FERC Chief Aims to Bolster Free Market Faith

Patrick H. Wood III, the former Texas regulator picked by President Bush to restore the nation’s confidence in unfettered electricity markets, does not fit the stereotype of a Republican appointee.

In his former life as Texas utilities commission chairman, Wood’s most celebrated showdowns were with big business. He wielded the power of government like a 9-pound hammer when the state’s electric utilities resisted deregulation.

Meanwhile, he gained devoted fans among consumer lobbyists and struck lasting friendships with once-skeptical Democrats, including a powerful state legislator who initially regarded him as “a little Mr. Smarty-Pants.”

The new chairman of the Federal Energy Regulatory Commission projects a youthful, choirboy demeanor. But Wood is part poker player, part policy whiz, part impresario.

Wood, 39, is quickly putting his mark on FERC, an obscure but powerful agency that was harshly criticized by California leaders for hesitating to rein in spiraling electricity rates in the darkest days of the state’s energy crisis.

Starting Sept. 12, when he gaveled to order his first meeting as FERC chairman, Wood vowed to dispel the aloofness that chilled the agency’s relations with California. Instead, he said, open debate, cooperative problem-solving and accountability to consumers will define his tenure.

Evangelical in his belief that properly functioning markets can do better at delivering electricity than monopolies overseen by regulators such as himself, he is nonetheless unwilling to relinquish the regulator’s role as market cop.

“It’s not the market that’s the end-all, it’s the customer,” Wood said. “The customers deserve nothing but the best.”

Although FERC’s governing board is autonomous, Wood’s marching orders from Bush are clear: First, keep California out of the headlines by helping overcome its energy problems; second, create consensus for reviving electricity deregulation in the rest of the country. Many states put their plans on hold after California started turning out the lights.

“It’s inevitable that we’re going to a fully open market, so we just need to go ahead and really thoughtfully get there and do it right,” Wood said. “Unfortunately, the message that might have come out [from] California is ‘the feds are going to leave you alone.’ ”

Energy legislation being debated in the Senate would give FERC new powers to police electricity traders and restructure the transmission grid to allow the emergence of a national market. But divisions between old-line regional utilities and a new generation of energy marketers, as well as resistance among the states to a greater federal role, will complicate Wood’s plans.

“The key is whether he can use his personal powers of persuasion to navigate some fairly treacherous waters,” said Bob Gee, a Texas colleague who served in a high-ranking Energy Department post in the Clinton administration.

Within FERC, Wood has been welcomed with open arms. Professional staffers say the agency’s morale is on the rebound. Employees stop him in the hallways. He gets many of his meals at the second-floor cafeteria and has nothing but praise for the turkey burgers. To wash down his meals, he prefers a Texas soft drink.

“When the FBI was doing his background check, they asked me if he had any addictions,” said Texas Rep. Steve Wolens (D-Dallas), the skeptic who became a friend. “I said, ‘Only to Dr Pepper.’ ”

Wood, a Texas A&M; engineering graduate with a Harvard law degree, was recommended to then-Gov. Bush by Jerry Langdon, a Bush gubernatorial appointee and associate from his Midland, Texas, days. As a young lawyer, Wood had worked with Langdon when he was a FERC commissioner appointed by former President Bush. Bush came to trust his utilities commission chair implicitly, even when Wood riled powerful business interests.

A defining moment for Wood came in 1997. Opposition from utilities stalled electricity deregulation in Texas. Central Power and Light, a major company, came before Wood’s commission seeking approval for a $70-million rate increase. Instead, it got an immediate $20-million rate cut, followed by two reductions of $13 million each.

“That was an outcome that was clearly beyond the realm of expectation,” said Thomas M. Hagan, then a senior executive with CP&L;’s parent company. “I believe Chairman Wood and his colleagues were sending a very clear message that if the utilities continued to resist competition, this was the sort of regulation they could expect.”

The reaction from Wall Street was “gut-wrenching,” Hagan continued. The stock of CP&L;’s parent firm lost about one-third of its value in a month. Other Texas utilities also took a drubbing. Soon, the companies endorsed deregulation.

Texas approved its retail electricity deregulation plan in 1999. It was largely authored by a troika of Wood, Wolens and state Sen. David Sibley (R-Waco), who studied but did not copy California’s design. The plan will go into full effect in January, making it a closely watched report card for Wood.

Wood’s lack of deference toward big business goes back to his roots as the son of an independent pharmacy owner in Port Arthur, Texas.

“I’ve seen the preferences that sometimes big businesses get, particularly from government,” Wood said. “Government tends to corrupt because it picks winners and losers, as opposed to letting them be picked by customers who vote with their dollars.”

The family story explains his faith in competition as well. When big chains moved into his father’s territory, the elder Wood decided to fight back. “Most independents would have just buckled and taken the buyout, but Dad was too young and he didn’t want to do that. So he got smart on computers, retooled his staff, beefed up customer service. As a result of him getting better, his customers liked it better.” The family business is thriving.

“The customer is king. I always learned that.”

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