On July 10, 2020, the D.C. Circuit issued its opinion on various Petitioners’ appeals of Order No. 841. As predicted, the Court denied Petitioners’ claim that FERC lacks the authority to prohibit States from barring electric storage resources (ESRs) located on utility distribution systems from participating in wholesale power markets. Given the EPSA Supreme Court decision involved the sale of a product – demand response – that is not even FERC-jurisdictional, this case – involving sales by ESRs of clearly FERC-jurisdictional products – made the decision a slam dunk. Indeed, Petitioners would be hard-pressed to obtain either a rehearing en banc or a writ of certiorari.
The D.C. Circuit applied a test found in EPSA in rejecting most of the Petitioners’ claims. The court examined: 1) whether the challenged practice at issue – FERC’s prohibition of State-imposed distributed ESRs participation bans – directly affects wholesale rates; 2) whether FERC had regulated State-regulated facilities; and, 3) whether the court’s determinations would conflict with the FPA’s core purposes of curbing prices and enhancing reliability in the wholesale electricity market. The first and third prongs were so easily met that the court barely touched on them. The court found “swiftly” as to the first prong that FERC’s prohibition of State-imposed participation bans directly affects wholesale rates. Indeed, it noted that “If ‘directly affecting’ wholesale rates were a target, this program hits the bullseye.” As to the third prong, the court found that the “challenged Orders do nothing more than regulate matters concerning federal transactions – and reiterate ordinary principles of federal preemption – they do not facially exceed FERC’s jurisdiction under the Act. Our decision today does not foreclose judicial review should conflict arise between a particular state law or policy and FERC’s authority to regulate the participation of ESRs in the federal markets.”
As to the second prong, the court relied heavily on the Supremacy Clause of the Constitution to reject claims that States can close off access to wholesale markets. The court explained that “because FERC has the exclusive authority to determine who may participate in the wholesale markets, the Supremacy Clause – not Order No. 841 – requires that States not interfere.”
Continue Reading The Lesson of the Appeal of Order No. 841 – Be Careful What You Ask For