898 F.3d 14
D.C. Cir.2018Background
- ISO New England (ISO-NE) runs a forward capacity market (FCM) that procures future generation via descending-price auctions; previously used a vertical demand curve, then adopted a sloped demand curve.
- The FCM includes a Minimum Offer Price Rule (MOPR) to prevent below-cost (state-subsidized) offers from depressing clearing prices and distorting entry signals.
- ISO-NE’s 2014 tariff filing created a limited exemption to the MOPR for up to 200 MW of qualifying new renewable capacity (with a 3-year carry-forward cap to 600 MW) and implemented a system-wide sloped demand curve.
- A group of generators (NextEra, NRG, PSEG, others) challenged FERC’s approval of the exemption, arguing it causes unjust, unreasonable, and unduly discriminatory rates by permitting price suppression; they also sought a hearing on disputed facts.
- FERC initially approved the tariff, denied rehearing, received a remand from this Court, reaffirmed the exemption with adjustments (including zonal sloped curves), and denied rehearing; the Generators petitioned for review in this Court.
- The court concluded FERC’s balancing of consumer and investor interests, reliance on record evidence (including expert testimony), and denial of a hearing were reasonable and denied the petition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the renewable MOPR exemption produces unjust and unreasonable wholesale rates | Generators: permitting state-subsidized below-cost offers will materially suppress clearing prices and shift subsidy costs to third-party suppliers, producing unjust rates | FERC/ISO-NE: small, capped exemption coupled with sloped demand curves, load growth, and retirements will limit price suppression and better reflect actual entry needs, protecting consumers from redundant capacity | Held: FERC reasonably balanced interests and the exemption can produce a just and reasonable rate; petition denied |
| Whether FERC’s factual and economic reasoning was arbitrary and capricious | Generators: FERC failed to quantify price-suppression effects, relied on disputed supply/demand curve assumptions, and used unsupported load/retirement forecasts | FERC: relied on competing expert testimony, economic reasoning, and substantial record evidence; quantitative precision not required for this market prediction | Held: FERC engaged in reasoned decision-making and permissibly resolved conflicting expert views; not arbitrary or capricious |
| Whether FERC abused its discretion by refusing an evidentiary hearing | Generators: material factual disputes (price suppression, load growth, retirements) required a hearing | FERC: extensive written record with expert analyses adequately resolved factual disputes; hearing not necessary | Held: No abuse of discretion; FERC may resolve these issues on the written record |
Key Cases Cited
- New England Power Generators Ass'n v. FERC, 757 F.3d 283 (D.C. Cir. 2014) (upholding FERC’s prior rejection of a categorical MOPR exemption)
- New Jersey Bd. of Pub. Utils. v. FERC, 744 F.3d 74 (3d Cir. 2014) (affirming elimination of a broad exemption but upholding limited exemptions for certain renewables)
- Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017) (requiring quantitative assessment where necessary to forecast significant environmental effects)
- Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527 (2008) (recognizing deference to agency rate determinations)
- Wisconsin Pub. Power Inc. v. FERC, 493 F.3d 239 (D.C. Cir. 2007) (affording deference to FERC’s market judgments)