Federal Energy Regulatory Commission

Federal Power Commission

The Federal Power Commission (FPC), which preceded FERC, was established by Congress 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. The FPC was authorized to regulate both hydropower and interstate electricity.

Natural Gas Act of 1938

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 jurisdiction over all wellhead sales of natural gas in interstate commerce.

Birth of DOE; FPC Becomes FERC

In response to the 1973 oil crisis, Congress passed the Department of Energy Organization Act in 1977, to consolidate 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 (FERC), 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 the Department of Energy proposes a rule, 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, which was passed as part of the National Energy Act of 1978. The National Energy Act included the Natural Gas Policy Act, which reduced the scope of federal price regulation, to bring greater competition to both the natural gas and electric industry.

In 1989, Congress ended federal regulation of wellhead natural gas prices, with the passage of the Natural Gas Wellhead Decontrol Act of 1989.

Energy Policy Act of 2005

The Energy Policy Act of 2005 expanded FERC's authority to protect the reliability and cybersecurity of the bulk power system through the establishment and enforcement of mandatory standards, as well as greatly expanding FERC authority to impose civil 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.

Responsibilities

The responsibilities of FERC now include the following:

Jurisdiction and authorities

FERC is an independent regulatory agency within the United States Department of Energy. The President and Congress do not generally review FERC decisions, but the decisions are reviewable by the federal courts. FERC is self-funding, in that Congress sets its budget through annual and supplemental appropriations and FERC is authorized to raise revenue to reimburse the United States Treasury for its appropriations, through annual charges to the natural gas, oil, and electric industries it regulates.

FERC is independent of the Department of Energy because FERC activities "shall not be subject to further view by the Secretary [of Energy] or any officer or employee of the Department". The Department of Energy can, however, participate in FERC proceedings as a third party.

FERC is composed of up to five commissioners who are appointed by the President and confirmed by the Senate. The President appoints one of the commissioners to be the chairman of FERC, the administrative head of the agency. FERC is a bipartisan body; no more than three commissioners may be of the same political party.

FERC has promoted 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; regional and interregional transmission planning and cost allocation through the landmark Order No. 1000.

FERC investigated the alleged manipulation of electricity market by Enron and other energy companies, and their role in the California electricity crisis. FERC has collected more than $6.3 billion from California electric market participants through settlements. Since passage of the Energy Policy Act of 2005, FERC has imposed, through settlements and orders, more than $1 billion in civil penalties and disgorgement of unjust profits to address violations of its anti-market manipulation and other rules.

FERC regulates approximately 1,600 hydroelectric projects in the U.S. It is largely responsible for permitting construction of a large network of interstate natural gas pipelines. FERC also works closely with the United States Coast Guard to review the safety, security, and environmental impacts of proposed LNG terminals and associated shipping.

Commissioners

The Commissioners are:

Criticism

FERC has been under increasing criticism as being a "Rubber Stamp" for industry, and a "Rogue Agency" which permits projects "illegally". In a July 1, 2014 decision, No Gas Pipeline v. Federal Energy Regulatory Commission, the United States Court of Appeals for the District of Columbia addressed similar claims by noting that pipeline applicants are not likely to pursue many certificates that are hopeless. “The fact that they generally succeed in choosing to expend their resources on applications that serve their own financial interests does not mean that an agency which recognizes merit in such applications is biased,” the court said. Others have directly disputed FERC’s critics by pointing out that “FERC is a creature of law. It follows a careful administrative path to regulate only a portion of natural gas such as interstate pipelines and LNG import and export terminals. That regulation includes extensive environmental review, driven by many federal laws enacted by Congress, signed by the president, and reviewed and upheld by the U.S. Supreme Court. If the agency were to adopt the path [suggested by these critics], FERC’s decisions would routinely be overturned by the federal courts.”

In a case decided by the U.S. Court of Appeals for the D.C. Circuit, the court held that FERC failed to consider the cumulative environmental impact of four projects that had been separately proposed by the same pipeline. The D.C. Circuit held that the projects were not financially independent and were “a single pipeline” that was “linear and physically interdependent,” so the cumulative environmental impacts should have been considered concurrently. Subsequently, in a separate decision, the D.C. Circuit clarified that the “critical” factor was that all of the pipeline’s projects were either under construction or pending before FERC for environmental review at the same time. This guidance has allowed FERC to address additional claims of improper segmentation.

There have been numerous disruptions of the regular open meetings of the Commission by people from impacted communities, and two week-long blockades of their headquarters in Washington DC. "Pipelines are facing unprecedented opposition," Commissioner LaFleur remarked to the National Press Club recently. "We have a situation here."

FERC's leaders have stressed many times since the onset of the increased activism, [that] the proper way to oppose a proposed new infrastructure project is by participating in the related proceeding by submitting comments, attending public meetings, etc. If someone does not like FERC's decision on a matter and/or believes the agency acted improperly, that decision can be appealed as far as the Supreme Court. And should the individual or group still be dissatisfied, Congress can always be asked to rectify the problem.” “As Commissioner Tony Clark said. . . ., the proper response of FERC to the protests is to ‘respond to incivility with civility,’ and that he would ‘encourage those folks who disagree with the law to direct activity to more legal and effective ways,’ meaning Congress, which writes the laws.”