Maryland Public Service Commission v. Federal Energy Regulatory Commission
394 U.S. App. D.C. 187
D.C. Cir.2011Background
- PJM Interconnection proposed the Reliability Pricing Model (RPM) in 2005 to replace the old pricing model to boost investment in capacity.
- FERC adopted the RPM with modifications, finding the old model unjust and unreasonable and approving the RPM with conditions.
- RPM includes three mitigation measures for market power: require all available capacity in RPM auctions, substitute a proxy bid when market power is found, and encourage new entrants via multi-year rate commitments.
- RPM auctions set prices three years in advance to allow new entrants to develop capacity, with shorter lags allowed for near-term deliveries.
- Petitioners (Maryland Public Service Commission and New Jersey Board of Public Utilities) challenge the RPM’s rates as not just and reasonable; the Commission found no evidence of market power and attributed price increases to transmission constraints and increased reliability, supported by multiple analytic reports; the court reviews under a highly deferential, arbitrary-and-capricious standard and ultimately denies the petition for review.
- The decision upholds the Commission’s orders as just and reasonable, citing substantial evidence that RPM promoted reliability and long-term investment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RPM’s rate design is just and reasonable | Petitioners argued RPM allows market power to inflate prices | FERC concluded RPM’s design is just and reasonable and mitigates market power | RPM just and reasonable; upheld |
| Whether the Commission properly addressed potential market-power abuse | Petitioners contend shorter lag and actual bids enable abuse | Commission found no evidence of market power after reviewing independent reports | Commission-supported finding of no market-power abuse |
| Whether the record supports deference to the Commission under arbitrary-and-capricious review | Challenges to the Commission’s factual findings on market power | FERC’s findings are supported by substantial evidence and expert analyses | Court upheld under arbitrary-and-capacious standard |
Key Cases Cited
- FPL Energy Maine Hydro LLC v. FERC, 287 F.3d 1151 (D.C.Cir. 2002) (agency findings are conclusive if supported by substantial evidence)
- Pub. Utils. Comm'n v. FERC, 254 F.3d 250 (D.C.Cir. 2001) (rate design questions reviewed deferentially)
- Sithe/Independence Power Partners v. FERC, 165 F.3d 944 (D.C.Cir. 1999) (highly deferential review of rate design decisions)
- Blumenthal v. FERC, 552 F.3d 875 (D.C.Cir. 2009) (precedent on what petitioners must show in challenges to rates)
- Tenn. Gas Pipeline Co. v. FERC, 860 F.2d 446 (D.C.Cir. 1988) (establishes that once a rate is found unjust, the Commission fixes the just and reasonable rate)