Understanding the Federal Energy Regulatory Commission (FERC)
The FERC, an acronym for Federal Energy Regulatory Commission, is an independent agency of the U.S. government that is mainly in charge of the regulation of interstate transmission of electricity, natural gas, and oil.
It also regulates hydropower projects.
The FERC aims to preserve and enhance the energy independence and reliability of the United States' electrical power systems.
The government created the FERC to protect the public from fuel shortages, price gouging, rate discrimination, and other predatory practices by market participants.
It ensures just and reasonable rates for consumers that are not unduly discriminatory or preferential.
Background of the Federal Energy Regulatory Commission (FERC)
Congress passed the Department of Energy Organization Act of 1977 and later signed by the president, authorizing the FERC as a separate entity of the Department of Energy (DOE) in the U.S because of the oil crisis year 1973.
The FERC was given the responsibility of regulating electricity prices to promote the country’s economic growth by making sure rates were fair and reasonable for customers.
Under certain circumstances, the FERC was also given jurisdiction over interstate oil pipelines, natural gas gathering lines, and liquefied natural gas facilities.
Today, the FERC still ensures that consumers access affordable, reliable energy sources while balancing environmental protection matters.
Responsibilities of the Federal Energy Regulatory Commission
The FERC was given a load of responsibilities by the Energy Policy Act of 2005. As such, the Federal Energy Regulatory Commission:
- “Regulates the transmission and wholesale sale of electricity in interstate commerce
- Reviews certain mergers and acquisitions and corporate transactions by electricity companies
- Regulates the transmission and sale of natural gas for resale in interstate commerce
- Regulates the transportation of oil by pipelines in interstate commerce
- Approves the siting and abandonment of interstate natural gas pipelines and storage facilities
- Reviews the siting application for electric transmission projects under limited circumstances
- Assesses the safe operation and reliability of proposed and operating LNG terminals
- Licenses and inspects private, municipal, and state hydroelectric projects
- Protects the reliability of the high voltage interstate transmission system through mandatory reliability standards
- Monitors and investigates energy markets
- Enforces FERC regulatory requirements through the imposition of civil penalties and other means
- Oversees environmental matters related to natural gas and hydroelectricity projects and other matters
- Administers accounting and financial reporting regulations and conduct of regulated companies”
The Mission of the FERC
The FERC's mission, as implied, is to assist consumers in obtaining reliable, safe, secure, and economic services of energy at a reasonable value through appropriate regulatory, market means, and collaborative efforts.
Guiding Principles
The FERC has the following guiding principles:
Organizational Excellence
The Commission aims to achieve its strategic priorities by utilizing its resources efficiently and effectively.
Due Process and Transparency
It ensures that it follows proper procedures when handling cases and making decisions. It intends to be open and fair to the public and people involved in its undertakings.
Regulatory Certainty
Through consistent approaches and actions, the FERC strives to give regulatory certainty.
Stakeholder Involvement
Ensuring that interested parties have an adequate opportunity to contribute to the Commissions' performance, it administers a regular outreach program.
Timeliness
To achieve an appropriate resolution of each proceeding expeditiously is the goal of the FERC. It makes a point of responding as quickly as possible to issues that affect stakeholders and the energy markets.
FERC Standards of Conducts
The Standard of Conduct is intended to avoid undue discrimination and preferences in the provision of interstate transmission services by constraining marketing function employees from receiving preferential treatment or non-public transmission information.
The FERC Standard of Conducts includes:
- Implementation plan
- Voluntary consent
- Affiliate information
- Transmission function of employee job descriptions
- Employee transfers
- Waivers of tariff provisions
- Standards of Conduct Chief Compliance Officer
The Bottom Line
The Federal Energy Regulatory Commission is a vital government organization that was created in the late 1970s to help deregulate and oversee the energy industry in the United States.
The FERC has a wide range of responsibilities, from regulating the electricity and natural gas industries to managing environmental matters related to energy production.
It is guided by several principles, including organizational excellence, due process and transparency, regulatory certainty, and stakeholder involvement.
The FERC also has a Standard of Conduct that helps ensure that employees of regulated companies do not receive preferential treatment or access to non-public information.
FAQs
1. What is the FERC?
The FERC, an acronym for Federal Energy Regulatory Commission, is an independent agency of the U.S. government that is mainly in charge of the regulation of interstate transmission of electricity, natural gas, and oil.
2. What are the responsibilities of the FERC?
The responsibilities of the FERC include regulating the electricity and natural gas industries, overseeing environmental matters related to energy production, and administering accounting and financial reporting regulations for regulated companies.
3. What role does the FERC play in the energy markets?
The FERC has a crucial role in overseeing those involved in wholesale electricity market transactions and those who provide natural gas transmission services through pipelines. The FERC ensures that these entities operate according to effective and ethical practices on a level playing field so that consumers benefit from fair and efficient markets.
4. Why do producers and consumers need the FERC?
Producers need the FERC to regulate the infrastructure for their transportation through pipelines. The FERC also needs to monitor wholesale markets to ensure that they are competitive. Consumers need the FERC to set prices so that utilities can be fair in their transactions with consumers at all service levels.
5. What does the FERC do?
The FERC known as Federal Energy Regulatory Commission is responsible for regulating the interstate transmission of electricity, oil pipeline rates, natural gas pipeline rates, and licensing of hydroelectric dams. The FERC monitors markets to protect consumers by regulating energy rates for many interstate energy transactions.
