Belmont Municipal Light Department v. FERC, 38 F.4th 173

ISO New England (ISO-NE) filed tariff revisions (Inventoried Energy Program, IEP) to pay generators to hold up to three days of fuel for winters 2023–24 and 2024–25 to mitigate winter fuel-security risks.
FERC accepted IEP in June 2020 as a short-term, technology-neutral solution to a purported misaligned-incentives problem; the tariff went into effect by operation of law after a temporary lack of quorum.
Petitioners (NECOS, state utility advocates, Sierra Club, Union of Concerned Scientists) challenged FERC’s approval as unjust, unreasonable, discriminatory, and likely to produce windfall payments.
The administrative record showed that nuclear, coal, hydroelectric, and biomass generators already keep >3 days of fuel onsite, so payments to them would likely not change their behavior.
FERC’s prior decision in the Winter Reliability Program disallowed compensating resources that would not change behavior; in contrast FERC approved IEP’s broad, fuel-neutral eligibility without explaining the departure.
The D.C. Circuit held FERC’s approval arbitrary and capricious only as to IEP’s inclusion of nuclear, coal, biomass, and hydro generators; that portion was vacated and the remainder of IEP was left intact and remanded.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether IEP’s inclusion of nuclear, coal, biomass, hydroelectric generators is just and reasonable	IEP will award windfall payments to resources that already store fuel and thus will not change behavior; inclusion is arbitrary and discriminatory	FERC argued broad, technology‑neutral eligibility is justified to provide "similar compensation for similar service" and to address misaligned incentives	Court: Vacated portion of IEP including those resources as arbitrary and capricious for failing to explain departure from precedent and lacking reasoned analysis
Whether ISO‑NE met its Section 205 burden to show IEP is just and reasonable overall	IEP lacks a rigorous cost‑benefit showing; may duplicate other programs and overcharge consumers	FERC: IEP is a reasonable short‑term fix relying on prior fuel‑security analysis; detailed cost‑benefit not required for interim measure	Court: Upheld the remainder of IEP—FERC’s reasoning adequate for other aspects
Standing to seek review	Petitioners asserted imminent injury from higher rates and state regulatory interests	FERC did not contest standing	Court: NECOS and State Petitioners have Article III and statutory standing
Remedy and severability	Petitioners sought vacatur of IEP	FERC did not specify severability; argued for upholding the order in full	Court: Severed and vacated only the inclusion of nuclear, coal, biomass, hydroelectric resources; remanded the rest to FERC

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary-and-capricious standard for agency rulemaking)
FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) (agency must display awareness and explain when changing prior policies)
San Diego Gas & Electric Co. v. FERC, 913 F.3d 127 (D.C. Cir. 2019) (rate incentives must be prospective and tied to future conduct)
New England Power Generators Ass'n v. FERC, 881 F.3d 202 (D.C. Cir. 2018) (deference to FERC but requirement of reasoned decisionmaking)
NextEra Energy Res., LLC v. FERC, 898 F.3d 14 (D.C. Cir. 2018) (context on ISO‑NE market structure and FERC review)
Public Serv. Comm'n of N.Y. v. FERC, 589 F.2d 542 (D.C. Cir. 1978) (courts must police agency giveaways lacking statutory warrant)
Davis Cnty. Solid Waste Mgmt. v. EPA, 108 F.3d 1454 (D.C. Cir. 1997) (severability/practical functioning test for vacatur)
Carlson v. Postal Regulatory Comm'n, 938 F.3d 337 (D.C. Cir. 2019) (no substantial doubt standard for whether agency would have acted absent the invalidated provision)