ERAC Regulatory Compliance & Legal Framework 5 — Questions and Answers
Question 1: Under FERC's market-based rate (MBR) authority, a seller must rebut the presumption of market power in the relevant market. Which two geographic markets must sellers typically analyze?
- National and international markets
- Generation capacity market and ancillary services market
- Wholesale generation and transmission markets (Correct answer)
- Retail distribution and wholesale markets
Correct answer: Wholesale generation and transmission markets
FERC's MBR analysis requires sellers to demonstrate lack of horizontal market power in the generation capacity market and lack of transmission market power in the relevant geographic market.
Question 2: The Securities Act of 1933 requires energy companies issuing public securities to file a registration statement. Which exemption is most commonly used by energy companies for private placements?
- Rule 144A / Regulation D (Correct answer)
- Regulation S-K
- Rule 10b-5
- Regulation FD
Correct answer: Rule 144A / Regulation D
Energy companies frequently use Rule 144A for resales to qualified institutional buyers and Regulation D for private placements exempt from full SEC registration requirements.
Question 3: Which FERC regulation requires electric utilities to provide open-access transmission service on a non-discriminatory basis, forming the foundation of competitive wholesale electricity markets?
- Order 636
- Order 888 (Correct answer)
- Order 1000
- Order 2000
Correct answer: Order 888
FERC Order 888 (1996) required utilities to file open access transmission tariffs (OATTs) providing non-discriminatory access to their transmission systems.
Question 4: Under the Federal Power Act, which section grants FERC authority to review and set 'just and reasonable' rates for wholesale electricity sales in interstate commerce?
- Section 201
- Section 203
- Section 205 and 206 (Correct answer)
- Section 211
Correct answer: Section 205 and 206
FPA Sections 205 and 206 grant FERC jurisdiction to review and establish just and reasonable rates for wholesale electricity sales and transmission in interstate commerce.
Question 5: A coal-fired power plant operator is assessing compliance risk under EPA's Mercury and Air Toxics Standards (MATS). MATS establishes emission limits for hazardous air pollutants from which source category?
- Mobile sources including diesel locomotives
- Electric utility steam generating units (Correct answer)
- Oil and natural gas production facilities
- Industrial boilers serving manufacturing facilities
Correct answer: Electric utility steam generating units
MATS (40 CFR Part 63, Subpart UUUUU) sets emission standards for mercury and other hazardous air pollutants from coal- and oil-fired electric utility steam generating units.
Question 6: Under CFTC regulations, a company that regularly makes markets in swaps and whose swap dealing exceeds the de minimis threshold must register as what?
- Major Swap Participant (MSP)
- Swap Dealer (SD) (Correct answer)
- Commodity Pool Operator (CPO)
- Introducing Broker (IB)
Correct answer: Swap Dealer (SD)
Entities that deal in swaps above the de minimis threshold (currently $8 billion in aggregate gross notional amount) must register as Swap Dealers with the CFTC.
Question 7: Which provision of the National Environmental Policy Act (NEPA) requires federal agencies to assess the environmental impact of major federal actions, including energy project approvals?
- Section 4(f)
- Section 7 consultation
- Section 102(2)(C) — Environmental Impact Statement requirement (Correct answer)
- Section 303 Water Quality Standards
Correct answer: Section 102(2)(C) — Environmental Impact Statement requirement
NEPA Section 102(2)(C) requires federal agencies to prepare an Environmental Impact Statement (EIS) for major federal actions significantly affecting the quality of the human environment.
ERAC Regulatory Compliance & Legal Framework 5
Under FERC's market-based rate (MBR) authority, a seller must rebut the presumption of market power in the relevant market.
Which two geographic markets must sellers typically analyze?