By Lene Powell, J.D.
To prepare for a wide range of possible energy futures—from abundant renewable energy to continued substantial reliance on fossil fuels—regulators need to learn from industry experts and public interest groups and work with regulatory partners like the Federal Energy Regulatory Commission (FERC), said CFTC Commissioner Summer Mersinger in remarks at an energy conference. Regulators cannot predict the future and should not try to drive outcomes, she said.
Mersinger delivered the remarks on October 27 at the S&P Global Commodity Insights Nodal Trading Conference.
Can’t predict the future. Regulators cannot assume that today’s markets will look like the markets 10, 20, or 30 years into the future, said Mersinger.
Drawing on the history of automobiles, Mersinger noted that President Teddy Roosevelt drove in an electric car in the very first presidential motorcade in 1902. While electric cars were quieter, cleaner, and safer than their gas-powered counterparts, they were ultimately eclipsed due to the high cost of electricity and limited electrification outside of cities. Just five years after the historic Roosevelt ride and eight years after selling half of all cars produced in the U.S., the electric car company that built that vehicle disappeared.
Similarly, Mersinger pointed out that in 1915, the Editor of the Twin Falls Idaho Times wrote, “Automobiles may come and go, may puff in and speed out, but his majesty the horse remains monarch of the road against all competition.”
Don’t pick winners or losers. According to Mersinger, regulators’ primary mission is to foster an environment where all technologies—both existing and new—can fairly compete on their own merits.
“It is not our job to ask which should prevail. We should always strive to implement technology-neutral rules and regulations,” said Mersinger.
A range of outcomes. While remaining neutral, regulators must prepare for the future, said Mersinger.
In her sponsorship of the CFTC’s Energy and Environmental Markets Advisory Committee (EEMAC), Mersinger established two subcommittees, one on Traditional Energy Infrastructure and a second one on Metals Markets, the raw materials necessary for widespread electrification. The committee has toured the “Pipeline Crossroads of the World” in Cushing, Oklahoma; an integrated electric vehicle and internal combustion manufacturing facility in Spring Hill, Tennessee; and the largest and deepest open pit copper mine in the world in Bingham Canyon, Utah. These conversations and visits have provided an appreciation for the size and scale of U.S. power and energy infrastructure, she explained.
Mersinger outlined a range of possible energy futures, from ample renewable energy generation and storage to one still heavily reliant on “forms of power generation considered less desirable,” or something in between.
She said that to reach a future where renewable energy is abundant, the U.S. electric grid will need to be remade, large portions of land will have to be reallocated to solar and wind generation, trillions of dollars must be invested in that new transmission and generation, and battery storage technology that currently does not exist will have to be invented.
In a related development on October 30, President Joe Biden announced the largest electric grid infrastructure investment in history—more than $30 billion from the Bipartisan Infrastructure Law and Inflation Reduction Act.
In preparing for various outcomes, Mersinger said that regulators must continue to work “hand-in-hand” with agencies like FERC and learn from industry experts and public interest groups about possibilities on the horizon.
Role of derivatives markets. Through it all, explained Mersinger, the derivatives markets provide risk management and price discovery to those directly impacted by uncertainty in the energy markets.
“The risk management and price discovery functions of the derivatives markets regulated by the CFTC are all the more critical in changing times,” she said.
Finally, Mersinger noted that the CFTC has a statutory mandate to promote responsible innovation.
“Guided by these lessons from the past, the CFTC must fulfill the mandate that Congress has given us in our governing statute to promote responsible innovation of all kinds, and thereby prepare for any potential outcome so that we can protect our customers, our markets, and ultimately, the American people,” said Mersinger.