GAO-03-586 Electricity Restructuring
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