FERC 101 Learn the Basics Presentation for PLI by Susan J. Court Principal SJC Energy Consultants, LLC Former Director, Office of Enforcement Federal Energy Regulatory Commission March 24, 2015 1
Some Preliminaries 2
U. S. Energy Industry • • • One billion short tons of coal (2012) 26 billion barrels of proved oil reserves (2011) 143 refineries (2013)(4 idle) (decrease of 7 since 2008) Close to 200, 000 miles of oil pipelines, delivering over 11. 3 billion barrels of petroleum each year (2013) 215 interstate oil pipeline companies (2013) 514, 637 producing natural gas wells (2011) (30% of natural gas production came from shale) 348. 8 Tcf of proved reserves of natural gas (2011) 20, 300 miles of natural gas gathering lines (2011) Over 400 underground natural gas storage sites (2014) (majority of which are depleted field reservoirs) 215 interstate natural gas storage companies (2013) • • • Over 1, 400 natural gas compressor stations (2014) 220, 000 miles of interstate pipelines (2014) 170 interstate natural gas pipelines (2014) 2. 4 million miles of natural gas distribution pipelines (2014) 25. 46 Tcf of natural gas consumed (2012) 96, 000 MW of conventional hydropower and pumped storage capacity (2009) Generation of Megawatt-hours of electricity (2011): coal (42. 3%); natural gas (25. 0%), nuclear (19. 3%), oil (0. 7%), hydro (7. 6%), other (5. 1%). Electricity providers (% of sales to ultimate consumers) (2011): about 2, 000 publicly owned utilities (15. 4%), 875 electric cooperatives (11. 1%), 195 IOUs (54. 5%), 9 Federal power agencies (1. 2%), 180 power marketers (17. 8%) 200, 000 miles of high-voltage electric transmission lines Nearly 3, 856 billion k. Wh in electricity consumption (2011) 3
Energy Trade Associations 4
State vs. Federal National Association of Regulatory Utility Commissioners (NARUC) NARUC is a non-profit organization founded in 1889 whose members include the governmental agencies that are engaged in the regulation of utilities and carriers in the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands. NARUC's member agencies regulate telecommunications, energy, and water utilities. NARUC represents the interests of State public utility commissions before three branches of the Federal government . 5
Federal Energy Regulatory Commission http: //ferc. gov 6
Overview of FERC • • • Who -- Commissioners and the staff What -- Jurisdiction of the FERC Where -- Locations of FERC offices When -- Timing of FERC action How -- Decision-making process Why -- Protection of the public interest 7
WHO The Commissioners • • • Five-member commission No more than three members in same political party Appointed by the President, confirmed by the Senate Five-year staggered terms One commissioner designated by the President to be Chairman, who is also chief administrative officer of the agency • Each commissioner has an equal vote on agenda items but does not participate in administrative or personnel matters 8
Current Commission • • • Chairman Cheryl La. Fleur (D – Mass. ) (6/18) Philip Moeller (R – Oregon) (6/15) Tony Clark (R – North Dakota) (6/16) Norman Bay (D – New Mexico) (6/18) Collette Honorable (D–Arkansas) (6/17) 9
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Staff Make-up • By Program ü Rates and Enforcement: 680 ü Infrastructure and Reliability: 470 ü Administrative: 282 • By Profession ü ü ü ü Lawyers Engineers Economists Accountants Public utilities specialists Cyber specialists Ecologists Geologists Biologists Outdoor recreation planners Historians Archeologists Landscape architects 11
WHAT • FERC is an independent regulatory agency created on 10/1/77 by the Department of Energy (DOE) Organization Act. • FERC inherited the authority of the Federal Power Commission and assumed more responsibility by subsequent legislation. • FERC’s 2016 budget request is $319, 800, 000, which will be paid back to U. S. Treasury through annual charges and fees. FTE request is 1, 480. 12
Statutory Bases • Hepburn Act – 1906 Interstate Commerce Act • Federal Water Power Act – 1920 Part I of FPA • Federal Power Act – 1935 Parts II & III of FPA • Natural Gas Act – 1938 • DOE Organization Act – 1977 • Natural Gas Policy Act – 1978 13
Other Relevant Laws • FERC Statutes: Public Utility Holding Company Act (1935); Outer Continental Shelf Lands Act Amendments (1978); Alaska Natural Gas Transportation System (1977); Public Utilities Regulatory Policies Act (1978); Electric Consumers Protection Act (1986); Natural Gas Wellhead Decontrol Act (1989); Energy Policy Act (1992); Alaska Natural Gas Pipeline Act (2004); Energy Policy Act (2005); Electricity Modernization Act (2005); Hydropower Regulatory Efficiency Act (2013). • Other Federal Statutes: National Environmental Policy Act; Clean Water Act; Clean Air Act; Coastal Zone Management Act; National Historic Preservation Act; Endangered Species Act; Wild and Scenic Rivers Act; Administrative Procedure Act; Sunshine in Government Act; Freedom of Information Act; Government Paperwork Reduction Act; Government Paperwork Elimination Act. 14
Primary Regulatory Bases • Order No. 636 (1992) non-discriminatory (open access) unbundled transportation service to be provided by interstate natural gas pipelines (contract carriers) (modified in Order No. 637 (2000)). • Order No. 888 (1996) non-discriminatory (open access) unbundled transmission service to be provided by electric public utilities (contract carriers) Open Access Transmission Tariff (OATT) (modified in Order No. 890 (2007) and Order No. 1000 (2011)). • Order No. 672 (2006) process for certifying a single independent Electric Reliability Organization (ERO) to propose and enforce a new national regime of mandatory reliability standards subject to Commission review and oversight. • Order No. 2002 (2003) hydropower licensing process. • Order No. 561 (1993) methodology for oil pipelines (common carriers) to change their rates through use of an index system that establishes ceiling levels for such rates. 15
Regulations Title 18 of the Code of Federal Regulations (CFR) 16
Regulations (Too) https: //www. naesb. org http: //www. nerc. com 17
Subject Matter Jurisdiction Ø Ø Hydropower Electric Natural Gas Oil Pipeline 18
Hydropower Jurisdiction 19
Responsibilities • Issues licenses for the construction of new hydropower projects and hydrokinetic pilot projects on navigable waterways in the U. S. • Issues licenses for the continuance of an existing project (relicensing). • Oversees all ongoing project operations, including dam safety inspections and environmental monitoring. 20
Electric Jurisdiction 21
Responsibilities • Approves rates and terms and conditions of service for wholesales and transmission of electricity in interstate commerce for jurisdictional (investor-owned) utilities, power marketers, power pools, power exchanges and independent system operators. • Oversees the issuance of certain stock and debt securities, assumption of obligations and liabilities, and mergers. • Reviews officer and director positions held between top officials at utility companies and certain firms with which they do business. • Reviews rates set by the federal power marketing administrations (PMAs). • Certifies qualifying small power production and cogeneration facilities, although QFs may no longer require purchase. 22
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As a separate matter…. 24
Reliability • EPAct 2005 amended the Federal Power Act authorizing FERC to oversee a mandatory reliability program. • FERC chose NERC to be Electric Reliability Organization and approved eight regional entities to be primarily responsible for ensuring compliance with mandatory reliability standards. • Regional Entities registered 1, 600 users, owners and operators in United States that are now subject to standards. The original 83 became mandatory on June 18, 2007. To date, FERC has approved over 100 mandatory standards. • FERC has original, concurrent, and appellate jurisdiction. 25
Reliability Regional Entities 26
Natural Gas Jurisdiction 27
Responsibilities • Certificates construction and operation of pipeline and storage facilities, and authorizes the siting of liquefied natural gas facilities onshore or in state waters and ultimately oversees the abandonment of those facilities. • Ensures that projects are environmentally sound, and serves as lead agency for one Federal record. • Oversees the construction and operation of pipeline facilities at U. S. points of entry for the import or export of natural gas. • Approves wholesales rates and transportation rates, terms, and conditions of service provided by natural gas pipelines in interstate commerce. 28
Major Interstate and Intrastate Pipelines 29
Underground Natural Gas Storage 30
Existing FERC Jurisdictional LNG Import/Export Terminals 31
Oil Pipeline Jurisdiction 32
Responsibilities • Regulates rates and practices of oil pipeline companies engaged in interstate transportation; • Administers an index system that establishes ceiling levels for such rates and reviews that methodology every five years. The index is pegged to the Producer Price Index for Finished Goods, plus 2. 65 percent adjustment for 7/1/11 -July 2016; and • Establishes equal service conditions to provide shippers with equal access to pipeline transportation. • See http: //ferc. gov/industries/oil/indus-act/handbooks. asp. 33
Enforcement (Post-EPAct) • New or greatly expanded penalty authority – NGA, FPA Part II, NGPA – $1 million per day per violation for duration of violation • Explicit anti-manipulation authority (“any entity”) • Specific direction to facilitate transparency in natural gas and electric energy prices (“any market participant”) • New responsibilities to ensure the reliability of the electric transmission grid (“all users, owners, and operators of the bulk power system”) 34
Statistics Jurisdictional Companies Category of jurisdictional company* Number of companies • • • • Traditional cost-of-service electric utilities RTOs/ISOs Electric suppliers with market-based rate authority ERO Reliability Regional Entities Reliability Registered Entities Federal power administrations Hydroelectric projects Liquid natural gas terminals Oil pipelines Interstate natural gas pipelines Natural gas storage facilities Intrastate pipelines Total • “Any entity” subject to prohibition against market manipulation 358 6 1, 881 8 1, 600 4 1, 019 9 215 170 215 111 5, 597 35
Statistics Submissions to and Issuances by the Commission in FY 2014 • Submissions: 68, 896 (hard copy, e. Filed, e. Forms, electronic (CD /DVD)). • Issuances: – 1, 028 Commission Orders – 7, 428 Delegated Orders – 13, 948 Other Issuances (e. g. , notices). 36
Statistics Reports (Samples) • Reports Submitted By FERC to Congress – – Congressional Performance Budget Request Performance and Accountability Report Annual Report (last issued for 2010) Report to Congress on Progress Made in Licensing and Constructing the Alaska Natural Gas Pipeline – Fees for the Use of Government Dams Report to Congress • Reports Submitted by Staff to FERC – Gas-Electric Coordination Quarterly Report (June 2014) – Assessment of Demand Response and Advanced Metering (Oct. 2013) – Office of Energy Projects Energy Infrastructure Update – Summer Market and Reliability Assessment – Winter Energy Market Assessment 37
WHERE – FERC locations 38
WHERE – FERC Locations • Headquarters: 888 First Street, N. E. , Washington, D. C. 20426 www. ferc. gov • Regional OEP offices: New York, NY; Atlanta, GA; Chicago, IL; San Francisco, CA; and Portland, OR • Regional OEMR representatives: Carmel, IN and Folsom, CA • Regional OER office: Hagerstown, MD 39
WHEN : Timing of FERC Action • Commission meets on third Thursday of each month, except August (no meetings) in open session starting at 10 AM Eastern Time. Televised and web streamed. • Commission may meet in closed meetings. • Commission may vote “notationally. ” • Commission also acts through authority delegated to its office directors. 40
Events Leading to a Vote • 14 days before open meeting: staff distributes 75 -100 draft orders for the Commission’s consideration. • 7 days before open meeting: Secretary issues “Sunshine Notice” of all dockets in which orders will be considered. • 6 -7 days before open meeting: Commissioners’ personal staff meet with professional staff in a “pre-agenda. ” • Day of meeting: Commissioners will vote out majority of orders on “consent” agenda, and hear presentations and discuss 3 -5 items on its “regular” agenda. Need a quorum, at least 3 commissioners, then a majority of those voting. 41
HOW Decision-making Process • Company-specific decisions in response to submittals from jurisdictional companies, their customers, and other market participants, or following a proceeding initiated by the Commission • Generic or industry-wide decisions usually initiated by the Commission or in response to a petition for rulemaking 42
Company-Specific Decisions • • • Licensing of the construction and operation of a hydroelectric project Authorization of a change in rates, terms and conditions of service Approval of a merger of two or more electric companies Certification of the building and operation of a natural gas pipeline Authorization of the siting of an LNG terminal Issuance of an order following an investigation of an alleged violation of the law 43
Example: gas pipeline rate proceeding • Company files application OSEC issues notice –> staff reviews filing and comments Commission issues order within 30 days • Order (1) accepts/suspends filing for 5 months and may set matter for hearing before ALJ, (2) accepts/suspends filing for a moment and may set up a technical conference, (3) accepts filing without suspension, or (4) rejects filing • If goes to hearing, testimony, briefs, initial decision back to Commission for decision • If handled “on paper” review by staff back to Commission for decision After Commission decision, parties may file for rehearing Commission issues an order on rehearing parties may file petition for review in a court of appeals 44
Example: natural gas pipeline certificate proceeding • Company may engage in pre-filing process (required for LNG) • Company files application OSEC issues notice parties intervene • Staff commences environmental review, which may involve Environmental Impact Statement (EIS) • Commission issues order on non-environmental issues (called a Preliminary Determination or PD) • Parties file rehearing requests • Commission issues order on rehearing of nonenvironmental issues and at same time certificates project, including environmental conditions, if finds in the PC&N After Commission issues decision, parties may file rehearing requests Commission issues order on rehearing parties may file petitions for review in a court of appeals 45
Complaints vs. Investigations • Complaints -- initiated by a company or individual filing a complaint (under NGA sec. 5 or FPA sec. 206) or by the Commission on its own motion -- pursued “on paper” or in trial-type hearing -- parties • Investigations -- initiated by staff under Part 1 b of FERC regulations -- sources: calls to the Hotline (hotline@ferc. gov) (1 -877 -337 -2664), a selfreport, an RTO market monitor referral, recommendation from another part of the agency (OE oversight and auditing, OEMR, OEP staffs), or referral from a Commissioner -- can be preliminary or formal, public or non-public -- no parties 46
Industry-Wide Decisions • Rulemakings: Notices of Inquiry (NOI), Advanced Notices of Proposed Rulemakings (ANOPR), Notices of Proposed Rulemakings (NOPR) Final Rules • Other: Policy Statements, Interpretive Rules, Declaratory Orders 47
Example: typical rulemaking Commission issues NOPR Reviews comments Holds technical conferences Issues Final Rule Parties file for rehearing Rehearing Order Rule becomes effective 30 - 60 days after publication in FR Parties file petitions for review in court of appeals 48
Alternative Dispute Resolution • Dispute Resolution Service (DRS) -- small group of non-decisional employees with specialized skill in negotiation, facilitation, and convening techniques (housed in the Office of Administrative Law Judges) -- “ 800” Number: 877 -FERC-ADR (877 -337 -2237) • Settlement Judges -- process detailed in 18 C. F. R. Sec. 385. 603 -- can be directed by Commission or requested by parties 49
FERC ALJs 50
FERC Hearing Room 51
Judicial Review - Court System 52
Judicial Review - Court Process • Generally, FERC decisions reviewed by one of 12 U. S. Courts of Appeal; a few actions lie in U. S. District Courts. • For gas, electric, and hydro cases, parties must seek rehearing first (jurisdictional pre -requisite). • Parties have 60 days to file petitions for review. • About one-fourth of all FERC orders on rehearing are appealed. • Most FERC decisions are appealed to D. C. Circuit. • Review involves briefs and oral argument. • Standard of review is premised on the decision’s not being arbitrary and capricious, i. e. , adequately explained and based on substantial evidence reasoned decisionmaking. Note: FERC gets considerable deference. • Decisions take about 1 – 1 ½ years. 53
WHY Protection of the Public Interest • Just and reasonable rates • Adequate supply of energy • Nondiscriminatory services • Environmentally and economically sound projects • Reliable bulk power system • Energy markets free of manipulation 54
Susan J. Court SJC Energy Consultants, LLC susan. court@courtenergy. com http: //www. courtenergy. com 55
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