Energy Bill Includes Most Significant Changes to Energy Law in 70 Years, Kelliher Says

Federal Energy Regulatory Commission (FERC) Chairman Joseph Kelliher has stated that the federal energy bill's provisions involve the most significant changes since the Federal Power Act of 1935 and the Natural Gas Act of 1938. Among those new responsibilities is overseeing the reliability of the nation’s electricity transmission grid. Congress has directed FERC to finalize within 180 days new rules establishing an enforceable framework of mandatory power-grid reliability rules. The law also gives the FERC new "backstop authority" responsibility to site power-transmission facilities in "national interest electric transmission corridors." The commission must adopt rules regarding permit applications for transmission facilities and long-term transmission rights, and providing incentive-based rates to promote transmission investment. The energy bill also repeals the 1935 Public Utility Holding Company Act (PUHCA), creating new mandates for the FERC to issue rules addressing access to utility holding company books and records.

"We are optimistic that PUHCA repeal will bring sorely needed new avenues of capital investment into the U.S. electricity sector, particularly for the transmission grid where investment has been lagging growth for years," Kelliher said, noting that PUHCA had served to blunt electricity market entry by certain well-capitalized companies and industry sectors. "While time will tell whether or not PUHCA repeal results in a significant uptick in mergers and acquisitions, I am nonetheless gratified that Congress saw fit to reinforce FERC's merger-review authority, particularly with regard to generation-only transactions. This added merger-review authority will strengthen the Commission's ability to prevent the exercise of market power," he observed.

Kelliher also applauded Congress for granting FERC additional tools to prevent market manipulation. "Congress acted to prevent market manipulation by establishing an express prohibition of market manipulation and giving the Commission the ability to act swiftly to bar and sanction manipulative practices," he said. "We felt these new tools were necessary to enable us to respond to the changes that have occurred in electricity and gas markets since the 1930s. Congress apparently agreed."

The energy bill includes provisions addressing price transparency in electric and natural gas-markets, and significantly revises FERC’s enforcement and civil penalties authorities. "Putting FERC’s civil-penalty muscle on par with those of other federal agencies should be a significant deterrent to any repeat of the sort of unscrupulous behavior that occurred during the Western energy crisis in 2000 and 2001," Kelleher observed.

Kelliher noted that FERC is actively working with other federal agencies, such as the U.S. Department of Energy, in the implementation of the new law, which includes inter-agency studies and reports mandated by Congress. A fact sheet summarizing the FERC's obligations under the new law is available at www.ferc.gov.

(Source: FERC news release, 8/8/05)