CEP Energy Market Fundamentals 3

Question 1

Which body has primary federal jurisdiction over wholesale electricity markets in the United States?

Accepted Answer

The Federal Energy Regulatory Commission (FERC)

Answer

FERC regulates wholesale electricity rates, transmission access, and natural gas pipelines under the Federal Power Act and Natural Gas Act.

Question 2

What is a 'capacity market' designed to do in restructured electricity markets?

Accepted Answer

Ensure sufficient generation resources exist to meet future peak demand

Answer

Capacity markets compensate generators for being available during peak periods, ensuring resource adequacy even when energy market prices alone don't incentivize enough investment.

Question 3

A natural gas 'citygate' price represents:

Accepted Answer

The price at which gas is delivered from a pipeline to a local distribution company

Answer

The citygate is the transfer point between interstate pipelines and local distribution companies, and its price includes transport costs from production areas.

Question 4

What risk does a fixed-price energy contract primarily eliminate for the buyer?

Accepted Answer

Price volatility over the contract term

Answer

Fixed-price contracts lock in a known cost, removing exposure to market price fluctuations for the duration of the agreement.

Question 5

In natural gas markets, 'peaking storage' facilities are characterized by:

Accepted Answer

Smaller capacity but very high deliverability for short-duration peak events

Answer

Peaking storage (typically LNG or salt cavern facilities) trades volume capacity for high withdrawal rates needed to meet sudden demand spikes.

(CEP) Certified Energy Procurement Professional Practice Test

(CEP) Certified Energy Procurement Professional Practice Test

CEP Energy Market Fundamentals 3