​Investor-owned electric power companies are highly regulated at the federal and state levels. At the federal level, EEI works to ensure favorable regulatory outcomes at the Federal Energy Regulatory Commission (FERC), the Department of Energy (DOE), and other federal agencies.

FERC is the federal agency that regulates electricity transmission and wholesale electricity sales in interstate commerce. FERC has authority to regulate the prices, terms, and conditions of wholesale power sales and transmission services. FERC also implements the laws of Congress through orders and rulemakings on electricity policy.

 

FERC has oversight authority for the Electric Reliability Organization (ERO), an independent, self-regulating entity that enforces mandatory electric reliability rules on all users, owners, and operators of the nation’s transmission system. These reliability rules require otherwise unregulated utilities, such as electric cooperatives and government-owned utilities, to comply with mandatory standards.

 

In July 2006, FERC certified the North American Electric Reliability Corporation (NERC) as the ERO. In March 2007, FERC approved 83 NERC Reliability Standards, which became the first set of legally enforceable standards for the U.S. bulk power system, effective June 4, 2007.

 

FERC also has limited backstop authority to site electric transmission facilities located in “national interest electric transmission corridors” if states cannot or will not act. DOE must identify such corridors, which may include any geographic area experiencing electric transmission capacity constraints or congestion.

 

One of FERC’s key priorities is to help assure that energy markets operate fairly. FERC has authority to investigate and prosecute allegations of manipulation in the energy markets. FERC also responds to complaints and reports of market activities or transactions that may be considered market manipulation, an abuse of an affiliate relationship, a tariff violation, or other possible violations or concerns. FERC’s anti-manipulation rule allows the agency to asses civil penalties (fines) on companies or individuals found in violation of the rule.

 

EEI actively participates in numerous FERC proceedings and files comments on behalf of our investor-owned electric company members.

Electric companies also are regulated by the Federal Communications Commission. Electric companies are required to allow telecommunications companies to use electric poles for wires and other facilities supporting wireless, fiber, broadband, and other communications systems. The structural integrity, safety, security, and reliability of utility poles are fundamental components of the nation’s critical energy infrastructure—and the cost to companies for maintaining these poles is considerable. 

​The investor-owned segment of the electric power industry also must comply with the many federal regulations that apply to all U.S. businesses. These regulations include financial and accounting requirements from the Securities and Exchange Commission and Commodity Futures Trading Commission; and anti-trust regulations from the Department of Justice and Federal Trade Commission.  

 

Over-the-counter (OTC) derivatives are financial products that electric utilities and a variety of other U.S. businesses use to manage financial risks associated with energy production and fuel costs. Utilities engage in OTC transactions with other utilities and in transactions within the financial markets in order to lock in a guaranteed price for commodities such as electricity, natural gas, and coal for future delivery.

Trading derivatives “over-the-counter”—directly between two parties instead of through centralized clearinghouses or exchanges—enables utilities to manage risk and minimize price volatility in a cost-effective manner.

After Congress passed the Dodd-Frank financial reform law in July 2010, the Commodity Futures Trading Commission (CFTC) proposed to address the oversight and transparency of OTC energy markets and to prevent excessive speculation. Some proposals would have eliminated the ability of electric companies to use OTC derivatives. This would increase the cost of hedging and reduce the capital available for capital investments and job creation by electric companies.

In 2012, the CFTC issued two final rules that preserve the ability of companies to access critical OTC energy derivatives products and OTC energy commodities markets. Access to these markets is key to protecting energy customers from wholesale commodity price volatility. And it provides the stability and certainty electric companies need to make critical capital investments that contribute to economic growth and job creation.