over wholesale electric sales but congress also explicitly reserve powers to the states these powers include jurisdiction over the distribution side of the electric grid the rule at issue here disregards that division the state public utility commissions in every state that regulate utilities that provide essential services like electricity and natural gas they're responsible for ensuring that their retail customers receive safe reliable and  system and prevent states from executing their responsibilities fully just prevents them from guaranteeing that their retail customers receive safe reliable and affordable service before turning to the statutory language of the states may not quote broadly prohibit unquote local state regulated storage resources all of the distribution system from participating in federally regulated postal markets th participating in the wholesale market but that language is in i guess and explored in the explanatory section of the forty one i'm sorry a bord  so we are asking that the court remove the language from the order i guess what i'm trying to to get at this is normally we weave a case in order because there is a rule or a specific amicus states that include california have said that while they don't like that language the broadly prohibiting language they don't believe that ultimately it's going to wildfire or potential blackout or something of that nature in that if there is a potential conflict they believe that they can work it out with for they can then they'll if the court finds that this language does not impact state jurisdiction we would find that to be an acceptable result broad proto visions of against all local storage resources participating in federal wholesale markets as they can with demand response resources currently we were looking for the language in the rule making instead of providing that language for cars on the other way and directly prohibited pitted states from taking this sort of action so i understand what you're saying but it  seems that they work for to remain silent on this issue but they chose not to and said of leaving it open for states to try to implement regulations regarding local storage resources participating in the wholesale market they they've preemptively said you cannot do this and so and they're saying that even if we did it we'd be preempted but if  s i read on to be see exactly how you read states and compared to the way in which the asians for safety reasons for reliability reasons for whatever reasons but if the state allows the d s r to get on the grid it can borrow it from providing power to interstate wholesale markets r from getting on the local grid at all and just block it from getting on the grid but once it allows it to be on the grid then it can't discriminate against provision of interstate wholesale accessing the wholesale markets let me ask one other question is there any state that has said that they want to or they're thinking about or there they might anytime in the near future customers individually or collectively through a rd party aggregator that is not overseen by the commission cannot participate in the wholesale market so that they have to do  with respect but i think there's an analogy but has any but any state in north carolina indicated it wants to do this with respect to no directly states have said that they want to preserve this authority that they want to make sure that this is a new situation for them they are before and acted this proceedings and pleadings so they've they partake in they've done this through our pro  so as these go through this process they want to be sure that they can still meet their obligations which include the design operation reliability and cost of the systems for the distribution  that the state can do is once d s r is on the grid approved to be on the grid state camp barak some providing power to interstate wholesale markets has some state indicated that it wants to which would include storage resources but they said that they don't think that they're going to use the opt out but they want to preserve the ability to use the opt out and that is generally the consensus among our members is that they're they want to be able you it seems that what you're asking us to do is is to strike them this language order now which seems to be is it because we're supposed to interpret this language as as as a mandate to the states and we should strike at them now as opposed to waiting until if and when the state decides to take action and for interprets that action as yes i mean that would be one way to approach it but we also feel that the federal power act does not support for its interpretation of its jurisdiction in order to be able to do this for states that its rule is directed at hotel market operators and barring a power source that is already a local grid from providing power to an interstate market that right yes so pre prior to the rule are power regular power plants fossil fuel plants etc that are local grids to begin with that is the way they plug into the interstate providing interstate wholesale power is through a local gri no most of those plants are on the transition with them here on are there any when you say most are there any i would think that there may be a few particularly in the smaller  ones to ensure that those plants can reach the interstate grid and provide wholesale poller you think that is a violation of their jurisdiction  saying that to do so they need to use the dispersed distribution facility and those distribution facilities that activity but it can be used physically to transmit power from these d s hours or in the in my hypothetical power plant to the transmission grid right right yet we are not saying yes i recognize that many of our the states are eager and and are willing to have their resources participate in the whole support that we are just saying that not all states are there not all states are ready for this and that those states that aren't are going to then those things that don't have the capabilities to handle the accounting in the metering and on all the extras that come with implementing this mentioning those are question of whether the rules arbitrary the question i'm asking is whether there's jurisdiction so isn't this a rule that affects wholesale rates just in the same way demand response was a rule that affected a wholesale race even though it applied it even though it required a crossing of the local grid a conversation for both of us if there were a transaction such a transaction it would affect the wholesale rate right it would provide power and that would be more supply and that would affect the rate and the courts have found that not only not worried about court see it all i'm only asking the economics for a moment but that would only be an incidental effect on the  affect the rate and i respectfully disagree so the the issue in the us the case was the actual setting of the rate the opt out happened before hand and the language broadly prohibiting states from from banning trick storage resources from participating in the wholesale market that that language appears in a forty one regulation right regulation thirty five twenty eight correct might have made other changes but not with regard to th so if the regulation is what is i guess governing the action by the states then how are you harmed by that regulation all right thank you thank you investor owned utilities in the united states and then a m t which represents a number of utilities primarily on the east coast and midwest so when we didn't see the were concerned without an opt out that we wanted it clear that it wasn't that the state still had that authority to broadly probe prohibit it not necessarily that we thought and in fact we know that not all states are going to use it and more important from our standpoint not that we're not sure we don't know that we will even ask for it we're the utilities that are going to have to change their distribution systems to allow for this and energy storage to get to the interconnect judge garland you kept referring to local grid and and i don't i don't know exactly how you define that but we all of these energy storage facilities that we're discussing are on what we call the distribution facilities there behind them either are there and so you have to go through the distribution facilities to get to the point where the distribution system in or connects with what we call  know at least what i would normally call the grid which is really the wholesale market the interstate grid so it isn't it isn't the situation you you brought carl in to the question a lot of generators on the grid already yes they are on the grid and they are you probably remember a lot of cases back a few years  ago with a large generator interconnection agreements when we argued whether those adjustments we're going to be rolled in or directly assigned to that generator as well think of that in a to allow you to put that if you wanted to sell your solar powered generator was what adjustments are we going to have to make to the distribution system to allow you to do that and that's where the problem in our standpoint you don't have an opt out and i agree with you that the question an arbitrary and capricious question i'm happy to address that but i want to address more our st sort of the legal issue when you see that it's only the distribution of what we call the distribution facilities and that's the language in their systems and what the commission is that is none of them none of those d and there are literally hundreds if you add those all up none of those people in the future can probably you did make one reference which sounded different jurisdictional which is that they doesn't have jurisdiction over these facilities but that's not what the statute says what the st is is a twenty four dollars a which is any rule or practice affecting such rate so that's why that's the way in which they get jurisdiction over to require nondiscriminatory transmission over the local distribution in order to get to the interconnection in order to get to the transmission never had to address this question but if you look we started out with connecticut light and power in our priests and we're justice jackson said yes this could be a federal system but that is for whatever reason they put that language in and it has to mean something and other cases that we cited northwest central the court said b one limitation on for jurisdiction if if the state is going to have what the court is saying almost anything that the state is going to affect wholesale right so if that's true court's description of the way in which the band response directly affected is any different than the way in which preventing discriminatory ban directly effects and i would say yes it is it's very different in the critical point which is that demand response you did not have to use he distribution facilities to effect the market remember demand response is just getting a bunch of people to lower the amount of energy that they're taking  period you don't have to use the distribution facilities with energy storage distribution what we call distributed storage that on the on the distribution facilities or behind the meter matter if they if they give the states the ability to opt out of the mandate your argument is that they don't have the power to do it in the st place if something is alt don't fix it by saying well we know we don't have doesn't have the power to do this but we're going to let them do it unless and until a state objects if they line from although claiming the ability to negate such a decision the commission chose not to do so in recognition of the linkage between wholesale and retail market so in my view what the court with say and they put this they they already have to opt out and they used it here and they claim that they have the ability to do that but we're not addressing out of question we're asking you now to address that question and secondarily what we're saying is ok if you think they have that power we think you know as you're off all  argument by the petitioners in i guess it was the respondents in that case because they had won in the d c circuit that you know the logical conclusion the sepsis argument would re the logical conclusion of the argument that you're making here isn't it that this isn't allowed at all yes but that's true  and but that i think that the question that hasn't been that that was not decided by and you it's also a position that nobody in the comments right any summary of our position on rehearing i think you will see that we took and that's why why the commission made a stronger station about we're not going to allow states would i see ok well we can perhaps agree to disagree but i don't see five hundred and ten saying that that's what you said can you point to point to the page in the  before i get to that there's one record point i just want to clarify from i think a question from judge garland a judge from us the question about whether there are regular or traditional power plant judge garland that was helpful could you help me with one more thing which is more fundamental which is my understanding of what is here and i put it to the petitioner who  read with this sort of description i don't line description i want to see whether that's the same description you have that the state can buy our i d s are from getting on the local grid at all for security permissions in place to be able to connect to a distribution facility fatso they are what i understood meaning the bottom line of but if the d s r is already allowed and i understand that's that's where you get rules to police matters like reliability and safety of the distribution system none of those authorities are changed as a result of the rule the broad prohibition that we've been speaking about this morning is the commission interpretation of the statutory authority over exclusive authority over the wholesale markets as meaning that states cannot extend their state authority over matters like reliability and start blocking wholesale sales in interstate commerce to the extent that a state or retail regulator decided to do that in the future that's where the commission pointed out that that future regulation would be preempted of course the commissions not whatever whatever powers a state or retail regulator had to issue regulations or enact laws the rules not changing any of those prophecies it's just a matter of the commission pointing out that this is this is the bounds of interpretation of the federal power act to the extent a state in the future decides to regulate in a way this intruding upon our exclusive forty over the wholesale markets that's the sort of thing that the courts have preempted consistently the rule that existing market rules were on just an unreasonable by imposing barriers to entry to electric surgery sores they did not dispute the notion that sort of resources participating in the whole thing market would have effect on wholesale rates including benefiting the wholesale market i know that counsel for the state made a reference to incidental effects that that that phrase typically applies in the context of preemption of of state laws we're not aware of any authority for the notion that there's some sort of fresh hold on how much of an effect on wholesale rates is needed had a direct effect on the whole thing that's the same point that the commissions made here in terms of participation of storage resources respondent in electric power supplies association the petitioners here have not raised a traditional culture virus argument they do not argue and actually no one at the commission level made the argument that the commission simply does not have a full ready to regulate electric storage resource what they've argued is that is that to the extent that even if the commission has authority over this practice states still have to consent to it the problem with that and i think we pointed this out more brief is that because of the limited nature of their challenge either the commission has power over the practice or it does not and so if the commission is actually  exercising its a forty under the statute and if it is not regulating local distribution facilities in violation of a twenty four dollars b one then it's an appropriate exercise of the commission commission does not have a forward over a particular practice that it chooses to regulate under the statute then the fact that a particular state consents to that does not cure the the statutory overreach again we either have power over the again i just want to emphasize in the rule that the commission is making clear that whatever states could do to protect reliability and safety and so forth with respect to distribution systems that power is completely unchanged by the rule and so to the extent that a state in the future passes some sort of regulation or law to protect the reliability of the distribution system so long as that regulation is within the scope of state power for example over reliability the fact that it has effects on the wholesale spear is not relevant and to the extent that anyone whether it's a private party or the commission has a problem with what the state regulation in the future does and decides to challenge it as presented by the federal power act then that's just going to be a dispute that would come before an article three court like this one and then i mean like every other preemption case that we're aware of the court would actually be able to compare an existing state law or regulation and whether or not that law or regulation either intrudes upon the field granted to the commission by congress or improperly conflicts in rule clarified on rehearing actually deprive the state of authority to decide whether distribute is storage they participate in wholesale market in your view that's a nonstarter here because of the a twenty four authority and that and that the  that the statute certainly that imposes a restriction on the commission's jurisdiction over facilities used in local distribution number one there's a copy to that denial jurisdiction that there's a phrase asserting authority over is facilities used in local distribution the rule itself does not impose any obligations whatsoever any type of facility local distribution or otherwise now to the extent that  there there is some effect at the distribution level i mean that ship has sailed long before this rule your honour's number one this court and the supreme court have approved the commission asserting authority over and it east physically located at the distribution level and number two this court also for done several instances the commission asserting authority over wholesale sales in interstate commerce even when they occur over in both respects i think the way they raise the jurisdictional point is this is what they repeatedly refer to as the how versus whether decision they've come up with in their briefs which is that in their view states have authority to decide whether a then at the distribution level can participate in the st place so markets i mean part of the problem there is that the the language that takes away for over facilities use the local distribution can't be read to go as far as giving states exclusive impairment dominion over anything that happens at the distribution of that fly in the face of a lot of case law that gives authority over wholesale transactions wherever they occur and it both electric power supply which was a practice affecting wholesale rate by a resource at the distribution level it's also this court's national association decision which is about interconnections of generators hug to ensure the safety and reliability of its group and local distributions the way to interpret that language i think is is in the context of what what the commission was responding to which is the notion that states can prohibit a resource of the dissolution level for making wholesale sales and interstate commerce and so that's the only if you want to call it a restriction in the rule that the commission was articulating it was trying to make clear through a number of examples in the rule that states have all the authority that they had to before the rule in terms of whether with the issue of reasoned decision making and whether or not it was  extensively addressed all the the various ways in which state and retail regulators authorities preserved on the way in which to the extent there are impacts on utilities that operate the distribution system those utilities for example continue to have the authority to allocate any costs that they incur in the future as a result of the rule and so they're very so i mean i guess one way to think about this surge wilkens is that there has been too conflation in this case of the wholesale markets and the distribution system for authority over the whole so markets is exclusive in paramount and that's the authority it is exercising in the rule it's not trying to say anything with respect to the distribution system so whatever process sees a an energy whether a storage resource or any other type of entity connecting at the distribution of the hod to follow to get permission to  inject power at a local level none of those rules change as a result as a result of the rule here i would judge garland but it is requiring the local distribution facility to commission clarified that the point of the rules that wherever a storage resource is located whether it's on the transmission system or on the distribution system it's the resources choice whether or not to participate in the wholesale markets  retail regulator or state regular decides to prohibit and any for making wholesale sales in interstate commerce that would be an intrusion on the commission's statutory authorities but but the rule itself does not impose any obligations on anyone other than wholesale market operators and we know from a number of supreme court cases including electric power supply that so long as the commission is acting within the scope of its authority and get into it by congress and so long as it's not regulating facilities use for local distribution the effects on the retail fear or on local distribution facilities do nothing to extinguish the commission's statutory jurisdiction now i don't know can you help me for one second with sort of a physical explanation of what's happening here and they inject into the local distribution facility who runs the local distribution  have to do anything or refrain from doing anything to permit the power to cross local facility to get to the transmission line to the to get to the interstate transmission lines you mean you mean in a physical a technical sense yes i don't think so i mean there are i my understanding of at the distribution level there are many utilities that that have a variety of like power plants or other resources connected to that system and those those entities are able to transmit power to the wholesale market so there is some sort of physical connection that's that's there between what we call the distribution system and interstate transmission lines i mean the rule not requiring anyone to  need to be upgrades to the facilities and so forth that's that's still in the purview of state and retail regulators and so the role explicitly points out that anything with respect to upgrades or technical requirements or costs those are all in purview of and i understand that but i what struck me was the sentence you said earlier that the rule doesn't propose any obligation on the local distribution facility and i assume it transmission to the state transmission facility from the local to the interstate i mean i guess here again we have to go through what it means to impose an obligation  commission the rd thing it's authority over the whole so market necessarily means that states and others don't have authority over the market so i don't think it's i don't think it opposes any obligation facilities use for the generation of electrical energy or over facilities used in local distribution ok your position that they are not that does that work is not doing anything with respect to facilities used in local distribution or is your position that this falls within the except clause which that takes you to  so you're not relying on the except clause is that your sign well i mean part of this is if we're talking about a facility in local distribution that is also being used to  for wholesale sales i think that's where the except as specifically provided clause would come from that the commission has jurisdiction over the wholesale sales that occur over those so it is because the perceiving language in that in that provision states that the commission has and this this part of unqualified the commission has authority over all facilities used in for wholesale sales in interstate commerce but in response to the point that because the the commission is reaching and it is better connected at the distribution level the and the petitioners arguments that somehow constitutes regulation of local distribution facilities i think our answer's no it's not imposing any requirements on facilities at all the exercise of authority by the commission is only over wholesale sales in interstate commerce  homeowner installs solar panels on her home and as a part of that also install batteries so that she can store the power generated by her solar panels and she might at some point decide to use that backup power instead of buying power from the local  grid to power her home or she might decide that it might be advantageous at some point to sell that power that she's got stored in her batteries when the wholesale market other aspects of the distribution system to facilitate that and how how is the homeowner going to get her power from her batteries in her basement or backyard or wherever they are to the wholesale market without facilitation by the local utility so whatever process he's she was before the rule to get permission to connect to the local distribution those rules would still continue to govern her connection to the distribution facility and so and so to the extent that and so the role does not does not burden any of that it does not take away state or retail regulators or the then prohibit wholesale sales so i guess i guess the point here is that the fact that there may be that tax on the distribution system as a result of the rule is not the same thing of the commission i obligations on states or on distribution owning utilities they still have whatever powers and whatever rights they had before the rule on the terms of access to the distribution doesn't touch any of that but the fact that there may be effects on the distribution side i mean that's as long as the commission is acting within a grant of authority from congress and as long as it's not imposing obligations or requiring anything of facilities used in local distribution in a way that would constitute regulation then then the facts are legally irrelevant so you're saying that with this water is not mandating that forty one you're pretty excited about the prospect of selling into wholesale markets to the extent the homeowner then marches over to her distribution utility or to our state regulator and demand access the rule doesn't give her that access she still has to go storage resource under the rule on review here another question i have is relates to what we were discussing earlier about what does this broadly prohibit language mean so it appears from the briefing that some states like california have rules and policies in place that require storage capacity to be reserved for use in relieving local great congestion or other grid reliability  point out that the broad prohibition language means that what a state cannot do is take away the voluntary choice of a resource to participate in the market so one of the examples in the role is that a state a retail regulator could require a resource to make a choice between the whole sale of the retail side that doing so would not take away the resources voluntary choice and that was the point of the rule which is that is that the just and reasonable rule of practice should be that any resource that wants to participate should be able to do so i think the regulation of regulation along the lines you're talking about if we're talking about granting priority for for local congestion grid congestion rel what i mentioned that's not taking away the voluntary choice of a resource the participate whole so i think that would be fine  how how do you propose that if we were concerned about not ruling on giving it three rulings and not preventing challenges future challenges that that could be considered to be either arbitrary the states but at the same time you can point out that to the extent the state decides to regulate in the future any disputes about the viability of that regulation whoever brings that challenge can be resolved in a future case where a court can actually consider some existing state regulation versus the federal power act as has all preemption case cases tend to tend to go there tends to be an actual particular state policy rule statute that's been identified as as being in the conflict with with the order at issue here orders at issue here is there any precedent that requires that there be a life conflict in the water for us to find injury or to state sovereignty could satisfy injury i think here is a good point for me to point out that in the state petitioners reply brief their allegation of injury in fact is not the same as the allegation of injury factor in the opening so i mean i would say that the court should consider the injury alleged in the opening brief i think to the extent that states are changing that allegation of injuring their reply brief i would say that's a waste and furthermore i mean what they alleged in their at least on injury seems to be nothing more than a repetition of the ultimate claim on the merits that is the notion that states get to decide whether a resource can participate a wholesale by the commission saying states can't assume that they are correct on the merits or that they will prevail on the merits then why isn't this a sufficient allegation of injury well i think that this is where some of the cases that we cited on injury come in which those cases have involved scenarios where the court found that standing with blocking because the rules did not actually impose any obligations or that the allegation of injury did not show any imposition of an obligation on the pitching parties and if so i mean what they've alleged here is an infringement of the ability to regulate and the rule expressly preserves in a number of places that precise ability i'm not sure i'm not sure that's enough for standing purposes obviously i mean we're talking about state petitioners i understand there's somewhat of a different standard when it comes to a state petitioner but they still have to meet the the elements of article three standing and i think the commission and they didn't include any declarations at least  all right well in rebuttal perhaps we can explore that thank you if there are no further questions from the panel i can stop at this point mrs murphy yes thank you your honor i appreciate that i wanted to address a few things raised by her counsel one is that he was clarifying that there are generation resources on the distribution system that participate in the wholesale markets those are done through wholesale market but just a participant agreements because  wner who is connecting to the local distribution system with her storage and her solar panels she there are in some cases our retail market that she could participate in and st rule is saying that it is the local storage resources decision whether to participate in the it in either the wholesale market or the retail market they did that state could prevent them from participating in both markets but if a state wants to require them to participate only in the retail market they're not able to do that and the participation requires additional accounting and metering if they are going to participate in the wholesale market and that is a burden on the state that they that that's an impact honest before you stop i'd like for you to address stamping what is the injury here the injury here is that it affects the state ability to regulate and manage the distribution system and for good thing that they will be preempted state to be preempted even if we have a rule but  it would affect our ability to i'm sorry i'm looking for that it would have effect on our ability ok and i'm correct that there is no declaration in the record about how that will be that injury will take place because the  to your injury seems to be now you just said is that these burdens and requirements that are being imposed on the states as your injury but that's not the way that i read your opening brief that i am i all right i'll leave it there thank you finding that wasn't challenged and sort of the more specifically that that's the basis of the entire rule not just the part about states and you're not challenging the rule in that respect is that actually in part your honor yes so the rule applies to much more than just the these resources that we're discussing the ones on the local distribution system and the ones behind the need or so for determined that it needed to allow all storage resources to participate and so therefore operators to remove barriers within the wholesale market so that rate can be just reasonable but we're arguing that that by by including the resources in the distribution that are connected through the distribution system is beyond what they can do in terms of their operation of the market we're saying that the their powers are limited to distribution utilities going to have to do something to their facilities to allow the distributed what i'm calling distributed storage the solar panel on the homeowners house to get to the markets and the answer is absolutely yes i think if you look at j five hundred and thirty seven paragraph forty two the commission names a number of those things that are going to have to be done and sort of cloak a way if you think about it and the cost i know that this court has heard a number of large generator interconnection agreement cases where that's because more power is being added to the system you have to you have to make adjustments to the system to the grid if you want to call it that for the distribution facilit they have to be in a and those those are in fact what the commission calls the requirements that the being the state o local d authority will have to decide is valid or not valid so let's just take an example of the homeowner with a solar panel let's say that it it's go fifty times as much to add facilities on the add new equipment to the distribution facilities that person that solar panel i mean who knows what's reasonably related is if you're having wildfires and you want to conserve all of that energy storage for the local distribution who has the right to do that or does st because it doesn't allow a broad prohibition just take that option away entirely these are these are the kind of questions and i want to  just bring up another point judge garlands you keep saying this directly affects the wholesale market well if if the if the energy storage is taken out of the distribution market and goes to the wholesale market it directly affects the distribution market now who makes that decision if that if those if those energy storage resources are on the distribution system suggest that the state is the one that should be entitled to make that decision and if that requires a broad prohibition they should be allowed to do that that's not preempted i just preemption so just because there is an effect on the wholesale market doesn't mean that the states are preempted you have to look beyond that and you have to look at the clear lines in