Federal Energy Regulatory Commission
Encyclopedia
The Federal Energy Regulatory Commission (FERC) is the United States
federal agency
with jurisdiction
over interstate electricity sales, wholesale
electric rate
s, hydroelectric
licensing
, natural gas
pricing, and oil pipeline
rates. FERC also reviews and authorizes liquefied natural gas
(LNG) terminals, interstate natural gas pipelines and non-federal hydropower
projects.
, was founded in 1920 to allow cabinet members to coordinate federal hydropower development.
In 1935, the FPC was transformed into an independent regulatory agency
with five members nominated by the President
and confirmed by the Senate
. At that time the FPC regulated both hydropower and interstate electricity.
In 1938, the Natural Gas Act gave FPC jurisdiction over interstate natural gas pipelines and wholesale sales. In 1942, this jurisdiction was expanded to cover the licensing of more natural gas facilities. In 1954, the Supreme Court decision in Phillips Petroleum Co. v. Wisconsin
extended FPC jurisdicition over all wellhead sales of natural gas in interstate commerce.
In response to an energy crisis
, Congress
passed the DOE Organization Act in 1977, which consolidated various energy-related agencies into a Department of Energy
. Congress insisted that a separate independent regulatory body be retained, and the FPC was renamed the Federal Energy Regulatory Commission, preserving its independent status "within" the Department. FERC was also given added responsibility to hear appeals of DOE oil price control determinations and to conduct all "on the record" hearings for DOE. As a result, DOE does not have any administrative law judges. As a further protection, when DOE proposes a rulemaking, it must refer the proposal to FERC, and FERC can take over the proceeding if FERC determines that the rulemaking "may significantly affect" matters in its jurisdiction. The DOE Act also transferred the regulation of interstate oil pipelines from the Interstate Commerce Commission
to FERC. However, the FERC lost some jurisdiction over the imports and exports of gas and electricity.
In 1978, FERC was given additional responsibilities for harmonizing the regulation of wellhead gas sales in both the intrastate and interstate markets. FERC also administered a program to foster new cogeneration
and small power production under the Public Utilities Regulatory Policy Act of 1978
.
In 1983, Congress ended federal regulation of wellhead natural gas prices. At this time, FERC undertook to bring greater competition to both the natural gas and electric industries.
The Energy Policy Act of 2005
expanded FERC's authority to impose mandatory reliability
standards on the bulk
transmission system and to impose penalties
on entities that manipulate the electricity and natural gas markets. The Energy Policy Act of 2005 gave FERC additional responsibilities as outlined in FERC's Top Priorities and updated Strategic Plan. As part of that responsibility, FERC:
within the United States Department of Energy
. Neither the President
nor Congress
reviews FERC decisions. All FERC decisions are reviewable by the federal court
s. FERC is also self-funding. The Commission pays for itself by recovering costs directly from the industries it regulates through annual charges and fees.
FERC is independent of the Department of Energy, but DOE may intervene just like any other party in FERC proceedings. FERC activities "shall not be subject to further view by the Secretary [of Energy] or any officer or employee of the Department."
In recent years, the FERC has been promoting the voluntary formation of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to eliminate the potential for undue discrimination in access to the electric grid. However since the passage of new energy legislation, it has aggressively developed regulations to implement key provisions of the new law dealing with LNG
terminals, electric reliability, Public Utility Holding Company Act of 1935 repeal
and implementation of the Public Utility Holding Company Act of 2005, new merger regulations and new anti-market manipulation regulations.
FERC has also been heavily involved in the California electricity crisis
and in investigating allegations of electricity market
manipulation by Enron and other energy companies. FERC has collected over $6.3 billion from California electric market participants by facilitating settlements. FERC is also working with Canadian energy officials to facilitate processing of a proposed Alaskan Natural Gas Pipeline
, which would bring natural gas from Alaska's North Slope to the lower 48 States.
FERC regulates approximately 1,600 hydroelectric projects in the U.S. It is largely responsible for permitting the construction of a large network of interstate natural gas pipelines. FERC also works closely with the United States Coast Guard
in reviewing the safety, security and environmental impacts of proposed LNG terminals and associated shipping.
currently serves as Chairman of the Commission (term expires on June 30, 2013). The Commissioners are:
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
federal agency
Independent agencies of the United States government
Independent agencies of the United States federal government are those agencies that exist outside of the federal executive departments...
with jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...
over interstate electricity sales, wholesale
Wholesale
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services...
electric rate
Rate
In mathematics, a rate is a ratio between two measurements, often with different units. If the unit or quantity in respect of which something is changing is not specified, usually the rate is per unit time. However, a rate of change can be specified per unit time, or per unit of length or mass or...
s, hydroelectric
Hydroelectricity
Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy...
licensing
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
, natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
pricing, and oil pipeline
Pipeline transport
Pipeline transport is the transportation of goods through a pipe. Most commonly, liquids and gases are sent, but pneumatic tubes that transport solid capsules using compressed air are also used....
rates. FERC also reviews and authorizes liquefied natural gas
Liquefied natural gas
Liquefied natural gas or LNG is natural gas that has been converted temporarily to liquid form for ease of storage or transport....
(LNG) terminals, interstate natural gas pipelines and non-federal hydropower
Hydropower
Hydropower, hydraulic power, hydrokinetic power or water power is power that is derived from the force or energy of falling water, which may be harnessed for useful purposes. Since ancient times, hydropower has been used for irrigation and the operation of various mechanical devices, such as...
projects.
History
A predecessor agency, the Federal Power CommissionFederal Power Commission
The Federal Power Commission was an independent commission of the United States government, originally organized on June 23, 1930, with five members nominated by the president and confirmed by the Senate...
, was founded in 1920 to allow cabinet members to coordinate federal hydropower development.
In 1935, the FPC was transformed into an independent regulatory agency
Independent agencies of the United States government
Independent agencies of the United States federal government are those agencies that exist outside of the federal executive departments...
with five members nominated by the President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
and confirmed by the Senate
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
. At that time the FPC regulated both hydropower and interstate electricity.
In 1938, the Natural Gas Act gave FPC jurisdiction over interstate natural gas pipelines and wholesale sales. In 1942, this jurisdiction was expanded to cover the licensing of more natural gas facilities. In 1954, the Supreme Court decision in Phillips Petroleum Co. v. Wisconsin
Phillips Petroleum Co. v. Wisconsin
Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672 , was a case decided by the Supreme Court of the United States holding that sale of natural gas at the wellhead was subject to regulation under the Natural Gas Act. Prior to this case, independent producers sold natural gas to interstate pipelines...
extended FPC jurisdicition over all wellhead sales of natural gas in interstate commerce.
In response to an energy crisis
Energy crisis
An energy crisis is any great bottleneck in the supply of energy resources to an economy. In popular literature though, it often refers to one of the energy sources used at a certain time and place, particularly those that supply national electricity grids or serve as fuel for vehicles...
, Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
passed the DOE Organization Act in 1977, which consolidated various energy-related agencies into a Department of Energy
United States Department of Energy
The United States Department of Energy is a Cabinet-level department of the United States government concerned with the United States' policies regarding energy and safety in handling nuclear material...
. Congress insisted that a separate independent regulatory body be retained, and the FPC was renamed the Federal Energy Regulatory Commission, preserving its independent status "within" the Department. FERC was also given added responsibility to hear appeals of DOE oil price control determinations and to conduct all "on the record" hearings for DOE. As a result, DOE does not have any administrative law judges. As a further protection, when DOE proposes a rulemaking, it must refer the proposal to FERC, and FERC can take over the proceeding if FERC determines that the rulemaking "may significantly affect" matters in its jurisdiction. The DOE Act also transferred the regulation of interstate oil pipelines from the Interstate Commerce Commission
Interstate Commerce Commission
The Interstate Commerce Commission was a regulatory body in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads to ensure fair rates, to eliminate rate discrimination, and to regulate other aspects of common carriers, including...
to FERC. However, the FERC lost some jurisdiction over the imports and exports of gas and electricity.
In 1978, FERC was given additional responsibilities for harmonizing the regulation of wellhead gas sales in both the intrastate and interstate markets. FERC also administered a program to foster new cogeneration
Cogeneration
Cogeneration is the use of a heat engine or a power station to simultaneously generate both electricity and useful heat....
and small power production under the Public Utilities Regulatory Policy Act of 1978
Public Utility Regulatory Policies Act
The Public Utility Regulatory Policies Act is a law, passed in 1978 by the United States Congress as part of the National Energy Act. It is meant to promote greater use of domestic renewable energy...
.
In 1983, Congress ended federal regulation of wellhead natural gas prices. At this time, FERC undertook to bring greater competition to both the natural gas and electric industries.
The Energy Policy Act of 2005
Energy Policy Act of 2005
The Energy Policy Act of 2005 is a bill passed by the United States Congress on July 29, 2005, and signed into law by President George W. Bush on August 8, 2005, at Sandia National Laboratories in Albuquerque, New Mexico...
expanded FERC's authority to impose mandatory reliability
Reliability engineering
Reliability engineering is an engineering field, that deals with the study, evaluation, and life-cycle management of reliability: the ability of a system or component to perform its required functions under stated conditions for a specified period of time. It is often measured as a probability of...
standards on the bulk
Bulk
-Industry:* Bulk cargo* Bulk liquids* Bulk mail* Bulk material handling* Bulk pack, packaged bulk materials/products* Bulk purchasing- Physics :*Bulk density*Bulk modulus...
transmission system and to impose penalties
Sanctions (law)
Sanctions are penalties or other means of enforcement used to provide incentives for obedience with the law, or with rules and regulations. Criminal sanctions can take the form of serious punishment, such as corporal or capital punishment, incarceration, or severe fines...
on entities that manipulate the electricity and natural gas markets. The Energy Policy Act of 2005 gave FERC additional responsibilities as outlined in FERC's Top Priorities and updated Strategic Plan. As part of that responsibility, FERC:
- Regulates the transmission and sale of natural gas for resale in interstate commerce;
- Regulates the transmission of oil by pipelines in interstate commerce;
- Regulates the transmission and wholesale sales of electricity in interstate commerce;
- Licenses and inspects private, municipal, and state hydroelectric projects;
- Approves the siting of and abandonment of interstate natural gas facilities, including pipelines, storage and liquefied natural gasLiquefied natural gasLiquefied natural gas or LNG is natural gas that has been converted temporarily to liquid form for ease of storage or transport....
; - Ensures the reliability of high voltage interstate transmission system;
- Monitors and investigates energy markets;
- Uses civil penalties and other means against energy organizations and individuals who violate FERC rules in the energy markets;
- Oversees environmental matters related to natural gas and hydroelectricity projects and major electricity policy initiatives; and
- Administers accounting and financial reporting regulations and conduct of regulated companies.
Position within the government
FERC is an independent regulatory agencyIndependent agencies of the United States government
Independent agencies of the United States federal government are those agencies that exist outside of the federal executive departments...
within the United States Department of Energy
United States Department of Energy
The United States Department of Energy is a Cabinet-level department of the United States government concerned with the United States' policies regarding energy and safety in handling nuclear material...
. Neither the President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
nor Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
reviews FERC decisions. All FERC decisions are reviewable by the federal court
United States federal courts
The United States federal courts make up the judiciary branch of federal government of the United States organized under the United States Constitution and laws of the federal government.-Categories:...
s. FERC is also self-funding. The Commission pays for itself by recovering costs directly from the industries it regulates through annual charges and fees.
FERC is independent of the Department of Energy, but DOE may intervene just like any other party in FERC proceedings. FERC activities "shall not be subject to further view by the Secretary [of Energy] or any officer or employee of the Department."
In recent years, the FERC has been promoting the voluntary formation of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to eliminate the potential for undue discrimination in access to the electric grid. However since the passage of new energy legislation, it has aggressively developed regulations to implement key provisions of the new law dealing with LNG
Liquefied natural gas
Liquefied natural gas or LNG is natural gas that has been converted temporarily to liquid form for ease of storage or transport....
terminals, electric reliability, Public Utility Holding Company Act of 1935 repeal
Repeal
A repeal is the amendment, removal or reversal of a law. This is generally done when a law is no longer effective, or it is shown that a law is having far more negative consequences than were originally envisioned....
and implementation of the Public Utility Holding Company Act of 2005, new merger regulations and new anti-market manipulation regulations.
FERC has also been heavily involved in the California electricity crisis
California electricity crisis
The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001 was a situation in which California had a shortage of electricity caused by market manipulations and illegal shutdowns of pipelines by Texas energy consortiums...
and in investigating allegations of electricity market
Electricity market
In economic terms, electricity is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use...
manipulation by Enron and other energy companies. FERC has collected over $6.3 billion from California electric market participants by facilitating settlements. FERC is also working with Canadian energy officials to facilitate processing of a proposed Alaskan Natural Gas Pipeline
Alaskan Natural Gas Pipeline
The Alaska gas pipeline is a proposal to transport natural gas from the Alaska North Slope natural gas reserves to the U.S. Midwest. The project is developed by TransCanada Corp. and ExxonMobil. TransCanada has secured state seed money and a license from the state of Alaska to build and operate a...
, which would bring natural gas from Alaska's North Slope to the lower 48 States.
FERC regulates approximately 1,600 hydroelectric projects in the U.S. It is largely responsible for permitting the construction of a large network of interstate natural gas pipelines. FERC also works closely with the United States Coast Guard
United States Coast Guard
The United States Coast Guard is a branch of the United States Armed Forces and one of the seven U.S. uniformed services. The Coast Guard is a maritime, military, multi-mission service unique among the military branches for having a maritime law enforcement mission and a federal regulatory agency...
in reviewing the safety, security and environmental impacts of proposed LNG terminals and associated shipping.
Commissioners
Jon WellinghoffJon Wellinghoff
Jon Wellinghoff is an American attorney and energy expert who has been at the forefront of cutting-edge, energy issues such as renewable integration, plug-in electric vehicles, and the modernization of the nation’s electric grid...
currently serves as Chairman of the Commission (term expires on June 30, 2013). The Commissioners are:
- Philip D. Moeller (term expires on June 30, 2015)
- Marc Spitzer (term expired on June 30, 2011)
- John Norris (term expires on June 30, 2012)
- Cheryl LaFleur (term expires on June 30, 2014)
See also
- United States Energy Law
- High-voltage direct currentHigh-voltage direct currentA high-voltage, direct current electric power transmission system uses direct current for the bulk transmission of electrical power, in contrast with the more common alternating current systems. For long-distance transmission, HVDC systems may be less expensive and suffer lower electrical losses...
- Custody transferCustody transferCustody Transfer in the oil and gas industry refers to the transactions involving transporting physical substance from one operator to another. This includes the transferring of raw and refined petroleum between tanks and tankers; tankers and ships and other transactions...
- North American Electric Reliability Corporation (NERC)