Regulatory Framework, Tariffs, and Compliance
This domain tests the jurisdictional architecture of utility regulation and the procedural rules that make a rate or service term lawful: who regulates what, how tariffs are filed and changed, and how reliability and market-conduct obligations are enforced.
Jurisdiction
- FERC regulates wholesale sales, interstate transmission, interconnection agreements, and mergers under Sections 203, 204, 205, and 206 of the Federal Power Act.
- State commissions regulate retail rates, service quality, integrated resource plans, and often siting; municipalities and cooperatives have their own governance.
- NERC develops and enforces mandatory reliability standards under FERC oversight, including the CIP cyber standards, with penalties that can reach one million dollars per violation per day.
- PURPA requires utilities to purchase from qualifying facilities at avoided cost; the 80 MW small-power-production size limit and the CFR 292 rules remain testable.
Tariffs
- A filed tariff is the contract and the law; a utility may not serve a customer at a rate or term that departs from it without a filing, and a customer cannot bargain around it.
- Section 205: a change requires a filing with at least 60 days notice; FERC may suspend for up to five months and set the matter for hearing, with refunds if the increase is not justified.
- Section 206: a complaint or Commission-initiated review of an existing rate that is unjust, unreasonable, or unduly discriminatory.
- Standards of conduct and affiliate rules restrict information sharing between transmission and merchant functions; ex parte rules restrict private communications in contested proceedings.
Worked example
A transmission owner wants to raise its formula rate by 6%. It must file under Section 205 with no less than 60 days notice. FERC may accept the rate subject to refund, suspend it for up to five months, and set a hearing. If the increase is ultimately disallowed, refunds run from the date the suspended rate would otherwise have taken effect. Billing the new rate immediately and litigating later is not an option open to the utility.
Traps that cost marks
- Asserting state commission authority over a wholesale sale.
- Assuming a bilateral contract with one customer can override a filed tariff.
- Confusing Section 205 (change) with Section 206 (complaint against an existing rate).
- Ignoring notice periods and refund exposure when advising on a rate change.
- Treating NERC standards as voluntary guidance.