Federal Energy Regulatory Commission (FERC)

What Is the Federal Energy Regulatory Commission?

The Federal Energy Regulatory Commission (FERC) is an independent agency that controls the interstate transmission of electricity, natural gas, and oil. FERC additionally surveys recommendations to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines as well as licensing hydropower projects.

Grasping the Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission's stated mission is to help consumers in getting reliable, efficient, and sustainable energy services at a reasonable cost through suitable regulatory and market means. It has five core values.

FERC means to utilize its resources efficiently and really to accomplish its strategic needs through organizational greatness. With the goal of due cycle and transparency, it means to be open and fair to all participants. In its orders, conclusions, and reports, FERC endeavors to give regulatory certainty through reliable methodologies and actions. FERC conducts ordinary effort to guarantee that closely involved individuals have an opportunity to add to the performance of its liabilities.

FERC Background and Responsibilities

FERC was laid out under the Department of Energy Organization Act of 1977. It directs electric transmission and wholesale sales rates and services essentially under Parts II and III of the Federal Power Act. It directs Hydroelectric dam licensing and safety under Part I of the Federal Power Act. FERC directs natural gas pipeline transportation rates and services essentially under the Natural Gas Act. It directs oil pipeline transportation rates and services under the Interstate Commerce Act. FERC is subject to these statutes and can operate inside what the statutes permit.

The Energy Policy Act of 2005 gave FERC numerous extra obligations. It controls the transmission and wholesale sales of electricity in interstate commerce. It audits certain mergers and acquisitions and corporate transactions by electricity companies. FERC controls the transmission and sale of natural gas for resale in interstate commerce.

Likewise, it manages the transportation of oil by pipeline in interstate commerce. FERC supports the siting and abandonment of interstate natural gas pipelines and storage facilities. It audits the siting application for electric transmission projects. FERC guarantees the safe operation and unwavering quality of proposed and operating LNG terminals.

Moreover, it licenses and assesses private, municipal, and state hydroelectric projects. FERC safeguards the dependability of the high voltage interstate transmission system through mandatory unwavering quality standards. It screens and examines energy markets. It upholds FERC regulatory requirements through the burden of civil punishments and different means. Also, it directs environmental issues connected with natural gas and hydroelectricity projects as well as manages accounting and financial regulations and conduct of regulated companies.

Analysis of FERC

Environmental gatherings have scrutinized the FERC for its close connections to the energy industry, charging that the regulator neglected its legal obligations for the industry's benefit. After a 2017 lawsuit drove by the Sierra Club, a Federal Appeals Court cleared the FERC-issued permit for the Sabal Trail pipeline, saying that the Commission had failed to assess the "downstream" emissions of the natural gas project. FERC was ordered to create another environmental impact statement, considering these extra factors.

In any case, the FERC didn't follow the court's guidelines in later projects, saying that it didn't have the authority to assess the indirect ozone harming substance emissions of the projects they were assessing. This stance was portrayed as "quite not exactly hounded" by judges of the D.C. Circuit Court.

Following the Sabal Trail lawsuit, the D.C. Circuit Court of Appeals required FERC to consider "downstream emissions" in surveying the environmental impact of new transmission pipelines.

Instances of FERC Regulatory Actions

BP America

In 2015, an administrative law judge established that BP America had planned their conveyances of natural gas to control the settling price of natural gas futures. The company was ordered to repay $207,000 in unfair profits, and an extra $20 million in punishments.

Competitive Energy Services and Rumford Paper Company

In one more case of market manipulation, FERC fined a large paper company and its energy consultant for scheming to control their energy costs to the detriment of the nearby independent systems operator. As per the Commission, Competitive Energy Services contrived to "falsely swell Rumford's customer baseline to enable Rumford and CES to receive compensation for demand response without Rumford aiming to offer the support or actually diminishing load."

By making the illusion of utilizing less power, they had the option to claim payment from the neighborhood transmission operator in times of high demand. FERC ordered civil punishments of $7,500,000 against Competitive Energy, and a further $600,000 against its overseeing member. The paper company was ordered to eject $166,000.

FERC FAQs

What Is FERC Order 1000?

FERC Order 1000 is a Final Rule that changes the planning and cost allocations for public electricity transmission suppliers. Albeit the rule is highly complex, the core issue is whether states can be constrained to arrange 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 alludes to the Uniform System of Accounts, a set of record-keeping guidelines by the Federal Energy Regulatory Commission. To guarantee transparency and consistency in corporate accounts, FERC Accounting subtleties how companies ought to report plant investment costs, the meanings of common industry terms, and how facilities ought to be reported for utility purposes.

What Is a FERC Paper Hearing?

A FERC Paper Hearing alludes to an administrative hearing wherein the Federal Energy Regulatory Commission (FERC) mediates a claim or objection, utilizing paper records and written contentions as opposed to an oral contention before an administrative law judge.

The Bottom Line

The Federal Energy Regulatory Commission (FERC) is an important regulator for the U.S. Energy industry, regulating infrastructure like oil and natural gas pipelines, as well as electricity transmission. It is responsible for assessing the environmental impacts of new energy infrastructure, as well as forestalling price manipulation in the energy market. Like different regulators, it is powerless to regulatory capture and lobbyist pressure.

Highlights

• FERC is additionally responsible for oversight over energy markets. It can rebuff companies for fixing or controlling energy prices.
• FERC has five commissioners, of which something like three can be from a similar political party. In August 2021, FERC had two Democratic commissioners, two Republicans, and one open seat.
• The Federal Energy Regulatory Commission (FERC) is responsible for oversight of the energy industry, including power plants, transmission lines, pipelines, and other infrastructure.
• FERC requires the companies it controls to follow a Uniform System of Accounts. This makes it simpler to conduct oversight.
• FERC has been condemned for its tolerance towards the energy industry. The Sierra Club and other environmental gatherings have won several lawsuits for stricter investigation of natural gas permits.