Legal Definitions - Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (FERC) is an independent agency within the U.S. Department of Energy. Composed of five members, FERC plays a crucial role in regulating the interstate transmission and wholesale sale of electricity and natural gas, as well as the transportation of oil by pipeline. Its primary responsibilities include ensuring fair rates, promoting competition, and overseeing the reliability and security of the nation's energy infrastructure. FERC also licenses and inspects private, municipal, and state hydroelectric projects.

Here are some examples illustrating the work of the Federal Energy Regulatory Commission:

• Example 1: Licensing a New Hydroelectric Dam
  Imagine a power company proposes to build a new hydroelectric dam on a river that flows through several states to generate clean electricity. Before construction can begin, this company must apply to FERC for a license. FERC will review the project's design, assess its environmental impact on the river and surrounding areas, and consider its effect on local communities and energy supply. This illustrates FERC's responsibility for licensing hydroelectric power projects, ensuring they meet regulatory standards before they can operate.
• Example 2: Setting Rates for Natural Gas Pipelines
  A major natural gas pipeline company transports natural gas from production fields in Oklahoma across state lines to distribution companies in Illinois, which then sell it to homes and businesses. FERC is responsible for reviewing and approving the rates that the pipeline company charges for this interstate transportation service. This demonstrates FERC's role in regulating the prices for transporting and selling natural gas at wholesale across state borders, aiming to ensure fair costs for consumers and reasonable returns for pipeline operators.
• Example 3: Overseeing Wholesale Electricity Sales
  A large power plant in Pennsylvania generates electricity and sells it in bulk to various utility companies located in New Jersey, Maryland, and Delaware. These utility companies then distribute the electricity to their residential and commercial customers. FERC oversees the wholesale market where this electricity is bought and sold between the power plant and the utility companies. This highlights FERC's function in setting and monitoring the rates for the wholesale sale of electricity that crosses state lines, promoting competitive markets and preventing unfair pricing practices.