What is the Federal Energy Regulatory Commission?
The Federal Energy Regulatory Commission (FERC) is an independent agency that regulates the interstate transmission of electricity, natural gas and oil. FERC also reviews proposals for the construction of liquefied natural gas (LNG) terminals and interstate natural gas pipelines, as well as licensing hydroelectric projects.
- The Federal Energy Regulatory Commission (FERC) is responsible for overseeing the energy industry, which includes power plants, transmission lines, pipelines and other infrastructure.
- FERC is also responsible for monitoring energy markets. This can penalize companies for fixing or manipulating energy prices.
- FERC requires the companies it regulates to adhere to a Universal System of Accounts. This makes it easier to inspect.
- FERC has been criticized for being soft on the energy industry. The Sierra Club and other environmental groups have won numerous lawsuits calling for strict scrutiny of natural gas permits.
- FERC has five commissioners, of whom not more than three can be from the same political party. In August 2021, FERC had two Democratic commissioners, two Republicans and one open seat.
Understanding the Federal Energy Regulatory Commission
The stated mission of the Federal Energy Regulatory Commission is to help consumers obtain reliable, efficient and sustainable energy services at a reasonable cost through appropriate regulatory and market access. It has five guiding principles.
FERC aims to use its resources efficiently and effectively to achieve its strategic priorities through organizational excellence. It aims to be open and fair to all participants, with a goal of due process and transparency. In its Orders, Opinions and Reports, FERC strives to provide regulatory certainty through consistent approaches and actions. FERC conducts regular outreach to ensure that interested parties have the opportunity to contribute in the performance of their responsibilities.
FERC Background and Responsibilities
FERC was established under the Department of Energy Organization Act 1977. It primarily regulates electric transmission and wholesale sales rates and services under Parts II and III of the Federal Power Act. It regulates hydroelectric dam licensing and safety under Part I of the Federal Power Act. FERC primarily oversees natural gas pipeline transportation rates and services under the Natural Gas Act. It regulates oil pipeline transportation rates and services under the Interstate Commerce Act. FERC is subject to these laws and may only act as permitted by law.
The Energy Policy Act of 2005 gave FERC a number of additional responsibilities. It regulates the transmission and wholesale sale of electricity in interstate commerce. It reviews certain mergers and acquisitions and corporate transactions by power companies. FERC regulates the transmission and sale of natural gas for resale in interstate commerce.
In addition, it regulates the transportation of oil by pipeline in interstate commerce. FERC approved the installation and abandonment of interstate natural gas pipelines and storage facilities. It reviews siting applications for power transmission projects. FERC ensures the safe operation and reliability of the proposed and operational LNG terminals.
In addition, it licenses and oversees private, municipal and state hydroelectric projects. FERC protects the reliability of high voltage interstate transmission systems through mandatory reliability standards. It monitors and investigates energy markets. It enforces FERC regulatory requirements by imposing civil penalties and other means. And, it oversees environmental matters related to natural gas and hydropower projects as well as manages the accounting and financial regulations and conduct of regulated companies.
Criticism of FERC
Environmental groups have criticized FERC for its close relationship with the energy industry, alleging that the regulator has ignored its legal obligations to benefit the industry. Following a 2017 lawsuit led by the Sierra Club, a federal appeals court vacated the FERC-issued permit for the Sabal Trail pipeline, saying the commission had failed to evaluate the natural gas project’s “downstream” emissions. FERC was ordered to take into account these additional factors to prepare a new environmental impact statement.
However, FERC did not comply with the court’s directions in subsequent projects, saying it did not have the authority to assess indirect greenhouse gas emissions of the projects they were evaluating. The pose was described as “definitely less-than-dog” by DC Circuit Court judges.
Following the Sabal Trail lawsuit, the DC Circuit Court of Appeals required FERC to consider “downstream emissions” in assessing the environmental impact of new transmission pipelines.
Examples of FERC Regulatory Actions
In 2015, an administrative law judge determined that BP America had scheduled delivery of natural gas in order to manipulate the settlement price of natural gas futures. The company was ordered to pay $207,000 in unjust profits, and an additional $20 million in fines.
Competitive Energy Services and Rumford Paper Company
In another case of market manipulation, FERC fined a large paper company and its energy consultant for conspiring to manipulate its energy costs at the expense of a local independent system operator. According to the commission, Competing Energy Services “conspired to artificially increase Rumford’s customer baseline so as to help Rumford and CES receive compensation for demand response without Rumford with the intention of providing the service or actually reducing the load.” to be enabled.”
By creating the illusion of using less electricity, they were able to claim payment from the local transmission operator in times of high demand. FERC ordered a civil penalty of $7,500,000 against Competing Energy, and a further $600,000 against its managing member. The paper company was ordered to pay $166,000.
What is FERC Order 1000?
FERC Order 1000 is a final rule that changes the planning and cost allocation for public electricity transmission providers. Although the rule is extremely complex, the key issue is whether states can be forced to coordinate on planning and cost obligations for new transmission capacity. The rule was first proposed in 2010 and adopted the following year.
What is FERC Accounting?
FERC accounting refers to the Uniform System of Accounts, a set of record-keeping guidelines by the Federal Energy Regulatory Commission. To ensure transparency and consistency in corporate accounts, FERC accounting details how companies should report plant investment costs, definitions of common industry terms, and facilities for utility purposes.
What is FERC Paper Hearing?
FERC paper hearing refers to an administrative hearing in which the Federal Energy Regulatory Commission (FERC) adjudicates a claim or complaint before an administrative law judge, using paper records and written arguments rather than oral arguments.
The Federal Energy Regulatory Commission (FERC) is a key regulator for the US energy industry, overseeing infrastructure such as oil and natural gas pipelines as well as power transmission. It is responsible for evaluating the environmental impacts of new energy infrastructure as well as preventing price manipulation in the energy market. Like other regulators, this regulator is susceptible to capture and lobbying pressure.