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The Federal Energy Regulatory Commission (FERC) regulates interstate transmission of electricity, natural gas, and oil. It has broad regulatory powers, including permitting and inspection of hydroelectric projects, monitoring energy markets, and enforcing reliability standards. FERC is an independent agency within the Department of Energy, with four members appointed by the US president. It recoups its operating costs through taxes charged to the industries it regulates. FERC played a leading role in investigating and penalizing entities during the energy crisis in the early 21st century. The Energy Policy Act of 2005 empowered FERC to certify certain industries under its jurisdiction for renewable energy tax credits.
The Federal Energy Regulatory Commission (FERC) is an independent entity within the US government’s Department of Energy. Its purview is the regulation of interstate transmission of electricity, natural gas, and oil. It was incorporated on October 1, 1977 as a successor agency to the Federal Power Commission.
FERC’s four members – three commissioners and a president – are appointed by the US president and must be confirmed by the US Senate. While technically within the Department of Energy, FERC is an independent agency and its decisions cannot be reviewed by the Secretary of Energy or any other agent of the department. The Department of Energy can act like any other party, however, in seeking a review of FERC decisions in the federal courts. FERC is a self-funded agency, and recoups its operating costs through taxes charged to the industries it regulates.
In terms of electricity, the Federal Energy Regulatory Commission has broad regulatory powers. For example, FERC regulates the wholesale sales and transmission of electricity in interstate commerce and reviews certain electric company mergers and acquisitions. It is also responsible for the permitting and inspection of hydroelectric projects and enforces reliability standards that help protect the reliability of the interstate high voltage transmission system.
In the natural gas and petroleum industries, FERC is responsible for regulating the interstate transportation of oil through pipelines and approves or disapproves sites and decisions to abandon interstate pipelines and natural gas storage facilities. It also monitors LNG facilities to ensure safety and reliability. The Federal Energy Regulatory Commission also monitors energy markets, handles environmental issues related to hydroelectric and natural gas projects, enforces its regulatory requirements, and handles accounting and reporting requirements for regulated industries.
During the energy crisis that unfolded in the western United States in the early part of the 21st century, the Federal Energy Regulatory Commission played a leading role in investigating the causes and ramifications of the crisis. It also played a role in penalizing entities the commission found exploited and exacerbated the energy crisis. FERC facilitated large monetary deals as a result of the crisis and contributed to the civil penalties and numerous criminal cases that were pursued by the Justice Department during that time.
The Energy Policy Act of 2005 empowered FERC to certify certain industries under its jurisdiction that exhibit incremental increases in output due to efficiency improvements or capacity additions. In the case of FERC, this generally applies to hydroelectric plants. A FERC certification in this area allows a particular entity to apply for a renewable energy tax credit with the Internal Revenue Service under the Internal Revenue Code of 1986.
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