WHAT IS the FEDERAL
The Federal Energy Regulatory Commission is an independent government agency, officially organized as part of the Department of Energy. The purpose of the Commission is to protect the public and energy customers, ensuring that regulated energy companies are acting within the law.
FERC is responsible for:
• Regulating the interstate transmission of natural gas, oil, and electricity;
• Regulating the wholesale sale of electricity (individual states regulate retail sales);
• Licensing and inspecting hydropower projects; and
• Approving the construction of interstate natural gas pipelines, storage facilities, and Liquefied Natural Gas (LNG) terminals.
• Monitoring and Investigating Energy Markets: Market Oversight
• Reviews the siting application for electric transmission projects;
• Reliability of the electric grid
The Commission is composed of five members, known as Commissioners, who:
• Are appointed by the President of the United States, with the advice and consent of the Senate;
• Serve five-year terms; and
• Have an equal vote on regulatory matters.
Also, to prevent undue political influence, no more than three Commissioners may belong to the same political party.
Congress exercises oversight over the Commission by holding hearings on energy related topics where the Commission offers testimony.
HISTORY OF FERC (according to FERC)
FERC vs. STATE REGULATION
The U.S. has adopted a federalist system for regulating the electricity industry in this country. The Commission has an important role, and state regulators have an important role. Below is an illustration of these roles:
• Wholesale transactions (sales of energy for resale)
• Interstate transmission (transfers of power across state lines) – Rates charged for transmission of oil
• Hydroelectric licenses
– Licensing of nonfederal hydroelectric projects
– Inspection of hydroelectric projects for safety issues
• Natural gas pipeline certification
• Retail sales (sales of energy to users)
• Intrastate transmission (transfers of power with state boundaries)
• Certification for new electric generation and electric transmission facilities
• Certification for oil pipelines
• Develop retail franchise areas
• Enforce service and quality standards
• Set retail tariffs
• Approve planning of transmission and generation facilities
• Approve construction of non-hydro generation and transmission facilities
In its early days, FERC received its operating budget through federal general fund appropriations. FERC pays the money back to the US Treasury through annual charges and filing fees from the industries it regulates. It recovers the full cost of its operations through the annual charges and filing fees it imposes on the industries it regulates, as authorized by the Federal Power Act and the Omnibus Budget Reconciliation Act of 1986. FERC deposits this revenue into the Treasury as a direct offset to its appropriation.