The Federal Energy Regulatory Commission (FERC) is not a household name, but its impact on the daily lives of Americans is profound. FERC is an independent and bipartisan federal agency, and a well‐functioning FERC is essential to a well‐functioning energy industry in the United States. The agency is responsible for (among other things):
- reliability of the bulk power system (the “grid”),
- wholesale electricity markets across the country,
- hydroelectric facility licensing (mostly relicensing),
- certification of interstate natural gas pipelines, and
- siting and construction of liquefied natural gas (LNG) facilities.
FERC’s origin and responsibilities regarding hydropower go back to the 1920 Federal Water Power Act. Most of its present responsibilities come from two major congressional actions in the 1930s—the 1935 Federal Power Act and the 1938 Natural Gas Act (NGA). For more background, see the official “FERC 101” slide deck. Also, I should disclose that I spent about half of my career at FERC and have great respect for my friends and colleagues who work there.
An examination of the natural monopoly premises underlying FERC’s organic statutes is important but beyond the scope of this piece. Those of us who support free markets can debate whether the federal government should have so much authority, but FERC has had a significant level of authority since the 1930s and is not going anywhere soon.
In fact, recent legislative proposals would give FERC an additional responsibility—one that’s presently being abused by the Department of Energy (DOE)—to approve the international sale of natural gas. FERC is responsible for licensing LNG facilities, many of which are for domestic use only. However, under the NGA (as amended by the DOE Organization Act), the DOE is responsible for approving the sale itself—the import or export of the natural gas commodity—if it deems the transaction in the “public interest.”
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