The new chairman discusses the meaning of the Energy Policy Act of 2005.
Lori Burkhart is Fortnightly’s legal editor.
The wide-ranging Energy Policy Act of 2005, signed into law by President Bush Aug. 8, already is affecting the energy industry—and guaranteeing that the Federal Energy Regulatory Commission (FERC) will be a very busy agency.
After years of speculation, the bill finally repeals the Public Utility Holding Company Act of 1935 (PUHCA), likely leading to an expected uptick in utility mergers. So the law sensibly expands the authority of FERC over a number of holding company activities.
FERC approval now is required for an electric utility holding company to acquire securities or to merge with another utility. FERC further is given authority under the new law to review costs charged to utilities under inter-affiliate transactions, and FERC and state regulators will examine the books and records of companies in any electric or gas utility holding company system.
Other big changes for FERC: the commission must adopt incentives for investment by transmission companies, using performance-based rates, assured cost recovery, and rates of return sufficient to attract new capital. Also, FERC will appoint and oversee an electric reliability organization to set and enforce mandatory reliability requirements.