USA Law and Practice Contributed by: David P. Flynn, Lindsey E. Haubenreich, Thomas F. Puchner, Dennis W. Elsenbeck and Zachary R. Hirschfeld, Phillips Lytle LLP
which included, among other things, passage of the Federal Power Act of 1935 (FPA), the Rural Electrifi- cation Act of 1936 (REA), and the creation of certain federally authorised public utilities. The FPA estab- lished jurisdictional boundaries between the federal government, which regulates wholesale sales and interstate transmission, and the states, which exer- cise authority through state utility commissions that oversee retail sales and distribution infrastructure. To promote electrification of underserved rural areas, the REA provided funding to a new class of utility – pub- licly owned co-operatives. Regulations The Public Utilities Regulatory Power Act of 1978 (PURPA), created in response to the 1970s’ energy crisis, encouraged conservation and created a market for non-utility power producers by requiring utilities, in certain circumstances, to purchase power generated by qualifying facilities (QFs). PURPA was implement- ed by each state, resulting in a range of regulatory regimes across the country. PURPA paved the way for a series of Federal Energy Regulatory Commission (FERC) orders that promoted open access to trans- mission facilities. Beginning in the 1990s, a number of states further deregulated the vertically integrated util- ity sector such that over 16 states and the District of Columbia now have some level of active retail choice programmes. The Energy Policy Act of 2005 (the “EPAct”) repre- sents one of the most significant pieces of federal legislation in the energy sector since the New Deal. It grants FERC enhanced authority to: • prevent market manipulation and abuse; • assess extraordinary civil penalties; • approve siting of major transmission projects; and • implement reliability standards. A number of initiatives are under way at both the fed- eral and state levels to facilitate the development of alternative power generation as well as to deal with the demands brought on by increasing electrification of economies in response to climate change. At present, at the federal level, aggressive steps are under way (and subject to ongoing legal challenges) to greatly reduce the scope of federal involvement in these ini-
tiatives; this increases the role and importance of a number of states in this regard. Federal-State Collaboration As energy regulation spans both federal and state governments and there has been some blurring of the bright line jurisdictional boundaries, some issues become cross-jurisdictional. While some issues end up in litigation to determine the borders of federal and state power, FERC and the National Association of Regulatory Utility Commissioners (NARUC) have com- mitted to collaborate on cross-jurisdictional issues relevant to both FERC and state utility commissions. Known as the Federal-State Current Issues Collabora- tive, meetings focus on issues such as regional and interregional transmission, reliability planning, and co- ordination between the gas and electric sectors. 1.2 Principal State-Owned or Investor-Owned Entities The US electricity industry is comprised of over 3,000 electricity providers, which include over 2,000 publicly owned utilities, over 800 co-operatives, nearly 200 IOUs and over 200 power marketers. The largest vertically integrated public utility holding companies include Duke, Southern Company, Nex- tEra, Entergy, Dominion and Xcel. The largest restructured public utility holding com- panies include PG&E, Exelon, Edison International, Consolidated Edison, First Energy, National Grid and Northeast Utilities. The largest retailers include AEP, NRG, Constellation, EFH, Exelon and ConEd. The largest public power systems, based on net gen- eration, are the New York Power Authority, the Salt River Project and CPS Energy. 1.3 Foreign Investment Review Process While US utilities or utility holding companies may have foreign ownership, and the USA generally main- tains – in principle – an “open investment” policy, that policy has been tempered by growing concerns about national security. The 1988 Exon-Florio Amendment to the Defense Protection Act of 1950 authorises the
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