Law Academy Course 102

Electricity and Electric Rate Regulation

Course 102

The goal of Course 102 is to provide an overview of electric regulation at the federal and state levels. The course begins with a brief overview of how electricity is generated, transmitted, and delivered to customers, and covers key legal milestones in electric regulation since commercial electric service began in the 1870s. The course explains how state and federal jurisdiction over different segments of the industry emerged under the Federal Power Act of 1935 and later legislation, including the Public Utility Regulatory Policies Act of 1978 and the Energy Policy Acts of 1992 and 2005. We will review key regulatory concepts underlying all forms of regulation, from traditional cost-of-service regulation to the parameters for setting market-based rates. The course will also cover alternative regulatory regimes,  development of competitive wholesale and retail electric markets, enforcement of the prohibition against market manipulation, the role of Regional Transmission Organizations, and the reliability regime administered by the North American Electric Reliability Corporation.

Energy Law Academy Certificate of Achievement: Course 102 is a requirement to obtain the Energy Law Academy Certificate of Achievement.


Introduction to Electric Industry

Legal and Economic Overview

Extent and Limits of State and Federal Jurisdiction under State Law and the Federal Power Act

  • State Regulation and Limitations (Attleboro Gap)
  • Federal Regulation under the FPA
  • FERC Enforcement Authority

Key Regulatory Constructs

  • Just and reasonable rates
  • Prudent Investment
  • Used and Useful Investment
  • Known and Measurable Costs
  • Cross Causation and Subsidization

The Role of Non-Jurisdictional Entities in the Regulatory Scheme

Traditional Cost of Service Regulation

  • Cost of service regulation – what it means
  • The five-step process to determine regulated rates
  • The revenue requirement
  • Cost functionalization
  • Cost classification and the FERC Uniform System of Accounts
  • Cost allocation
  • Rate and tariff design

Alternative Regulatory Structures - Market-Based Rates v. Traditional Cost of Service Regulation

  • Legal and economic basis for market-based rates
  • Market Analysis
  • Scope of Traditional Regulation
  • Mixed regulation – when some components are competitive and others are not

FERC Oversight of Market Manipulation

Diverse Market Structures Across the Nation and Regulatory Implications

  • Evolution of Competitive Generation – From PURPA to RTOs
  • RTOs – Purpose/Authority and Regulation
  • Non-RTO Regions

Overview of Relevant Electric Markets

  • Energy (day-ahead, real time)
  • Capacity (in some RTOs)
  • Ancillary Services

Reliability Regulation Under Section 215 of the FPA

  • Federal Power Act Section 215 – Responsibilities of the Electric Reliability Organization (NERC) and FERC
  • Standards Development Process
  • Enforcement & Settlement Practice
  • Western Electricity Coordinating Council