What Should Corporations Know about Energy Regulatory Law? (Attorney'S Guide)

FERC regulates the interstate transmission of electricity and natural gas, wholesale electricity markets, and hydroelectric licensing under the Federal Power Act and the Natural Gas Act. If your project involves transmission lines that cross state boundaries, wholesale power sales, or natural gas pipelines serving multiple states, FERC approval is typically mandatory. FERC proceedings often span 12 to 36 months and require detailed environmental impact assessments, stakeholder testimony, and compliance with mandatory reliability standards set by the North American Electric Reliability Corporation (NERC). Failure to obtain FERC authorization before construction or operation can result in civil penalties exceeding millions of dollars and mandatory project shutdown.

State public utilities commissions exercise primary jurisdiction over retail rates, generation facility siting, and utility service territory. In New York, the Public Service Commission (PSC) grants certificates of public convenience and necessity for new generation facilities, approves utility rate structures, and enforces state environmental and reliability standards. The PSC process typically involves written testimony, evidentiary hearings, and a formal order that may include conditions or modifications to the proposed project. Corporations must file detailed applications demonstrating that a project serves the public interest and complies with state energy policy, including New York's Climate Leadership and Community Protection Act targets for renewable energy deployment.

When a regulator detects a violation, it typically begins with an audit, inspection, or complaint investigation, followed by a notice of violation or show-cause order. The corporation then has an opportunity to respond in writing and may request a hearing before an administrative law judge. In New York State administrative proceedings, the burden of proof falls on the agency to demonstrate the violation by substantial evidence, but corporations must provide contemporaneous records proving compliance. Delays in submitting verified affidavits or loss documentation during the investigative phase can limit what remedies or defenses an administrative tribunal can address at a later hearing, making early legal review of agency correspondence critical.

Federal agencies and state utilities commissions impose civil penalties ranging from thousands to tens of millions of dollars depending on violation severity, duration, and the corporation's compliance history. FERC penalties for tariff violations or market manipulation can reach $1 million per day per violation. State PSCs may impose penalties, order disgorgement of profits, or suspend operating certificates. Criminal penalties under the Federal Power Act and state energy statutes can include felony charges, fines, and imprisonment for individual executives involved in knowing violations.

Corporations should conduct a regulatory jurisdiction audit before project launch, identifying all applicable federal, state, and local authorities and their filing, approval, and reporting requirements. Establish an internal compliance team with responsibility for tracking regulatory deadlines, maintaining required documentation, and coordinating with external counsel on filings. For energy regulatory matters, working with counsel experienced in both FERC and state PSC proceedings ensures applications are complete, timely, and framed to align with each regulator's statutory mandate and policy priorities. Corporations should also document all operational parameters approved by regulators and establish audit trails proving ongoing compliance with those conditions.

Engaging counsel during the project planning phase, before major capital commitments, allows corporations to identify regulatory pathways, estimate approval timelines, and assess whether project design modifications can accelerate licensing. Counsel can also review draft applications for technical accuracy and completeness, reducing the likelihood of deficiency notices that delay approval. For complex projects involving energy regulatory enforcement risk or prior regulatory disputes, early counsel engagement also allows corporations to address historical compliance issues transparently and develop remediation protocols that demonstrate commitment to ongoing compliance.