Electricity Markets: A Comprehensive Guide for Law Students

Question 1

The primary purpose of the Public Utility Holding Company Act of 1935 was to:

Accepted Answer

Prevent holding companies from dominating multiple utilities

Answer

Regulate interstate transmission of electricity

Answer

Foster competition within electricity markets

Answer

Safeguard consumers from excessive electricity costs

Question 2

Which of the following entities serves as an example of a balancing authority in the electricity industry?

Accepted Answer

New York Independent System Operator (NYISO)

Answer

Pacific Gas and Electric Company (PG&E)

Answer

Duke Energy

Answer

Southern Company

Question 3

What is the primary purpose of a bilateral contract in an electricity market?

Accepted Answer

To establish a legally binding agreement for the purchase and sale of electricity

Answer

To facilitate electricity trading through a centralized exchange

Answer

To regulate the prices at which electricity is sold

Answer

To allocate transmission capacity

Question 4

Which of the following is a fundamental characteristic of a market-based pricing mechanism for electricity?

Accepted Answer

Prices that are driven by demand

Answer

Regulation based on cost of service

Answer

Fixed price contracts

Answer

Government subsidies

Question 5

What is the primary responsibility of a transmission system operator (TSO) within an electricity market?

Accepted Answer

Operating the transmission network and ensuring its reliability

Answer

Allocating transmission capacity to market participants

Answer

Establishing wholesale electricity prices

Answer

Resolving disputes between market participants

Question 6

What is the primary objective of the Renewable Portfolio Standard (RPS) in many states?

Accepted Answer

Promoting the development of renewable energy sources

Answer

Reducing greenhouse gas emissions

Answer

Stabilizing electricity prices

Answer

Increasing grid reliability

Question 7

According to the United States' jurisdictional framework, which agency has the primary responsibility for regulating the wholesale electricity market?

Accepted Answer

Federal Energy Regulatory Commission (FERC)

Answer

North American Electric Reliability Corporation (NERC)

Answer

Securities and Exchange Commission (SEC)

Answer

Environmental Protection Agency (EPA)

Question 8

What is the fundamental objective of a Capacity Market?

Accepted Answer

To ensure that there is sufficient electricity generation capacity to meet demand

Answer

To reduce the price of electricity

Answer

To promote the development of renewable energy sources

Answer

To allocate transmission rights

Question 9

According to the Federal Power Act, what is the core purpose of federal regulation in electricity markets?

Accepted Answer

To establish a legal framework for the interstate transmission of electricity

Answer

To protect consumers from unfair or deceptive practices

Answer

To promote the development of renewable energy sources

Answer

To ensure the reliability of the electric grid

Question 10

Which of the following is NOT a right or liability of electricity market participants?

Accepted Answer

To sue other market participants for breach of contract

Answer

To sell electricity at a fair market price

Answer

To purchase electricity at a fair market price

Answer

To participate in market auctions

Question 11

Which of the following is a defining characteristic of a deregulated electricity market?

Accepted Answer

Competition among electricity generators

Answer

Government-controlled electricity prices

Answer

Limited entry of new generators into the market

Answer

Absence of a central market operator

Question 12

The Federal Energy Regulatory Commission (FERC) exercise jurisdiction over which aspect of electricity markets?

Accepted Answer

Interstate transmission of electricity

Answer

Retail electricity rates

Answer

Siting of new power plants

Answer

Environmental regulation of power plants

Question 13

Which type of electricity market structure involves a central entity that coordinates the dispatch of electricity and establishes wholesale prices?

Accepted Answer

Pool market

Answer

Bilateral contracting

Answer

Hybrid market

Answer

Demand response market

Question 14

What is the primary purpose of a renewable portfolio standard (RPS)?

Accepted Answer

Promote investment in renewable energy

Answer

Reduce reliance on fossil fuels

Answer

Ensure grid reliability

Answer

Lower electricity prices

Question 15

What is the role of demand response programs in electricity markets?

Accepted Answer

Reducing peak electricity demand

Answer

Increasing electricity generation capacity

Answer

Improving grid reliability

Answer

Lowering electricity prices

Question 16

What was the main consequence of the Public Utility Holding Company Act of 1935?

Accepted Answer

Large electricity holding companies were broken up

Answer

FERC gained jurisdiction over interstate electricity transmission

Answer

Utilities were banned from engaging in non-utility businesses

Answer

The national electricity grid was created

Question 17

Examine the main goals and consequences of the Public Utility Holding Company Act of 1935 for the electricity industry.

Accepted Answer

Prevent excessive concentration of power, protect investors, and ensure efficient operation of public utility systems.

Answer

Promote competition and reduce market power in the electricity industry.

Answer

Facilitate the entry of new companies into the electricity market.

Answer

Increase the cost of electricity for consumers.

Question 18

Which of the following is a characteristic of the wholesale electricity market in the United States?

Accepted Answer

Contracts are typically standardized. (Correct)

Answer

Prices are set by regulatory agencies.

Answer

Electricity is sold in small quantities.

Answer

Generators and consumers trade electricity directly.

Question 19

Which government agency is primarily responsible for regulating electricity markets in the United States?

Accepted Answer

Federal Energy Regulatory Commission (FERC). (Correct)

Answer

Environmental Protection Agency (EPA).

Answer

Securities and Exchange Commission (SEC).

Answer

Department of Energy (DOE).

Question 20

What is a key principle of the Electricity Reliability Organization (ERO) model for managing the grid?

Accepted Answer

Decentralized decision-making by market participants. (Correct)

Answer

Government ownership and control of transmission facilities.

Answer

Mandatory participation in wholesale markets.

Answer

Centralized planning and operation of the grid.

Question 21

What is the primary purpose of a transmission congestion charge?

Accepted Answer

To compensate transmission owners for the cost of congestion. (Correct)

Answer

To incentivize generators to locate near demand centers.

Answer

To discourage generators from overloading the transmission system.

Answer

To generate revenue for the government.

Question 22

Which of the following is a legal liability of a wholesale electricity generator in the United States?

Accepted Answer

Failure to meet contract obligations. (Correct)

Answer

Environmental pollution.

Answer

Injury to employees.

Answer

Bankruptcy.

Question 23

How do multilateral contracts in electricity markets differ from bilateral contracts?

Accepted Answer

Multilateral contracts involve multiple parties, while bilateral contracts involve only two parties. (Correct)

Answer

Multilateral contracts are typically for a longer duration than bilateral contracts.

Answer

Multilateral contracts are legally enforceable, while bilateral contracts are not.

Answer

Bilateral contracts are used to trade electricity across regional boundaries.

Question 24

What is the main objective of the Public Utility Regulatory Policies Act (PURPA)?

Accepted Answer

To promote the development of renewable energy sources. (Correct)

Answer

To encourage competition in the electricity industry.

Answer

To protect consumers from high electricity prices.

Answer

To regulate the environmental impact of electricity production.

Question 25

Which of the following is a potential benefit of distributed energy resources in electricity markets?

Accepted Answer

All of the above. (Correct)

Answer

Increased grid resilience.

Answer

Reduced environmental impact.

Answer

Lower electricity costs.

Question 26

Which of the following is a significant challenge facing the electricity industry in the United States today?

Accepted Answer

Aging infrastructure. (Correct)

Answer

Declining demand for electricity.

Answer

Increasing costs of renewable energy.

Answer

Cybersecurity threats.

Question 27

In an electricity market characterized by centralized control and bidding, which entity typically manages the market?

Accepted Answer

Independent system operator (ISO)

Answer

Independent power producer (IPP)

Answer

Public utility commission (PUC)

Answer

Regional transmission organization (RTO)

Question 28

Under the Federal Power Act, which entity has primary jurisdiction over the transmission of electricity in interstate commerce?

Accepted Answer

Federal Energy Regulatory Commission (FERC)

Answer

Environmental Protection Agency (EPA)

Answer

Nuclear Regulatory Commission (NRC)

Answer

Department of Energy (DOE)

Question 29

What is the primary purpose of a power purchase agreement (PPA) in an electricity market?

Accepted Answer

To establish the terms and conditions for the sale of electricity over a defined period

Answer

To regulate the prices of electricity

Answer

To prevent market manipulation

Answer

To promote renewable energy development

Question 30

Which entity is responsible for ensuring the reliability and security of the electric grid in North America?

Accepted Answer

North American Electric Reliability Corporation (NERC)

Answer

Federal Energy Regulatory Commission (FERC)

Answer

Environmental Protection Agency (EPA)

Answer

Department of Energy (DOE)

Question 31

What was the primary goal of the Public Utility Holding Company Act (PUHCA)?

Accepted Answer

To prevent the concentration of power in the electricity industry

Answer

To promote competition in the electricity market

Answer

To regulate the rates charged by utilities

Answer

To protect consumers from fraud

Question 32

Which characteristic is fundamental to a competitive electricity market?

Accepted Answer

Prices are set by supply and demand forces

Answer

Consumers have limited supplier options

Answer

Government sets prices for electricity

Answer

Utilities are fully integrated vertically

Question 33

What is the primary responsibility of the Federal Energy Regulatory Commission (FERC)?

Accepted Answer

Regulate interstate electricity transmission and wholesale sales

Answer

License hydroelectric dams

Answer

Set retail electricity rates

Question 34

In an electricity market, which entity is responsible for generating electricity?

Accepted Answer

Generator

Answer

Retailer

Answer

Transmitter

Answer

Distributor

Question 35

What is the significance of "must-run" status typically granted to renewable energy generators in electricity markets?

Accepted Answer

Renewable generators are required to operate even if not economically viable

Answer

Generators are prohibited from selling electricity on the market

Answer

Generators receive subsidies from the government

Question 36

Which of the following is a potential advantage of a regional electricity market?

Accepted Answer

Enhanced competition and reduced prices

Answer

Limited consumer choice

Answer

Diminished reliability

Answer

Increased environmental impact

Question 37

What is the primary financial obligation of a consumer in an electricity market?

Accepted Answer

Payment for electricity consumed

Answer

Damages caused by power outages

Answer

Investment in new generation facilities

Answer

Fines for violating market regulations

Question 38

What is the purpose of a capacity market in the electricity system?

Accepted Answer

Ensuring sufficient generation capacity to meet electricity demand

Answer

Setting retail electricity prices

Answer

Allocating transmission rights

Question 39

What is the primary objective of energy efficiency programs within electricity markets?

Accepted Answer

Reducing electricity consumption

Answer

Increasing renewable energy generation

Answer

Decreasing greenhouse gas emissions

Answer

Enhancing grid resilience

Question 40

Which of the following market structures is NOT typically found in electricity markets?

Accepted Answer

Bilateral Monopoly

Answer

Hybrid Market

Answer

Pool Market

Answer

Bilateral Contract Market

Question 41

Which aspect of electricity markets is subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC)?

Accepted Answer

Wholesale Electricity Rates

Answer

Environmental Regulation of Electricity Generation

Answer

Retail Electricity Rates

Answer

Siting of Power Plants

Question 42

Under the Public Utility Regulatory Policies Act (PURPA), electric utilities are required to:

Accepted Answer

Purchase Power from Qualifying Facilities

Answer

Set Retail Electricity Rates Below Cost

Answer

Invest in Renewable Energy Projects

Answer

Provide Electricity to All Customers

Question 43

What is the primary purpose of a transmission congestion charge in electricity markets?

Accepted Answer

To Allocate the Costs of Using Congested Transmission Lines

Answer

To Promote Investment in New Transmission Lines

Answer

To Reduce Electricity Demand

Question 44

Which of the following is a potential benefit of deregulating electricity markets?

Accepted Answer

Increased Competition

Answer

Reduced Reliance on Fossil Fuels

Answer

Elimination of Environmental Regulations

Answer

Guaranteed Low Electricity Prices

Question 45

What is the primary function of a regional transmission organization (RTO) in electricity markets?

Accepted Answer

To Coordinate and Operate the Regional Transmission System

Answer

To Allocate Transmission Capacity

Answer

To Set Electricity Prices

Question 46

What is the primary goal of carbon pricing in electricity markets?

Accepted Answer

To Reduce Greenhouse Gas Emissions

Answer

To Increase Electricity Prices

Answer

To Fund Renewable Energy Research

Answer

To Promote Nuclear Power

Question 47

**Which federal agency has primary responsibility for regulating electricity markets in the United States?**

Accepted Answer

**Federal Energy Regulatory Commission (FERC)**

Answer

**Environmental Protection Agency (EPA)**

Answer

**Nuclear Regulatory Commission (NRC)**

Answer

**Department of Energy (DOE)**

Question 48

**What is the primary purpose of a Reliability Agreement in electricity markets?**

Accepted Answer

**To ensure the reliability and coordination of the bulk power system.**

Answer

**To set rates for electricity transmission services.**

Answer

**To establish environmental standards for power plants.**

Question 49

**Which right is granted to participants in electricity markets under the Federal Power Act?**

Accepted Answer

**Open access to transmission lines.**

Answer

**Exclusive right to generate electricity.**

Answer

**Exemption from environmental regulations.**

Answer

**Subsidies for renewable energy projects.**

Question 50

**What is the primary responsibility of a Balancing Authority in electricity markets?**

Accepted Answer

**To balance supply and demand of electricity in real time.**

Answer

**To set prices for electricity.**

Answer

**To operate the transmission system.**

Question 51

**Which trend is currently shaping electricity markets?**

Accepted Answer

**Decentralization and the rise of distributed generation.**

Answer

**Stagnant demand for electricity.**

Answer

**Increased reliance on fossil fuels.**

Question 52

**What is a key challenge for regulators in electricity markets?**

Accepted Answer

**Balancing the need for competition with the need for reliability and affordability.**

Answer

**Protecting consumer privacy.**

Answer

**Enforcing environmental regulations.**