NRG Power Marketing, LLC v. Federal Energy Regulatory Commission
2017 U.S. App. LEXIS 12137
| D.C. Cir. | 2017Background
- PJM Interconnection (a Regional Transmission Organization) filed a Section 205 proposal to revise its Minimum Offer Price Rule (MOPR) for capacity auctions: replace unit‑specific review with two categorical exemptions (competitive entry and self‑supply) and extend a one‑year mitigation period to three years.
- PJM’s proposal was the product of stakeholder compromise: generators favored removing discretionary unit‑specific review; many load‑serving entities favored the categorical exemptions and a longer mitigation period.
- FERC found parts of PJM’s filing not just and reasonable and, under Section 205, suggested modifications: retain unit‑specific review alongside the two new exemptions and keep the one‑year mitigation period.
- PJM accepted FERC’s modifications rather than refile under a different statutory provision. Several generators (NRG, GenOn, PJM Power Providers) sought review, arguing FERC had exceeded its Section 205 authority by effectively imposing a new rate scheme.
- The D.C. Circuit held that Section 205 limits FERC to accepting or rejecting a proposed rate (or proposing only minor modifications); FERC’s changes here produced an ‘‘entirely new rate scheme’’ and thus exceeded its Section 205 authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC may, under Section 205, suggest modifications that create a materially different rate design | FERC exceeded Section 205 by transforming PJM’s compromise into a new rate scheme without using Section 206 | FERC could propose modifications and PJM consented, so the modifications were permissible | FERC violated Section 205: it may not impose an ‘‘entirely new rate scheme’’ even with the utility’s consent |
| Whether PJM’s consent cures the notice and comment concerns for customers | Consent does not cure the lack of prior notice to stakeholders or opportunity to comment on FERC’s novel modifications | Consent suffices because PJM agreed and minor changes are allowed | Court held consent is insufficient where modifications are more than minor and create a new rate design |
| Whether FERC’s modifications were merely ‘‘minor deviations’’ from PJM’s filing | Modifications were strategically opposite to PJM’s proposal (expanded exemptions and shorter mitigation), not minor deviations | FERC characterized changes as acceptable adjustments to render the filing just and reasonable | Court found the modifications followed a completely different strategy and thus were impermissible |
| Whether FERC may rely on Section 205 rather than Section 206 to impose a new rate | Petitioners: imposing a new scheme requires Section 206 procedures (showing current rates are outside the zone of reasonableness) | FERC: Section 205 review plus stakeholder acceptance suffices | Court reiterated that unilateral imposition of a new rate requires Section 206; FERC erred under Section 205 |
Key Cases Cited
- City of Winnfield v. FERC, 744 F.2d 871 (D.C. Cir. 1984) (FERC may propose minor changes with utility acquiescence but not its own original form of rate or an entirely new rate scheme)
- Western Resources, Inc. v. FERC, 9 F.3d 1568 (D.C. Cir. 1993) (under the NAT. GAS ACT analogue, FERC cannot adopt an entirely different rate design or a methodology‑distinct strategy)
- Atlantic City Elec. Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002) (Section 205 does not authorize unilateral imposition of a new rate; Section 206 applies for that power)
- Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288 (2016) (explains how capacity market clearing prices affect entry incentives and long‑term supply)