Energy and Utilities Energy Regulations and Policy 1 — Questions and Answers
Question 1: Which landmark US law restructured wholesale electricity markets and mandated open-access transmission?
- Clean Air Act
- Energy Policy Act of 1992 (Correct answer)
- Public Utility Regulatory Policies Act (PURPA)
- Federal Power Act
Correct answer: Energy Policy Act of 1992
The Energy Policy Act of 1992 promoted competition in wholesale power markets and required open-access transmission, paving the way for deregulation.
Question 2: What does PURPA (Public Utility Regulatory Policies Act of 1978) primarily require utilities to do?
- Install smart meters in all homes
- Purchase power from qualifying small power producers and cogenerators at avoided cost (Correct answer)
- Divest generation from transmission assets
- Submit annual reliability reports to FERC
Correct answer: Purchase power from qualifying small power producers and cogenerators at avoided cost
PURPA requires utilities to buy power from qualifying facilities (QFs) at the utility's avoided cost, fostering independent power producers.
Question 3: What is 'rate base' in utility regulation?
- The minimum rate a utility can charge
- The value of utility assets on which regulators allow the utility to earn a return (Correct answer)
- The base load generation capacity
- The regulatory filing fee
Correct answer: The value of utility assets on which regulators allow the utility to earn a return
Rate base is the value of a utility's invested capital — plant, equipment, and working capital — on which regulators permit it to earn an approved rate of return.
Question 4: What is a 'certificate of public convenience and necessity' (CPCN) in the utility industry?
- A worker safety certification
- A regulatory approval required before constructing major utility infrastructure (Correct answer)
- A customer service quality standard
- An environmental permit from the EPA
Correct answer: A regulatory approval required before constructing major utility infrastructure
A CPCN is a state or federal regulatory authorization required before a utility may construct major new facilities like pipelines or power lines.
Question 5: What does 'decoupling' mean in utility regulation?
- Separating generation from transmission ownership
- Breaking the link between utility revenue and the volume of energy sold (Correct answer)
- Removing smart meters from rate base
- Disconnecting customers who don't pay bills
Correct answer: Breaking the link between utility revenue and the volume of energy sold
Decoupling removes the disincentive for utilities to promote energy efficiency by separating their revenue recovery from the amount of energy sold.
Question 6: Which US government agency publishes the Annual Energy Outlook and Short-Term Energy Outlook?
- FERC
- EPA
- EIA (Correct answer)
- DOE Office of Science
Correct answer: EIA
The Energy Information Administration (EIA) is the federal statistical agency responsible for collecting, analyzing, and disseminating energy information.
Energy and Utilities Energy Regulations and Policy 1
Which landmark US law restructured wholesale electricity markets and mandated open-access transmission?