Electric Power Supply Ass'n v. Federal Energy Regulatory Commission
753 F.3d 216
D.C. Cir.2014Background
- Petitioners challenge FERC Order 745, which requires wholesale-market operators to compensate demand response resources at a specified level when two conditions are met, aiming to reduce wholesale prices.
- FERC asserts authority under the Federal Power Act (FPA) to regulate practices affecting wholesale rates and to bring demand response into wholesale markets.
- Petitioners argue FERC’s approach intrudes into exclusive State authority over the retail market and constitutes direct regulation of retail sales.
- The majority vacates Order 745, holding the rule exceeds FERC’s authority by directly regulating the retail market, which is reserved to the States.
- The court also weighs Chevron step-one considerations and analyzes whether § 201(b)(1) unambiguously limits FERC’s reach, as well as whether § 205/206 “affecting” jurisdiction supports the rule.
- Dissent argues that, under the ambiguity of the statute, FERC’s interpretation of its jurisdiction under the FPA is permissible and should be upheld.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC exceeded its authority under the FPA | Petitioners contend FERC impermissibly regulates the retail market. | FERC relies on its 'affecting' jurisdiction over wholesale rates and the link to retail demand response. | Order 745 vacated; FERC exceeded authority (ultra vires) |
| Whether forgone consumption constitutes a sale of electric energy under § 201(b)(1) | Forgone consumption is a retail sale or an 'other sale' Congress restricted to States. | Demand response resources directly affect wholesale rates and can be regulated under § 205/206. | Statute ambiguous and/or improper to conclude; in any event, rule invalid for direct retail regulation |
| Whether § 205/206 ‘affecting’ jurisdiction adequately limits FERC’s reach | Affirmative authority would permit broad, indirect regulation of non-jurisdictional activities. | Affirmative authority exists for regulating practices affecting wholesale rates; can be cabined by context. | Affirming jurisdiction exists but not to sustain the challenged rule; must be confined to its proper scope |
| Whether FERC’s compensation level (LMP vs LMP-G) is just and reasonable under the APA standards | LMP may overcompensate, failing to reflect forgone retail costs and creating windfalls. | LMP is appropriate to incentivize participation and remove barriers to demand response; substantial record support | Order 745 not arbitrary or capricious under APA |
| Whether the rule’s interaction with State programs constitutes unlawful interference | Order 745 interferes with State-dominated retail demand response policies. | Incidental effects on State programs are permissible; States retain ultimate authority over retail. | Incidental effects insufficient to sustain federal regulation; still vacated |
Key Cases Cited
- New York v. FERC, 535 U.S. 1 (U.S. 2002) (retail vs wholesale jurisdiction under FPA; exclusive state control of retail)
- Niagara Mohawk Power Corp. v. FERC, 452 F.3d 822 (D.C. Cir. 2006) (wholesale/retail separation under FPA; agency jurisdiction limits)
- Connecticut Dept. of Pub. Util. Control v. FERC, 569 F.3d 477 (D.C. Cir. 2009) (affecting-jurisdiction test; direct regulation limits under § 201)
- CAISO v. FERC, 372 F.3d 395 (D.C. Cir. 2004) (limits on using § 206 for regulation of practices affecting rates)
- City of Arlington v. FCC, 133 S. Ct. 1863 (U.S. 2013) (Chevron deference framework for agency statutory interpretations)