FERC v. Electric Power Supply Association

FERC v. Electric Power Supply Association
Docket number: 14-840
Date argued: October 14, 2015
Date decided: January 25, 2016
Certiorari: District of Columbia Court of Appeals
Lower court decision
Reversed and remanded
Majority opinion
Elena Kagan
Vote: 6-2
Majority
Elena Kagan • John G. Roberts • Anthony Kennedy • Ruth Bader Ginsburg • Stephen Breyer • Sonia Sotomayor
Dissenting
Antonin Scalia • Clarence Thomas
Recusals
Samuel Alito
Policy background
Federal Energy Regulatory Commission Energy policy in the United States

On January 25, 2016, the United States Supreme Court upheld a Federal Energy Regulatory Commission (FERC) program designed to encourage consumers to decrease their electricity consumption during peak demand periods. The court's 6-2 decision overturned an earlier ruling from the U.S. Court of Appeals for the District of Columbia Circuit.

Writing for a six-member majority, Justice Elena Kagan argued that the rule did not encroach on a state's ability to regulate retail electricity sales. Kagan was joined by Chief Justice John G. Roberts and Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor. Justice Antonin Scalia filed a dissenting opinion, which Justice Clarence Thomas joined. In his dissent, Justice Scalia argued that the rule in effect regulates retail electricity sales and is thus prohibited under the Federal Power Act. Justice Samuel Alito recused himself from the case.

Questions presented before the court: "First, and fundamentally, does the FPA [Federal Power Act] permit FERC to regulate these demand response transactions at all, or does any such rule impinge on the States’ authority? Second, even if FERC has the requisite statutory power, did the Commission fail to justify adequately why demand response providers and electricity producers should receive the same compensation?"

The court heard oral arguments in FERC v. Electric Power Supply Association on Wednesday, October 14, 2015 and issued its ruling on January 25, 2016.

Transcript of oral argument: SupremeCourt.gov, "FERC v. Electric Power Supply Association"

Audio of oral argument: Oyez.org, "FERC v. Electric Power Supply Association"

Background

The Federal Power Act of 1920 was passed to coordinate and encourage the development of dams, reservoirs, and other hydroelectric facilities. The act authorizes the Federal Energy Regulatory Commission (FERC) and other agencies to license and regulate electric power projects. FERC is authorized to issue licenses to citizens, corporations, states, or municipalities for the construction of reservoirs, transmission lines, dams, water conduits, and other projects.

The act also authorizes FERC to regulate "the sale of electric energy at wholesale in interstate commerce" and leaves to the states to regulate other electric energy sales, including retail sales. In March 2011, FERC issued an order requiring wholesale market operators in particular circumstances to pay the same price to electricity consumers that do not use power at certain times (for example, during summer months) as the price paid by owners of power plants that generate the electricity. A scenario in which payments are made to consumers to decrease their consumption is known as demand response. In 2015, the U.S. Department of Energy said of demand response, "The electric power industry considers demand response programs as an increasingly valuable resource option whose capabilities and potential impacts are expanded by grid modernization efforts."

The rule was challenged in the United States Court of Appeals for the District of Columbia Circuit by state agencies, publicly owned utilities, electric transmission owners, and electric supplier groups. These groups argued that FERC's order was prohibited under the Federal Power Act, which states that FERC cannot regulate retail sales of electricity. Additionally, the groups argued that FERC could not justify its order by arguing that the demand response payments only affect wholesale rates, which FERC can regulate under the Federal Power Act. Proponents of the rule argued that FERC was not directly regulating retail electric sales with its rule but instead regulating the wholesale market.

The D.C. Circuit Court struck down the rule, and FERC appealed to the U.S. Supreme Court in 2015.

Ruling

Majority opinion

Justice Elena Kagan wrote the majority opinion for the court. She was joined by Chief Justice John Roberts and Justices Anthony Kennedy, Sonia Sotomayor, and Ruth Bader Ginsburg. The court argued that FERC’s wholesale demand response programs were aimed at reducing wholesale rates and did not regulate retail electricity sales in violation of the Federal Power Act. The court elaborated that the programs solely addressed transactions that occur on the wholesale market, and that the programs indirectly, rather than directly, affect retail rates; thus, the rule was not a violation of the act because it was not a direct regulation of retail markets or sales. In addition, the court upheld FERC’s decision to compensate providers who offered demand response programs.

Dissenting opinion

Justice Antonin Scalia wrote a dissenting opinion, which was joined by Justice Clarence Thomas. Scalia argued that the Federal Power Act permits FERC to regulate only wholesale activity and that the regulation under review involves entities that do not resell energy to other customers in the way that wholesale sellers do. According to Scalia, the regulation violates the Federal Power Act's provision that FERC may only regulate wholesale sellers. Scalia further argued that participants in the demand response program are retailers because they purchase electricity for their own consumption and that the demand response programs are designed to reduce retail electricity sales. As a result, Scalia argued that FERC is in effect regulating retail sales, an action that is prohibited under the Federal Power Act.

See also

• 

  Energy use in the United States

• 

  Fracking in the United States

• 

  Environmental policy in the United States

• Supreme Court cases, October term 2015
• Supreme Court of the United States
• History of the Supreme Court
• Major cases of the Supreme Court October 2015 term
• Major cases of the Supreme Court October 2014 term

External links

• SupremeCourt.gov
• American Bar Association, 2015-2016 Supreme Court Briefs