Umair Gaines
The Federal Energy Regulatory Commission, or FERC, is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC also reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines, as well as licensing hydropower projects. The responsibility for authorizing the construction and maintenance of power-generating plants and transmission lines primarily resides with the state Public Utility Commissions. The National Association of Regulatory Utility Commissioners (NARUC) is a national association representing state public service commissioners who regulate essential utility services in each state.
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What You'll Learn
Federal Energy Regulatory Commission (FERC)
The Federal Energy Regulatory Commission (FERC) is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC ensures reliable, safe, secure, and economically efficient energy for consumers at a reasonable cost. FERC's responsibilities include approving rates for wholesale sales of electricity and transmission in interstate commerce for jurisdictional utilities, power marketers, power pools, power exchanges, and independent system operators. FERC also oversees the issuance of certain stock and debt securities, the assumption of obligations and liabilities, and mergers.
FERC has limited jurisdiction over the siting of certain electric transmission facilities located within National Interest Electric Transmission Corridors designated by the Department of Energy. These facilities are used for the transmission of electric energy in interstate commerce. FERC also reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines, as well as licensing hydropower projects. FERC regulates the transmission and wholesale sale of electricity in interstate commerce and reviews certain mergers and acquisitions and corporate transactions by electricity companies.
FERC also regulates the transmission and sale of natural gas for resale in interstate commerce and approves the siting and abandonment of interstate natural gas pipelines and storage facilities. FERC reviews the siting applications for electric transmission projects under limited circumstances and assesses the safe operation and reliability of proposed and operating LNG terminals. FERC licenses and inspects private, municipal, and state hydroelectric projects and protects the reliability of the high-voltage interstate transmission system through mandatory reliability standards.
FERC also oversees environmental matters related to natural gas and hydroelectricity projects. FERC's responsibilities were expanded by the Energy Policy Act of 2005, which gave the commission additional duties as outlined and updated in its Strategic Plan. FERC's predecessor, the Federal Power Commission (FPC), was established by Congress in 1920 to coordinate federal hydropower development. In 1935, the FPC became an independent regulatory agency with jurisdiction over hydropower and interstate electricity.
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State Public Utility Commissions
In the United States, a public utilities commission (PUC) is a governing body that regulates the rates and services of public utilities, such as electricity. A public utilities commission is a quasi-governmental body that provides oversight and/or regulation of public utilities in a particular area (locality, municipality, or subnational division). These utilities are often legal monopolies, meaning they are regulated by commissions to ensure fair pricing. The National Association of Regulatory Utility Commissioners (NARUC) is the national association representing the interests of the public utilities commissions in all 50 states. NARUC members are responsible for ensuring reliable utility services at fair, just, and reasonable rates.
The Federal Energy Regulatory Commission (FERC) is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC approves the rates for wholesale sales of electricity and transmission in interstate commerce for jurisdictional utilities, power marketers, power pools, power exchanges, and independent system operators. FERC also reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines, as well as licenses hydropower projects.
While FERC has limited jurisdiction over the siting of certain electric transmission facilities located within National Interest Electric Transmission Corridors designated by the Department of Energy, the state Public Utility Commissions have primary responsibility for authorizing the construction and maintenance of power-generating plants and transmission lines. Once electricity projects become operational, safety is regulated, monitored, and enforced by the state in which the project resides, with the exception of hydropower projects, for which FERC retains jurisdiction.
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National Association of Regulatory Utility Commissioners (NARUC)
The National Association of Regulatory Utility Commissioners (NARUC) is a non-profit organisation founded in 1889. It represents the US state public service commissioners who regulate essential utility services, including energy, telecommunications, and water. NARUC's mission is to serve the public interest by improving the quality and effectiveness of public utility regulation. The association provides a platform for its members and the regulatory community to set and influence public policy, share best practices, and collaborate on solutions to enhance regulation.
NARUC has eight standing committees that propose policies for the association to support on federal and state issues. One of its key committees is the Consumer Affairs Committee, which examines how state commissions protect consumer interests in various industries, including telecommunications and energy. The committee was established after the 2001 terrorist attacks to address security concerns related to utility infrastructure. It assists state regulators in sharing best practices and collaborating on security measures.
Another important committee within NARUC is the Electricity Committee, which focuses on developing and promoting policies that ensure a reliable, adequate, and affordable supply of electricity. This committee works towards creating environmentally sustainable and affordable energy solutions for utilities. They also emphasise the concept of interoperability, which refers to the ability of different systems to share and interpret data, presenting it to consumers in an accessible manner.
NARUC also has an International Committee that manages the association's outreach activities worldwide. Several countries, including those in Eastern Europe, Africa, and Bangladesh, have sought assistance and best practices from NARUC members. The association actively engages in international partnerships to share knowledge and expertise in the energy sector. For example, NARUC collaborated with the Electricity Authority of Cambodia (EAC) to help them establish a robust regulatory framework for renewable energy projects and promote electric vehicle usage.
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Transmission and wholesale sale of electricity
The Federal Energy Regulatory Commission (FERC) is an independent agency that regulates the transmission and wholesale sale of electricity in interstate commerce. FERC approves rates for wholesale sales of electricity and transmission in interstate commerce for jurisdictional utilities, power marketers, power pools, power exchanges, and independent system operators. FERC also has limited jurisdiction over the siting of certain electric transmission facilities located within National Interest Electric Transmission Corridors designated by the Department of Energy.
In the U.S., roughly five billion megawatt-hours of electricity are sold at the wholesale level, which is then sold to utilities or other entities that resell the energy to residential, business, or industrial customers. Wholesale electricity markets refer to power generators, transmission network operators, and financial markets that set the price for wholesale electricity. There is no single national market for wholesale electricity sales, and in some regions, these sales are conducted bilaterally through direct contact and negotiation, voice brokers, or electronic brokerage platforms.
Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) are large entities that operate wholesale electricity markets in many parts of the country, including the Northeast, Mid-Atlantic, California, and the middle section of the country from Texas to North Dakota. RTOs have functional control of the transmission system in their footprint and provide non-discriminatory access to transmission lines to sellers and purchasers of electricity. They also coordinate regional planning for new transmission lines and administer wholesale markets for the sale of electric energy, capacity, and ancillary services. ISOs operate the transmission system independently of wholesale markets and foster competition for electricity generation.
While FERC regulates the transmission and wholesale sale of electricity at the federal level, state Public Utility Commissions are responsible for regulating retail electricity sales to consumers and approving the physical construction of electric generation facilities. The National Association of Regulatory Utility Commissioners (NARUC) provides information about each state's Public Utility Commission and works to improve the quality and effectiveness of public utility regulation.
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Safety and reliability
The safety and reliability of electricity companies are regulated by various organizations, including the Federal Energy Regulatory Commission (FERC), the National Association of Regulatory Utility Commissioners (NARUC), and state Public Utility Commissions.
FERC is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. It also reviews proposals for liquefied natural gas (LNG) terminals and natural gas pipelines, as well as licensing hydropower projects. FERC's responsibilities include approving rates for wholesale electricity sales and transmission in interstate commerce, reviewing mergers and acquisitions, and ensuring the safe operation and reliability of LNG terminals. Once electricity projects become operational, safety is regulated and enforced by the state, except for hydropower projects, which remain under FERC's jurisdiction.
NARUC is a national association representing state public service commissioners who regulate essential utility services. NARUC members are responsible for assuring reliable utility services at fair and reasonable rates. They work to improve the quality and effectiveness of public utility regulation and often collaborate with state regulators to ensure safe utility practices.
State Public Utility Commissions are responsible for authorizing the construction and maintenance of power-generating plants and transmission lines within their respective states. They also regulate retail electricity and natural gas sales to consumers, address local distribution facility reliability issues, and oversee the physical construction of electric generation facilities.
Additionally, organizations like the Federal Trade Commission (FTC) and the District of Columbia Public Service Commission (DC PSC) play a role in regulating specific aspects of the electricity market, such as dynamic pricing and market power assessments.
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Frequently asked questions
The Federal Energy Regulatory Commission (FERC) regulates the interstate transmission of electricity, natural gas, and oil. They also regulate wholesale sales of electricity and transmission in interstate commerce for jurisdictional utilities, power marketers, power pools, power exchanges, and independent system operators.
The National Association of Regulatory Utility Commissioners (NARUC) is a national association representing state public service commissioners who regulate essential utility services in each state. State Public Utility Commissions are responsible for regulating retail electricity and natural gas sales to consumers, approving the physical construction of electric generation facilities, and regulating the activities of municipal power systems.
FERC reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines, as well as licensing hydropower projects. They also review mergers and acquisitions and corporate transactions by electricity companies.
