By Christopher J. Bateman and James T.B. Tripp

America’s electricity industry is at the heart of some of the nation’s and world’s biggest environmental challenges, including climate change. Yet the Federal Energy Regulatory Commission (“FERC”), which has regulatory jurisdiction over wholesale sales and transmission of electricity in interstate commerce and is charged with ensuring that rates and other aspects of the industry are “just and reasonable,” has an official policy of excluding environmental considerations from its regulation of the industry. This Article traces the evolution of this policy and argues that it is time for a new and better approach—one that integrates economic and environmental regulation of the industry, helps the United States achieve a clean energy future, and reduces excessive environmental impacts.

This Article explores the possibility of such an approach under the Federal Power Act (“FPA”), which provides FERC’s mandate. In doing so, it addresses FERC’s reasoning for its current policy and finds these reasons unpersuasive as a matter of law and policy. Contrary to FERC’s position, it is plausible to view the FPA alongside other federal laws as being silent or ambiguous about FERC’s environmental authority, thus permitting an environmentally inclusive approach within reasonable constraints. This reading of the FPA is reinforced by a host of policy considerations: the urgent need to address the U.S. electricity industry’s significant contribution to climate change; the inadequacy of and continuing uncertainty surrounding existing regulatory efforts on this front; FERC’s expertise in aspects of the electricity industry important to effective design and implementation of regulatory solutions; the unique nature of greenhouse gas emissions as pollutants and the feasibility of FERC regulation of carbon emissions in particular; and the glaring problems with our schizophrenic approach to energy regulation, in which environmental regulation and traditional utility regulation often undermine each other, creating inefficiencies.

This Article offers a number of concrete examples of the types of progressive industry reforms that would be possible if FERC adopted an environmentally inclusive approach, while also acknowledging and exploring the limits and challenges of this approach. On balance, the rewards seem to far outweigh the risks. Incorporating environmental considerations would allow FERC to make better informed decisions about how to maximize social welfare in areas such as transmission planning and organized electricity markets, and could create possibilities for productive collaborations with other regulatory authorities, including the Environmental Protection Agency, to guide the nation toward smarter energy policy.

Cite as: Christopher J. Bateman and James T.B. Tripp, Toward Greener FERC Regulation of the Power Industry, 38 Harv. Envtl. L. Rev. 275 (2014)

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