Wholesale Electricity Markets

Background

The Federal Power Act (FPA) governs the actions of public utilities that engage in interstate commerce. The Federal Energy Regulatory Commission (FERC) has the authority to regulate rates for the interstate sale and transmission of electricity. When the FPA ensures that wholesale purveyors of electric power charge fair rates to retailers, it thereby protects consumers from excessive rates. FERC’s mandate is to ensure that wholesale contracts are “just and reasonable” and also to monitor and investigate wholesale energy markets.

By enacting the “just and reasonable” provisions of the FPA, Congress intended to protect consumers from exploitation and abuse. Therefore, FERC must determine whether challenged rates affect the public interest. To do so, FERC must assess whether consumers’ electric bills are higher than they would have been if their utilities’ wholesale contracts had included just and reasonable costs.

Wholesale Electricity Markets: Policy

Ensuring affordable electricity

In this policy: FederalState

The Federal Energy Regulatory Commission (FERC) should order cost-based price regulation and take other appropriate regulatory actions in any wholesale market in which rates are not demonstrably and reliably “just and reasonable.”

FERC should closely monitor the wholesale electricity market to identify prices that reflect the exercise of market power and to order refunds to ratepayers for any overpayments.

Regulators should adopt safeguards that ensure just, reasonable, and affordable rates and high-quality service for residential customers.

Policymakers should consider expanding public power when doing so would create significant and measurable benefits for residential customers.

Policymakers should ensure adequate reserve capacity to maintain reliability and price stability.