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History of FERC

Founding of FPC
In 1920, Congress established the Federal Power Commission (FPC) to coordinate hydroelectric projects under federal control. Under the joint administration of the Secretary of War, Interior, and Agriculture the FPC could only employ an Executive Secretary, while all other personnel was borrowed from these administrating executive departments.
hydroelectric damLearn More about Hydroelectricity on Wikipedia External Link

This organization resulted in conflicting mandates, making it difficult to produce a consistent energy policy. Thus, in 1928 Congress voted to give the FPC funds to permanently hire their borrowed staff. Two years later, the Federal Power Act established a five-member, bipartisan commission to run the FPC.

Expansion of the FPC’s mission
With the passage of new acts and court decisions the mission of the FPC continued to expand.

  • The Federal Power Act of 1935 and the Natural Gas Act of 1938 gave the FPC the power to regulate the sale and transportation of electricity and natural gas;
  • In 1940 amendments to the Natural Gas Act enabled the FPC to certify and regulate Natural Gas facilities;
  • 1954 Phillips Petroleum Co. v. Wisconsin decided that the FPC has jurisdiction over facilities producing Natural Gas sold in interstate commerce;
  • 1964 City of Colton v. SoCal Edison decided that the FPC also has jurisdiction over intra-state sales of power that has been transmitted across state lines; and
  • In 1967, intrastate utilities became jurisdictional if they connected their supply lines to others outside of the state.

As a result of their expanded jurisdiction the FPC and the nation faced an energy crisis. There was a colossal backlog of applications for natural gas permits, while there were chronic brownouts in the 1960s and the OPEC embargo in the 1970s. This called for reorganization of the FPC.

Reorganization of the FPC
In 1977, Congress reorganized the FPC as FERC and the responsibilities of the Commission continued to expand.

  • In 1978 the National Energy Act (NEA) unified intrastate and interstate gas markets;
  • To enhance the nation's self sufficiency, FERC worked to develop simpler approval procedures and eliminate direct oversight of utilities;
  • FERC implemented Blanket gas certifications; and
  • In 1992 the Energy Policies Act gave FERC "wheeling authority." The Act also created a new category of electricity manufacturer; "exempt wholesale producers."

In the late 1970s FERC provided for gradual deregulation.

  • 1985 FERC Order No. 436 required that natural gas pipelines provide open access to transportation services, enabling consumers to negotiate prices directly with producers and contract separately for transportation;
  • In 1991 FERC issued a Notice of Proposed Ruled Rulemaking;
  • In 1992 FERC issued Order No. 636 (The Restructuring Rule). This mandated unbundling of sales services from transportation services, providing customers with  full choice of providers and opening these markets to competition; and
  • FERC Order No. 637 further addressed inefficiencies in the capacity release market.

Deregulation allows consumers to negotiate the best terms for supply and transportation of natural gas to markets. Due to deregulation of the US gas industry production has increased, proved reserves have decreased, and gas usage is increasing.

FERC Order No. 888
On April 24, 1996, FERC issued its Order No. 888, a final rule regarding electric industry restructuring.

Order No. 888:

  • Requires transmission owners who purchase transmission service to offer nondiscriminatory, comparable transmission service to others seeking such services over its own facilities. This often is referred to as the "open access" rule;
  • Has a goal to ensure that potential suppliers of electricity have equal access to the market; and
  • Encourages the creation of a separate Price Exchange to reveal market-clearing prices for electricity in the new competitive market.
    To reaffirm the determinations and conclusions of Order No. 888:
  • On March 4, 1997, FERC issued Order No. 888-A, which provided detailed guidelines on implementing the "open access" rule.
  • FERC issued Order No. 889, requiring the posting of available capacity on an electronic bulletin board; Open Access Same-time Information System (OASIS).

In 1999, FERC issued Order No. 2000 PDF, fostering participation in regional transmission organizations (RTOs) and Independent System Operators (ISOs), by establishing guidelines that a transmission entity must meet in order to qualify as an RTO. The expectation is that the RTOs will increase efficiency in wholesale energy markets and lower end-prices to consumers. Voluntary RTOs and ISOs have been formed in California (CAISO) External Link, Southwest (SPP) External Link, Midwest (MISO) External Link, Mid-Atlantic (PJM) External Link, New York (NYISO) External Link , and New England (ISO-NE) External Link.

EPAct 2005
The Energy Policy Act of 2005 PDF was the first major energy law enacted in over a decade, and makes the most significant changes in Commission authority since the Federal Power Act and Natural Gas Act. By passing the Energy Policy Act of 2005, Congress signaled a strong vote of confidence in the Commission. The Energy Policy Act of 2005 gave the Commission significant new responsibilities and granted it significant new authority to discharge these responsibilities by modifying the Federal Power Act, the Natural Gas Act, and the Public Utility Regulatory Policies Act of 1978. In addition the Energy Policy Act of 2005 repealed the Public Utility Holding Company Act of 1935 and in its place created a new rule, which emphasizes access to books and records. The Commission's significant new responsibilities also include:

  • Overseeing the establishment and enforcement of reliability standards for the Nation's electric transmission grid;
  • Implementing new tools, including penalty authority, to prevent market manipulation;
  • Providing rate incentives to promote electric transmission investment;
  • Supplementing state transmission siting efforts in national interest electric transmission corridors; and
  • Reviewing certain holding company mergers and acquisitions involving electric utility facilities, a well as certain public utility acquisitions of generating facilities.

On February 15, 2007, the Commission adopted a final rule PDF reforming its decade-old open-access transmission regulatory framework that will ensure transmission service is provided on a nondiscriminatory and just and reasonable basis, as well as provide for more effective regulation and transparency in the operation of the transmission grid. The rule is designed to: (1) strengthen the pro forma open-access transmission tariff, or OATT, to ensure that it achieves its original purpose of remedying undue discrimination; (2) provide greater specificity to reduce opportunities for undue discrimination and facilitate the Commission's enforcement; and (3) increase transparency in the rules applicable to planning and use of the transmission system.

On October 17, 2008, FERC issued Order No. 719 PDF which finalized regulations that will strengthen the operation and improve the competitiveness of organized wholesale electric markets through the use of demand response and by encouraging long-term power contracts, strengthening the role of market monitors and enhancing regional transmission organization (RTO) and independent system operator (ISO) responsiveness.