Examining EPAct 2005: A Prospective Lookat the Changing Regulatory Approachof the FERC

I. Introduction"This is an issue about the future. It is an issue that affects our children . . . it is an issue about the economy [and] security."1 High gasoline prices, high heating bills, and questions about foreign oil dependence have pushed the energy industry to the forefront of the political scene.2 On August 8, 2005 Congress passed the Energy Policy Act of 2005 (EPAct 2005)3 to address these concerns and plan for America's energy future. In the 1,700 pages of EPAct 2005, Congress drastically changed the electric utility regulatory regime, and this new regulatory regime will play a large role in the achievement of the goals of EPAct 2005.4The prior electric utility regulatory regime was established by the 1935 Public Utility Act (1935 Act).5 Through two titles the 1935 Act created parallel tracks of regulation.6 Title I, the Public Utility Holding Company Act (PUHCA), directed the securities and Exchange Commission (SEC) to simplify, restructure, and regulate electric utility holding companies.7 Title II amended the Federal Power Act (FPA) and gave the Federal Power Commission (now the Federal Energy Regulatory Commission-FERC) the power to oversee interstate wholesale sales of power.8 The SEC and the FERC have regulated on these parallel tracks for the past seventy years.9 EPAct 2005 repeals PUHCA, and creates a unified track of regulation, which will shape the future of the electric utility industry.10The FERC is now the sole electric utility regulatory commission, and its regulatory behavior has the potential either to hinder or advance the mission of EPAct 2005.11 Regulatory commissions develop unique regulatory personalities, and a commission's regulatory personality determines the characteristics of the resulting regulatory environment.12 The 1935 Act, combined with the history and tradition of the respective commissions, influenced the development of two distinct regulatory commissions.13 In administering the 1935 Act, the FERC and the SEC formed two distinct regulatory personalities and produced extremely different regulatory environments.14 The SEC, using a proactive and comprehensive approach to regulation, produced an efficient and stable regulatory environment.15 In contrast, the FERC became a reactive agency characterized by fragmented policies, producing an inefficient and unstable regulatory environment.16 EPAct 2005 anticipates great developments and growth in the energy industry. It will be difficult to achieve these goals without a stable, predictable, and efficient electric utility regulatory environment.17EPAct 2005 imposes significant changes in the electric utility regulatory regime, and these changes provide the FERC with the opportunity to reform its regulatory personality.18 If the FERC looks to the sec as a regulatory role model and adopts a proactive and comprehensive approach to regulation, a stable and efficient regulatory environment will likely result, making the goals of EPAct 2005 readily achievable.19 Recent FERC actions indicate that the FERC is embracing new patterns of regulation, but old habits die hard.20 Although recent actions indicate a change in the FERC's regulatory approach, the next few years will be crucial in determining whether the FERC is embracing its new mission or regressing to familiar patterns.21 It will be difficult to achieve the goals of EPAct 2005 unless the FERC adopts a new regulatory personality.This Note focuses on the interplay between the regulatory personality of a commission and the resulting regulatory environment, specifically the degree to which the FERC's regulatory personality will hinder or advance the goals of EPAct 2005. In Part II, this Note describes the historical background and founding principles of the electric utility regulatory commissions and discusses formation of the sec and the FERC's foundational principles. Part III illustrates how the regulatory personalities of the SEC and the FERC have shaped electricity regulation and discusses the connection between regulatory environments and the achievement of Congressional goals. …