New Jersey Board of Public Utilities v. Federal Energy Regulatory Commission
744 F.3d 74
3rd Cir.2014Background
- FERC approved PJM’s 2006 Reliability Pricing Model (RPM) tariff, including the Minimum Offer Price Rule (MOPR) and self-supply provisions, to ensure just and reasonable rates in interstate electricity markets.
- Beginning in 2011, FERC issued orders modifying the MOPR: eliminate state-mandated exemptions for state programs, remove some mitigation screens, add wind/solar exemptions, and clarify self-supply applicability.
- New Jersey and Maryland enacted capacity-need programs (LCAPP) to develop new generation and bid those resources into PJM auctions below cost.
- PJM Power Providers Group (P3) filed a §206 complaint with FERC seeking refinement/elimination of the MOPR’s state-exemption and other changes; PJM submitted tariff revisions.
- FERC issued the April 12, 2011 Order approving most revisions; November 17, 2011 Order affirmed; subsequent rehearing and related orders occurred; the court ultimately denied petitions for review of the 2011 Orders.
- Load Petitioners (several state-related utilities) and Hess challenged the 2011 Orders on jurisdiction, process, self-supply treatment, and discriminations; Cross-Petitioners challenged offsets methodology and one-auction exemption rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether elimination of the state-mandated exemption falls within FERC’s jurisdiction | New Jersey/Maryland argue it exceeds §201 generation-facility control and improperly substitutes FERC for states | FERC has broad authority to regulate rules affecting wholesale rates and capacity markets | Within FERC’s jurisdiction; elimination justified |
| Whether elimination of the exemption was arbitrary and capricious under the APA | States relied on reliance interests and prior approval; elimination lacks rational basis | Rational basis supported by evidence of risk of price suppression from state-subsidized entry | Not arbitrary or capricious; adequately explained |
| Whether automatic clearance for self-supply was improperly altered | Load Petitioners relied on guaranteed clearance for self-supply | PJM’s changes to self-supply mitigation remained just and reasonable | Moot regarding Load Petitioners after later changes; issue as raised no longer live |
| Whether the MOPR’s gas-fired focus and wind/solar exemptions discriminate unduly | New Jersey contends disparate treatment misaligns with price-suppression concerns | Differing treatment justified by resource characteristics and market impact | Not undue discrimination; rational basis for resource-based treatment |
| Whether energy/offets offsets (zonally based) and the single-auction clearance rule are reasonable | P3 argues nodal offsets and two-auction requirement better reflect reality | FERC reasonably approved zonal offsets and one-auction clearance as consistent with market design | Reasonable; supported by the record and balancing considerations |
Key Cases Cited
- Connecticut Dept. of Utility Control v. FERC, 569 F.3d 477 (D.C. Cir. 2009) (FERC capacity mechanisms within its jurisdiction; states bear economic consequences of their choices)
- Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (Supreme Court 1983) (agency changes require reasoned analysis; not arbitrary)
- New York v. FERC, 535 U.S. 1 (Supreme Court 2002) (open access transmission; market regulation under FPA)
- Pac. Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm’n, 461 U.S. 190 (Supreme Court 1983) (federal preemption of state authority over wholesale rates; FERC jurisdiction over rates)
- Old Dominion Elec. Coop. v. FERC, 518 F.3d 43 (D.C. Cir. 2008) (agency interpretation of tariff language not entitled to deference where unambiguous)