George Godding Director DMC Office of Market Oversight and Investigations Federal Energy Regulatory Commission USEA/USAID Energy Partnership Program Brasilia, Brazil August 9, 2005 FERC Overview (And Being a Regulator)

2 What is FERC? FERC Is An Independent Government Regulatory Agency in the Executive Branch of the U.S. Government Created by Department of Energy Organization Act (1977) Predecessor: Federal Power Commission (1920)

3 U.S. Constitution Executive Branch President (enforces the law) Judicial Branch Federal Courts (interprets the law) Legislative Branch Congress (makes the law) DOE Other Cabinet Departments Such as State, Treasury, Defense, Interior, Commerce, Education, Transportation, etc/. FERC NOTE: DOE DOES NOT REVIEW OR APPROVE FERC ORDERS

4 How is FERC Organized? There are 5 Commissioners –Nominated by the President, confirmed by the Senate, President designates Chairman –Each commissioner has a 5-year fixed term, with one term expiring each year The Chairman sets the Commission agenda –Orders voted out by majority rule

5 The Commissioners Joseph Kelliher, Chairman: Republican (6/30/2007) Nora M. Brownell: Republican (6/30/2006) Vacant Republican Suedeen G. Kelly Democrat (6/30/2009) Vacant Democrat

6 Budget of $210,000,000 (FY2005) –Approved by the President and Congress –Funds collected primarily through annual charges and filing fees –Budget is publicly available Staff of about 1280 (Rate and Tariff Analysts, Engineers, Accountants, Attorneys, Economists, Environmental Protection Specialists), –Energy Infrastructure: 769 –Competitive Markets: 291 –Market Oversight: 220 FERC’s Staff and Budget

7 Program Offices Office of Markets, Tariffs, and Rates - Natural Gas, Electric, and Oil Rate and Terms/Conditions of Service Office of Energy Projects - Natural Gas Pipeline Construction and Abandonment; Hydroelectric Projects (licensing, safety inspections, compliance); Environmental Reviews for Natural Gas and Hydro Projects Office of Market Oversight and Investigation - Market Monitoring and Enforcement Office of Administrative Litigation/Office of Administrative Law Judges - Trial Staff/Administrative Law Judges Office of General Counsel

8

9 What Does FERC Regulate? Electric Power Industry –Interstate transmission rates and services –Wholesale energy rates and services –Corporate transactions, mergers, securities issued by public utilities Natural Gas Industry –Interstate transportation rates and services –Interstate gas pipeline construction and oversee related environmental matters

10 What Does FERC Regulate? (con’t) Oil Pipeline Industry –Interstate transportation rates and services of crude oil and petroleum products Hydroelectric Industry –Licensing of nonfederal hydroelectric projects –Oversee related environmental matters –Inspect nonfederal hydropower projects for safety issues

11 What FERC Does Not Regulate Plan or finance investments Set electric reliability standards (North American Electric Reliability Council) * Note: proposed energy legislation would make standards mandatory and under FERC regulation. Regulate pollution produced by electric generators (Environmental Protection Agency) Regulate safety standards of nuclear generation (Nuclear Regulatory Commission) Regulate pipeline safety (Department of Transportation)

12 Federal versus State Regulation (electricity) FEDERAL - FERC –Wholesale (sales for resale) transactions –Rates, terms and conditions of interstate transmission service –No current authority to order the construction of new generation or transmission facilities STATE - Public Utilities Commissions –Retail (sales to end-user) transactions –Rates, terms and conditions of local distribution and retail transmission services –Certificates for construction of new electric generation and transmission facilities

13 Reference Points and Statistics

14 Coal 51% Nuclear 20% Gas 17% Other 6% Hydro 7% Generation: Capacity – 948,446 MW Total Net Generation – 3,883 billion KWh Coal – 1980 billion KWh Natural Gas – 660 billion KWh Nuclear – 777 billion KWh Petroleum – 116 billion KWh Hydroelectric – 272 billion KWh Other renewable – 116 billion KWh Overview of U.S. Electricity and Natural Gas (2003) Natural Gas Pipelines: 306,000 miles of pipe 22,375 billion cubic feet consumed Transmission: High-Voltage Circuit Miles – 160,704 (230-kV and above)

15

16 Existing Gas Pipelines

17 Switch Gears for a Few Minutes Even though we are in large, often slow moving bureaucracies we need to be strategizing and thinking ahead.

California Crisis & ENRON Manipulation Office of Market Oversight and Investigations INITIATIVE – FERC Market Monitoring EVENTS RESULT

19 Division of Reliability INITIATIVE – Reliability RESULT 2003 Blackout EVENT RESULT

20 Final Thought – “One who does not look ahead, remains behind” Brazilian Proverb

21 Questions?