Former Shell President Calls for Federal Energy Regulatory Board

John Hofmeister, former President of Shell Oil Company and head of Citizens for Affordable Energy, presented his case for a national independent energy regulatory agency to take over issues relevant to nationwide energy policy.  Speaking at Harvard's John F. Kennedy School for Government on April 1, Hofmeister opined that such an agency is necessary to deal with a divide between what he calls “energy time” and “political time.”  The main problem, he suggests, is that frequent political churn makes the policy environment too unstable for the energy sector. What the energy industry needs is policy stability over decades in order to make investments at the scale necessary.

 

The federal regulation of energy by an independently appointed board, presumably with long tenures, could result in a more stable energy policy nationwide.  This board would be responsible for a national greenhouse gas cap and trade system, taxes and incentives, aspects of permitting, and many of the electric power and generation and transmission areas currently regulated by states.  Hofmeister drew the analogy to the Federal Reserve System, which regulates national monetary policy through a variety of nationwide regulatory tools.

 

The idea of a Federal Energy Regulatory Board is a compelling one, although recent failures with the Federal Reserve suggest that centralized regulatory agencies need to be more agile in responding to an innovative marketplace.  Hofmeister is suggesting a technocratic regulatory structure to replace the unreliable mish-mash of partisan regulation passed down by Congress today.  Essentially, he is talking about an expansion and institutionalization of FERC to encompass more areas and more powers.

 

It is hard to say whether or not this will work in the energy sector, as there are still many fundamental tensions, especially in terms of federalism and long lead times, which lead to differences between energy and the financial sector.

   Watch the John Hofmeister Speech at Harvard Kennedy School