What is the Federal Energy Regulatory Commission?

Eric Misener

The Federal Energy Regulatory Commission (FERC) is an independent entity within the United States Government’s Department of Energy. Its purview is the regulation of the interstate transmission of electricity, natural gas and oil. It was formed on Oct. 1, 1977, as the successor agency to the Federal Power Commission.

The Federal Energy Regulatory Commission is in charge of licensing and inspecting hydroelectric projects, among other responsibilities.
The Federal Energy Regulatory Commission is in charge of licensing and inspecting hydroelectric projects, among other responsibilities.

FERC’s four members — three commissioners and a chairman — are appointed by the U.S. President and must be confirmed by the U.S. Senate. Although it technically is within the Department of Energy, FERC is an independent agency, and its decisions are not reviewable by the Secretary of Energy or any other agent of the department. The Department of Energy can act like any other party, however, in requesting a review of FERC’s decisions in the federal courts. FERC is a self-funding agency, and it recovers its operating costs through fees charged to the industries that it regulates.

In terms of electricity, the Federal Energy Regulatory Commission has broad regulatory powers. For example, FERC regulates wholesale sales and transmission of electricity in interstate commerce, and it reviews some electric company mergers and acquisitions. It also is responsible for licensing and inspecting hydroelectric projects, and it mandates reliability standards that help protect the dependability of the interstate high voltage transmission system.

In the natural gas and oil industries, FERC is responsible for regulating the interstate transport of oil through pipelines, and it approves or disapproves the sites for and decisions to abandon interstate pipelines and storage facilities for natural gas. It also monitors liquid natural gas facilities to ensure safety and reliability. The Federal Energy Regulatory Commission also monitors energy markets, managaes environmental matters concerning hydroelectric and natural gas projects, enforces its own regulatory requirements and deals with accounting and reporting requirements for the regulated industries.

During the energy crisis that occurred in the western U.S. in the early part of the 21st century, the Federal Energy Regulatory Commission played a leading role in investigating the causes and ramifications of the crisis. It also had a role in penalizing entities that the commission found to have exploited and exacerbated it the energy crisis. FERC facilitated large monetary settlements as a result of the crisis, and it contributed to the civil penalties and numerous criminal prosecutions that were pursued by the Department of Justice during that time.

The Energy Policy Act of 2005 gave FERC the power to certify certain industries under its jurisdiction that show incremental increases in production because of efficiency improvements or capacity additions. In FERC’S case, this applies generally to hydroelectric facilities. A FERC certification in this area allows a particular entity to apply for a renewable energy tax credit with the Internal Revenue Service under the Internal Revenue Code of 1986.

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