Federal Energy Regulatory Commission (FERC)
The Federal Energy Regulatory Commission (FERC) is an independent agency within the U.S. Department of Energy, established in 1977 as the successor to the Federal Power Commission. It plays a critical role in regulating the interstate transmission of electricity, natural gas, and oil, as well as overseeing the development of liquefied natural gas (LNG) terminals, interstate pipelines, and hydropower projects. FERC consists of five commissioners appointed by the President, who serve five-year terms and maintain an impartial stance across political affiliations.
The agency is responsible for ensuring that energy markets operate fairly and transparently, supporting competition within wholesale power markets while also monitoring energy market conditions. It engages in environmental assessments to evaluate the impacts of energy projects and encourages early communication between project developers and relevant stakeholders, including Native American tribes and state agencies. FERC's regulatory authority extends to overseeing the construction and operation of hydroelectric projects and ensures compliance with environmental standards through rigorous inspection and oversight.
FERC also coordinates with various federal and state entities, such as the U.S. Coast Guard and the Department of Transportation, to facilitate the safe transportation of natural gas and LNG. Overall, FERC's mission is to promote reliable, safe, and affordable energy while ensuring that environmental considerations are integrated into energy project licensing and operation.
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Federal Energy Regulatory Commission (FERC)
Summary: The Federal Energy Regulatory Commission, a division of the Department of Energy that acts as an independent agency, regulates the interstate transmission of electricity, natural gas, and oil, and reviews proposals for liquefied natural gas (LNG) terminals, interstate natural gas pipelines, and hydropower projects.
The Federal Energy Regulatory Commission (FERC) was created in 1977 as successor of the Federal Power Commission, which had been established in 1920. As an independent federal agency, it consists of five commissioners, who may be members of different political parties and are required to keep an independent political viewpoint. They are appointed by the president of the United States under advice and consent of the Senate. Serving five-year terms, all commissioners have an equal vote on regulatory matters, such as the interstate transmission and wholesale of electricity, natural gas, and oil. Congress exercises oversight over FERC by holding hearings on energy-related topics. To give qualified testimony, FERC maintains an environmental measures effectiveness database that tracks the success of environmental requirements in licenses.
Authorized by the Federal Power Act and the Omnibus Budget Reconciliation Act of 1986, FERC obtains its own, cost-covering revenue through annual charges and filing fees assessed on the industries it regulates. This revenue is deposited into the US Treasury.
The Energy Policy Act of 2005 (EPACT) requires FERC to coordinate the environmental review and the issuance of all federal authorizations for natural gas infrastructure proposals. Therefore, environmental assessments (EAs) are prepared, considering all environmental and further public concerns. Additionally, the EPACT strengthens the legal framework for competition in wholesale power markets. This includes the regulation of jurisdictional issuances of stock and debt securities, assumptions of obligations and liabilities, and mergers.
In general, FERC is obligated to keep policies neutral and nondiscriminatory; for instance, regarding the fuel source. To stay updated, an Energy Innovations Sector was established within FERC to provide information about contemporary issues associated with renewables and climate change.
FERC also directs the Electric Reliability Organization in supervising the approved mandatory (reliability) standards of the bulk power system. Furthermore, it monitors energy markets and supports the participation of demand response in organized wholesale power markets to ensure reasonable wholesale prices, increase awareness of energy usage, and lower transmission congestion. FERC aims to impose equal service and access conditions for shippers regarding pipeline transportation. If necessary, it serves to resolve disputes between energy companies, other organizations, and the public.
Another of FERC’s major responsibilities is the regulation of facility construction and abandonment, both of rates and of practices of oil pipeline companies engaged in interstate transportation.
FERC has no authority over the construction or maintenance of power-generating plants or oil pipelines, and it has only limited jurisdiction over transmission line siting. The responsibility over the construction and maintenance of power-generating plants and transmission lines primarily resides with state public utility commissions.
FERC oversees environmental matters related to natural gas as well as private, municipal, and state hydroelectric projects. In order to get licenses, the companies must prove that they are going to take the environmental impact of their project into consideration. FERC encourages all applicants, prior to submitting an application, to communicate information on the designated project to relevant federal and state natural resources agencies, Native American tribes, and state water quality agencies. Also, for supervising purposes, the National Environmental Policy Act of 1969 (NEPA) specifies when an environmental impact statement (EIS) or a scoping meeting is required. An EIS must take into account all issues and impacts on land, water, air, structures, living organisms, and environmental, social, and cultural values at the site; economic aspects are also considered. An EIS not only describes impacts, but also advances ways to manage them.
Natural gas transportation in interstate commerce, as authorized by the Natural Gas Policy Act and the Outer Continental Shelf Lands Act, is also regulated by FERC. This includes inspection during construction and operation of pipeline facilities at US points of entry for the import or export of natural gas, as well as liquefied natural gas (LNG) terminals. FERC works closely with the US Coast Guard, Department of Transportation, and state and local governments. After import, both transmission and (underground) storage are monitored. Certain quality requirements for natural gas, developed by FERC, have to be fulfilled prior to distribution.
With respect to hydropower, including hydrokinetics, FERC regulates the construction and operational phase of a project by issuing licenses, re-licensing existing projects, issuing preliminary permits, allowing 5-megawatt exemptions, and administering audits, penalties, fines, license surrenders, and transfers of license, as well as fielding complaints and making jurisdictional determinations. FERC reviews and approves the designs, plans, and specifications of dams, power plants, and other proposed projects. During construction and operation, FERC engineers frequently inspect the plant or dam, including safety inspections and environmental monitoring. More than 1,700 non-federal dams in the United States are regulated by FERC. The Federal Power Act requires FERC to consider the extent to which a project is consistent with federal or state comprehensive plans for improving, developing, or conserving a waterway affected by the project. Licenses are issued for a minimum term of 30 years and a maximum term of 50 years.
Bibliography
“Overview of FERC.” Federal Energy Regulatory Commission, 14 June 2023, www.ferc.gov/what-ferc/overview-ferc. Accessed 9 Aug. 2024.
Federal Energy Regulatory Commission. The Federal Energy Regulatory Commission: What It Is. Washington, DC: Department of Energy, Federal Regulatory Commission, 1978.
McGrew, James H. Federal Energy Regulatory Commission. 2nd ed. Chicago: American Bar Association, Section of Environment, Energy, and Resources, 2009.
"What You Need to Know About One of the Most Important Agencies Overseeing the US Energy System." Earth Justice, 1 Jan. 2024, earthjustice.org/article/one-of-the-most-important-agencies-overseeing-u-s-energy-faces-deadlock. Accessed 1 Aug. 2024.