Role of Government Institutions in National Energy Policy1

Abstract

As readers of this column are aware, the Federal Energy Regulatory Commission (FERC), is an independent agency organized within the US Department of Energy (DOE) and critically important in articulating and implementing federal energy policy. FERC provides the leadership necessary in establishing wholesale power market rules and supporting private sector investment in infrastructure development, and in market valuation and pricing of assets in energy markets. The impetus introducing competition in electricity markets began in 1978 with enactment of the Public Utility Regulatory Policies Act (PURPA). PURPA required that vertically integrated utilities—owning generation, transmission and distribution—purchase power from generators/producers that could produce electricity at a cost that was less than the utility's avoided cost (the cost at which the utility itself could have generated electricity). PURPA provided the opportunity for competition in generation where non‐utility independent power producers could build, operate, and compete with existing utility power generation.