9. ELECTRICITY

Regulating rates and services for the interstate transmission and sales of wholesale electricity.

Reviewing and approving interstate transmission reliability standards developed by NERC (described below).

Monitoring wholesale electricity markets to ensure competitiveness, fairness and efficiency, as well as to detect market manipulation or violation of rules.

Reviewing corporate transactions of public utilities (such as mergers and acquisitions and issuance of securities).

Licensing of hydropower projects.

NERC

NERC is a non-profit organisation, originally formed by the electric utility industry, which ensures the reliability of the North American bulk power system. In 2006, FERC designated NERC as the government’s electrical reliability organisation for the United States. As such, NERC has the authority to develop and enforce reliability standards and assess the reliability (both seasonal and long-term) of the physical grid, which it does on an annual basis. There are six regional reliability entities spanning the United States, Canada and Baja California in Mexico that fall under NERC’s jurisdiction to ensure reliability. Failure to comply with NERC reliability standards can carry hefty penalties.

State regulators

There are a number of regulatory areas that lay outside the purview of FERC, which fall to state regulatory commissions, most commonly referred to as state public service commissions or state public utility commissions. State commissions regulate the electricity distribution system, including retail rates and reliability of supply to end users of electricity within their respective jurisdictions. Ultimately, they are responsible for ensuring reliable retail supply of electricity to consumers at fair prices. State public utility commissions also oversee the siting and construction of generation assets (with the exceptions of licensing for hydropower and nuclear power facilities) as well as transmission and distribution infrastructure. If a given project crosses more than one state, then its developers must seek regulatory approval from each relevant state’s public utility commission or other state authority. Most commonly, state public utility commissions regulate investor-owned utilities rather than federal power agencies, rural electric co-operatives or municipal utilities (see below for more details on types of utilities).

The physical grid

The US electricity grid is divided into three main interconnection areas, which overlap with portions of Canada and Mexico: the Western Interconnection (comprising the western third of the United States, the provinces of Alberta and British Columbia in Canada, and parts of Baja California in Mexico); the Eastern Interconnection (comprising the eastern two-thirds of the United States and Central Canada eastward, except for Quebec); and the Electric Reliability Council of Texas (comprising most of the state of Texas). Hawaii and Alaska, as non-contiguous states, are not connected to the rest of

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ENERGY SECURITY

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