OVERSIGHT AND INVESTIGATION
What is FERC's responsibilities
in monitoring the energy markets?
The Commission oversees energy
markets to ensure that all companies and market participants follow
its rules and regulations. FERC:
- Promotes the understanding of energy market operations;
- Ensures that the market supports competition; and
- Maintains a just and reasonable marketplace by enforcing the rules.
What is an energy market?
An energy market is the exchange of electricity and natural gas between buyers and sellers. The energy markets that the Commission oversees are wholesale markets- sales are between different energy companies or between companies and marketers. Generators sell large amounts of electricity (bulk power), while buyers are typically are electric utilities who resell power to residential and business consumers.
Marketers
Energy markets have other
participants known as marketers. Marketers act as middlemen by
purchasing electricity and natural gas from those who have it
and selling it to those who need it. FERC oversees these complex
transactions to make sure that all market participants play by
the rules.
The Evolution of energy market regulation
The natural gas and electric
utilities were natural
monopolies. As a result, natural gas and electric utilities
received exclusive franchises over assigned areas. Parts of their
activities were regulated by the federal government and other
parts, particularly retail prices, were regulated at the state
level.
In the late 1970s, industries
started to rely on the pressure of market competition for regulation
rather than government action. Thus, many companies could compete
to produce and sell natural gas and electric power. This left
only transmission and distribution lines to regulation.
The Commission began to further lighten regulation of the energy industry in the 1990s through a series of orders:
- Order 636: created open access for shipping on natural gas
pipelines;
- Order 888: created open access to electric transmission lines;
and
- Order 2000: established rules for and encouraged the
development of Regional Transmission Operators (RTOs).
Energy markets are dynamic,
unpredictable, and sometimes counterproductive. As a result, using
market oversight for early detection and correction of market
problems is a new and vital part of the Commission's overall regulatory
strategy.
What is the Office of Enforcement's role in oversight and investigations?
The Office
of Enforcement serves the public interest by guiding the evolution
and operation of energy markets to ensure effective regulation
and protecting customers through understanding markets and their
regulation, timely identifying and remedying market problems,
assuring compliance with Commission rules and regulations, and
detecting and crafting penalties to address market manipulation.
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