Overview Of Federal Statutes And Regulations Governing The Electric Industry

• Pages: 37-61

37

CHAPTER III

OVERVIEW OF FEDERAL STATUTES AND

REGULATIONS GOVERNING THE ELECTRIC

INDUSTRY

A. Federal Statutory Scheme

The FPA114 is the source of authority for much of the federal

regulation of the electric industry. The FPA grants jurisdiction to FERC

over the transmission of electricity in interstate commerce and the sale of

energy for resale in interstate commerce.115 As in many other contexts,

interstate commerce has a broad meaning in this context.116 The FPA

exempts from FERC’s jurisdiction facilities for the generation and local

distribution of electric energy, as well as facilities for the transmission of

electric energy in intrastate commerce or for the consumption of the

transmitter.117 Section 201(f) of the FPA also exempts municipal utilities

and other state instrumentalities from certain aspects of the FPA, but not

from FERC’s authority to require mandatory transmission service under

Section 211, as discussed below.118

Sections 205 and 206 of the FPA govern services under FERC’s

jurisdiction. Section 205(a) requires all rates and charges made,

demanded, or received to be just and reasonable.119 Section 205(c) of the

FPA requires public utilities to file all rates and charges for jurisdictional

services.120 Under Section 206 of the FPA, FERC has continuing

114. 16 U.S.C. § 824 et seq. (2000)

115. 16 U.S.C. § 824 (2000).

116. See Federal Power Comm’n v. Fla. Power & Light Co., 404 U.S. 453

(1972) (affirming FPC’s use of “commingling test,” which postulated

that if energy commingles at a bus with energy that will leave the state,

all of the energy is in interstate commerce); see also Jersey Cent. Power

& Light Co. v. Federal Power Comm’n, 319 U.S. 61, 63-66 (1943)

(utility’s transmission to neighboring utility’s grid may have ultimately

contributed to small amounts of electric energy reaching an out-of-state

utility, and therefore constituted the transmission of electric energy in

interstate commerce).

117. 16 U.S.C. § 824(b) (2000).

118. 16 U.S.C. § 824(f) (2000).

119. 16 U.S.C. § 824d(a) (2000).

120. 16 U.S.C. § 824d(c) (2000).

38 Energy Antitrust Handbook

jurisdiction to revise rates that it finds unjust or unduly preferential.

Section 206 also allows parties to file complaints and allows FERC, in

response to a complaint or sua sponte, to modify any rate, charge, or

classification that it finds unjust, unreasonable, or unduly discriminatory,

and to order a public utility to make refunds of any amounts it collected

in excess of the just and reasonable level after FERC issued notice.121

The FPA regulates other aspects of the electric industry as well.

Under FPA Sections 202 and 210, either DOE or FERC may require

certain interconnection of utility transmission facilities and coordination

of operations.122 Section 203 of the FPA requires FERC approval before

a public utility may transfer jurisdictional facilities.123 Section 204 of the

FPA requires FERC approval before the issuance of any security or the

assumption of certain liabilities by public utilities.124 Under authority

conferred by the FPA, FERC regulations prescribe a uniform system of

accounts for public utilities.125 The FPA also regulates certain

interlocking directorates: It allows individuals to serve as officers or

directors of more than one public utility and of certain specified

companies, only with the approval of FERC, and requires persons

holding these positions to file yearly information statements with

FERC.126

Two statutes have significantly amended the FPA. PURPA required

public utilities to purchase the output of certain qualifying cogeneration

and small power production facilities at rates not more than the

“incremental cost to the utility of alternative electric energy.”127 The EP

Act128 expanded FERC’s authority to require transmission service under

FPA Section 211, and created an exemption from the Public Utility

Holding Company Act of 1935 (PUHCA), which places certain, often

121. 16 U.S.C. § 824e(a) (2000).

122. 16 U.S.C. § 824a (2000).

123. 16 U.S.C. § 824b (2000).

124. 16 U.S.C. § 824c (2000).

125. 18 C.F.R. pt. 101 (1999).

126. 16 U.S.C. § 825d (2000).

127. Pub. L. No. 95-617, 92 Stat. 3117 (codified in scattered sections of 16

U.S.C. (1994)). The incremental cost to a utility of alternative energy is

commonly referred to as a utility’s “avoided cost,” that is, the estimated

amount that the utility would have spent to generate the energy that it

purchased from the qualifying facility.

128. Pub. L. No. 102-486, 106 Stat. 2905 (codified at scattered sections of the

U.S. Code).