The Federal Power Act (FPA): Overview, definition, and example
What is the Federal Power Act (FPA)?
The Federal Power Act (FPA) is a U.S. law that gives the Federal Energy Regulatory Commission (FERC) the authority to regulate the interstate transmission and wholesale sale of electricity, natural gas, and hydropower. In contracts—especially in the energy, utility, or infrastructure sectors—references to the FPA confirm that the parties understand and agree to comply with the law’s requirements.
Why is the Federal Power Act (FPA) important?
The FPA plays a central role in ensuring fair pricing, reliability, and oversight in energy markets. Contracts that involve energy sales, transmission, or infrastructure development often include an FPA clause to reflect regulatory compliance and risk management. It also helps define what actions require FERC approval and protects parties from entering into unauthorized or unenforceable arrangements.
Understanding the Federal Power Act (FPA) through an example
A wind energy developer enters into a power purchase agreement (PPA) with a utility company to sell electricity across state lines. The contract includes an FPA clause requiring the parties to comply with all FERC rules. Later, if the sale structure changes or a FERC approval is delayed, the clause helps clarify that both parties are still bound to follow FPA procedures before implementing the changes—avoiding legal or regulatory penalties.
Example of a Federal Power Act (FPA) clause
Here’s how a Federal Power Act clause may look like in a contract:
"This agreement is subject to the Federal Power Act and all applicable regulations, orders, and requirements of the Federal Energy Regulatory Commission (FERC). The parties agree to take all necessary actions to comply with the FPA and to obtain any required FERC approvals in connection with the transactions contemplated herein."
Conclusion
An FPA clause reinforces regulatory compliance in contracts tied to energy production, sales, or transmission. For any business operating in the U.S. energy sector, this clause ensures that the agreement aligns with federal law and acknowledges FERC’s oversight authority. If your deal involves power or utilities, this clause is a legal and operational must.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.