United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 13, 2011 Decided January 17, 2012 

No. 10-1313 

INDIANA UTILITY REGULATORY COMMISSION, 

PETITIONER

v. 

FEDERAL ENERGY REGULATORY COMMISSION, 

RESPONDENT

AMERICAN PUBLIC POWER ASSOCIATION, ET AL., 

INTERVENORS

On Petition for Review of Orders of the 

Federal Energy Regulatory Commission 

Eric A. Eisen argued the cause and filed the briefs for 

petitioner. 

Steven J. Ross and Steven T. Nourse were on the brief for 

intervenor American Electric Power Service Corporation in 

support of petitioner. Randolph L. Elliott entered an 

appearance. 
2 

 

Samuel Soopper, Attorney, Federal Energy Regulatory 

Commission, argued the cause for respondent. With him on 

the brief was Robert H. Solomon, Solicitor. 

Barry S. Spector and Paul M. Flynn were on the brief for 

intervenor PJM Interconnection, L.L.C. in support of 

respondent. Robert A. Weishaar Jr. entered an appearance. 

Before: GINSBURG,

* HENDERSON, and KAVANAUGH, 

Circuit Judges.

 Opinion for the Court filed by Circuit Judge GINSBURG. 

 GINSBURG, Circuit Judge: The Indiana Utility Regulatory 

Commission petitions for review of an order of the Federal 

Energy Regulatory Commission approving the tariff of PJM 

Interconnection, L.L.C.. We dismiss the petition insofar as it 

challenges the order on grounds the IURC did not raise with 

sufficient specificity in its request for rehearing by the 

Commission, 16 U.S.C. § 825l(b). In all other respects, we 

deny the petition because the IURC has not shown the 

Commission acted unreasonably. 

I. Background 

Advancements in metering technology now enable retail 

customers to reduce their usage of electricity in response to 

short-term fluctuations in demand and price. This so-called 

“demand response” in effect returns energy to the market 

when it is most needed, thereby reducing the volatility of 

electricity prices and minimizing the likelihood of a 

*

 As of the date the opinion was published, Judge Ginsburg had 

taken senior status. 
3 

 

shortage.*

 In recognition of these benefits the Congress in 

2005 declared it is “the policy of the United States that timebased pricing and other forms of demand response ... shall be 

encouraged ... and unnecessary barriers to demand response 

participation in energy, capacity and ancillary service markets 

shall be eliminated.” 16 U.S.C. § 2642 note. 

The Federal Energy Regulatory Commission has 

implemented this policy in part through its Order 719, which 

requires operators of wholesale electricity markets to allow 

trading in retail as well as wholesale demand response. See 

Wholesale Competition in Regions with Organized Electric 

Markets, 73 Fed. Reg. 64,100-01 (Oct. 28, 2008) (codified as 

amended at 18 C.F.R. § 35.28). Specifically, the Commission 

required the operators to grant access to third-party 

“aggregators of retail customers” (ARCs), except where “the 

laws or regulations of the relevant electric retail regulatory 

authority do not permit the customers aggregated [by the 

ARC] to participate,” Order 719, ¶ 155.*

 The Commission 

said it included this exception in order to be clear that its 

“intent was not to interfere with the operation of successful 

[retail] demand response programs, [to] place an undue 

burden on state and local retail regulatory entities, or to raise 

new concerns regarding federal and state jurisdiction.” Id.; 

see also 16 U.S.C. § 824(b) (preserving states’ jurisdiction to 

regulate “facilities used in local distribution”). The 

Commission further stated it would not “require a [state 

*

 Depending upon context, “demand response” may refer either to 

the practice of reducing energy usage in response to price, or to the 

amount by which the customer reduces its demand, or to a third 

party’s sale of that energy in an organized market.

*

 Henceforth we refer to the “relevant electric retail regulatory 

authority” as the “state regulator.” 
4 

regulator] to make any showing or take any action in 

compliance with [Order 719],” nor place the operator of a 

wholesale market “in the position of interpreting the laws or 

regulations” of any state. Order 719, ¶¶ 155, 158(g) n.212. 

Other than exempting the state regulator and the operators of 

wholesale markets from the obligation to verify retail 

customers’ eligibility to sell demand response, the 

Commission did not specify how or by whom that task was to 

be performed. 

 The petition for review now before us arises from a 

dispute between the Indiana Utility Regulatory Commission 

(IURC) and PJM Interconnection, L.L.C., which, subject to 

the Commission’s oversight, operates the market for 

wholesale electricity in the District of Columbia and all or 

parts of 13 states, including Indiana. See 101 FERC P 61,345 

(2002) (authorizing PJM to serve as a regional transmission 

organization); Illinois Commerce Comm’n v. FERC, 576 F.3d 

470, 473 (7th Cir. 2009) (explaining role of such 

organizations in general and of PJM in particular). See 

generally Promoting Wholesale Competition Through Open 

Access Non-Discriminatory Transmission Services by Public 

Utilities, Order No. 888, 61 Fed. Reg. 21540 (1996) (creating 

regional electricity markets organized under open-access 

tariffs). Over 500 market buyers, sellers and traders of 

electricity participate in PJM’s market. FERC, Electric Power 

Markets: PJM, http://www.ferc.gov/market-oversight/mktelectric/pjm.asp (last visited Dec. 26, 2011). 

In 2009, PJM filed with the Commission a revised tariff 

implementing the changes required of it by Order 719. 

Section 1.5A.1 of the revised tariff permits a member of PJM 

to act as an ARC on behalf of “multiple individual end-use 

customer[s]” for the purpose of selling demand response 

“unless the [state regulator] prohibit[s] their participation.” 

Section 1.5A.3 provides that after it has accepted an ARC’s 
5 

application, PJM will “notify the appropriate electric 

distribution company or Load Serving Entity” for each 

customer the ARC represents, and that company, typically a 

retail utility, will have ten business days to object on the 

ground the customer is not eligible under state law to sell its 

demand response. If the retail utility fails to raise a timely 

challenge, or if it fails to produce sufficient documentary 

evidence the customer is ineligible to sell its demand 

response, then PJM will “assume” state law does not prohibit 

the customer’s participation. The tariff thus requires the retail 

utility to determine whether a customer is eligible and, if it is 

not, then to compile documentary evidence substantiating its 

objection. 

In response to the revision of PJM’s tariff, the IURC 

issued an order enjoining retail customers in Indiana from 

selling demand response in the wholesale market without the 

IURC’s prior approval. See Order on Requests for Interim 

Relief, IURC Cause No. 43566 (Feb. 25, 2009). The IURC 

reasoned the injunction was necessary because retail 

customers in Indiana obtain electricity through a traditionally 

regulated monopoly utility, Indiana Michigan Power (I&M), 

and allowing retail customers to aggregate demand response 

for sale through PJM “would at least partially bypass” the 

IURC’s oversight of the retail market. Id. Noting the 

complexity of the “relationship of demand response with 

integrated resource planning and other aspects of state 

ratemaking,” the IURC required that “the status quo be 

maintained” pending its further investigation. Id.

 The IURC then filed with the Commission a Notice of 

Intervention and Protest regarding PJM’s tariff and attached a 

copy of its own order. The IURC alleged the Commission 

would “step over the line drawn by the Federal Power Act” 

between federal and state jurisdiction if it approved the new 

provisions, which “directly interfere with the regulatory 
6 

authority of the IURC.” The IURC also challenged the 

requirement that a retail utility “object and prove” a particular 

customer of an ARC is ineligible to participate in the ARC’s 

offer to sell demand response. PJM answered the protest, 

defending its tariff as “just and reasonable” and consistent 

with Order 719. 

 The Commission conditionally accepted PJM’s proposed 

tariff revisions. 128 FERC P 61,238 (2009). The 

Commission held PJM’s tariff did not encroach upon the 

IURC’s jurisdiction but it nonetheless required PJM to make 

certain revisions to recognize that some states may require a 

retail customer to obtain regulatory approval before allowing 

an ARC to sell its demand response in the wholesale market. 

The Commission also accepted the provision imposing upon 

the retail utility the burden to “object and prove” a particular 

customer is ineligible to sell demand response because Order 

719 had afforded PJM “substantial flexibility to develop 

procedures with respect to this issue.” 

 After the Commission had denied its petition for 

clarification and rehearing, the IURC petitioned this court for 

review. Because the Commission contends certain of the 

IURC’s arguments are not properly before us, we first address 

the matter of our jurisdiction, mindful of the strict limitation 

imposed by Section 313 of the Federal Power Act, 16 U.S.C. 

§ 825l. 

II. Jurisdiction 

 The IURC’s primary argument is that the revisions to 

PJM’s tariff, if approved, would “encroach on Indiana state 

jurisdictional authority,” in violation of Section 201 of the 

Federal Power Act, 16 U.S.C. § 824. First, by “presuming” 

every customer is eligible to sell demand response, the tariff 

allegedly “creat[es] an irreconcilable conflict with an Indiana 

Commission order that requires precisely the opposite”;
7 

second, by “burdening” Indiana’s monopoly utility (I&M) 

with the task of objecting to the participation of each 

individual customer, the tariff “impermissibly cross[es] the 

state-federal jurisdictional line.” The Commission responds 

that the IURC did not preserve these arguments for our review 

because the IURC did not raise them with specificity in its 

request for rehearing. We agree. 

 Section 313 of the Federal Power Act limits our review to 

objections that were “urged before the Commission in [an] 

application for rehearing[,] unless there is reasonable ground 

for [the petitioner’s] failure so to do.” 16 U.S.C. § 825l(b). 

Additionally, because an application for rehearing must “set 

forth specifically the ground or grounds upon which such 

application is based,” 16 U.S.C. § 825l(a), our jurisdiction is 

limited by the extent to which a petitioner objected “with 

specificity,” Allegheny Power v. FERC, 437 F.3d 1215, 1220 

(D.C. Cir. 2006). 

In its brief the IURC objects to “the presumption and 

objection burden placed on the state jurisdictional retail 

utilities,” but in the IURC’s request for rehearing we find only 

this single statement alluding to a jurisdictional objection: 

The IURC has argued and continues to assert 

that having the retail utility bear this 

certification requirement is an impingement on 

the IURC’s jurisdictional authority over the 

retail utility. 

For openers, we note this statement makes no reference to the 

allegedly unlawful “presumption of eligibility”; clearly, we 

cannot consider the IURC’s after-thought challenge to the 

presumption. 
8 

 Whether the IURC preserved its jurisdictional challenge 

to the “objection burden” is an only slightly more difficult 

question. The IURC mentioned the issue in its request for 

rehearing, but it did so by “referring only in a general way” to 

an argument it had made in other filings; that is not sufficient. 

Conn. Dep’t of Pub. Util. Control v. FERC, 593 F.3d 30, 36 

(D.C. Cir. 2010). See also Pub. Serv. Elec. & Gas Co. v. 

FERC, 485 F.3d 1164, 1170 (D.C. Cir. 2007) (request for 

rehearing had “merely noted the alleged error in a single 

opaque sentence”); Allegheny, 437 F.3d at 1220 (request for 

rehearing had raised objection only “indirectly” by referring 

to previous arguments). Indeed, at oral argument the IURC 

conceded it was perhaps not “as articulate as one would wish 

to be” in a request for rehearing. The IURC nevertheless asks 

us to cut it some slack because the Commission was “not 

unaware that it was navigating a jurisdictional border” when it 

issued Order 719, and in fact was “specifically made aware” 

of the IURC’s objections in filings made prior to its request 

for rehearing. 

We must, of course, decline any invitation to exceed the 

jurisdiction conferred upon the court by statute; here, the 

relevant constraint limits our review to the grounds for 

objection “set forth specifically” in the petitioner’s request for 

Commission rehearing. 16 U.S.C. § 825l(a). It therefore 

matters not what the Commission knew or should have known 

at the time. In this regard the jurisdictional provisions of the 

Federal Power Act “differ[] fundamentally” from “routine 

judicial-review statutes” under which we might excuse a 

petitioner’s failure to exhaust a claim when an agency has 

considered the argument at the urging of another party. 

ASARCO, Inc. v. FERC, 777 F.2d 764, 774 n.7 (D.C. Cir. 

1985); accord Pub. Serv. Co. of N. M. v. FERC, 863 F.2d 

1021, 1022 (D.C. Cir. 1988) (Ginsburg, J., concurring in 

denial of rehearing en banc) (jurisdictional requirement in 
9 

Natural Gas and Federal Power Acts is not a “mere 

restatement of the judicial exhaustion requirement, subject to 

the same exceptions”). Compare CTIA-Wireless Ass’n v. 

FCC, 466 F.3d 105, 117 (D.C. Cir. 2006), with Save Our 

Sebasticook v. FERC, 431 F.3d 379, 381-82 (D.C. Cir. 2005). 

 With our purview limited to the four corners of the 

IURC’s request for rehearing, we conclude the IURC has not 

satisfied the requirements of Section 313 with respect to 

either of its contentions regarding the division between 

federal and state jurisdiction. See Pub. Serv. Elec. & Gas Co., 

485 F.3d at 1170 (dismissing statutory claim raised in 

petitioner’s brief where request for rehearing had “made no 

argument to substantiate the allegation of error, never 

confronted the language of [the statute], offered no analysis, 

and cited no legal authority”). We therefore dismiss the 

IURC’s petition insofar as it argues the Commission 

encroached upon the state’s jurisdiction. 

III. The Merits 

 Turning to the portion of the petition properly before us, 

we can see readily that we must uphold the Commission’s 

order approving the disputed tariff. Our review of this matter 

is deferential: We will not set aside an order of the 

Commission unless it is “arbitrary, capricious, an abuse of 

discretion, or otherwise not in accordance with law.” 5 

U.S.C. § 706(2)(A); accord Midwest ISO Transmission 

Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004). 

Furthermore we afford substantial deference to the 

Commission’s interpretation of Order 719 as it applies to 

PJM’s tariff. See Consumers Energy Co. v. FERC, 428 F.3d 

1065, 1067-68 (D.C. Cir. 2005) (“In evaluating FERC’s 

interpretation of its own orders, we afford the Commission 

substantial deference, upholding the agency’s decision unless 

its interpretation is plainly erroneous or inconsistent with the 
10 

 

order” (internal quotation marks omitted)). The Commission’s 

order plainly satisfies our standard of review.*

 As recounted above, the Commission approved PJM’s 

allocating to the retail utility the burdens of objection and 

proof as an exercise of the “substantial flexibility” afforded 

PJM under Order 719. In its request for rehearing the IURC 

maintained “the certification requirement should be placed on 

the ARC” rather than the retail utility for the “additional 

reason” that such a rule would reduce “regulatory 

uncertainty.” According to the IURC, requiring the ARC to 

confirm a customer’s eligibility to sell demand response 

would “assure the ARC is aware of and provides information 

to” retail customers about a state’s “customer eligibility 

requirements,” thereby reducing the “likelihood of confusion, 

miscommunication, and frustration that can thwart an end-use 

customer’s ability and motivation to participate in demand 

response.” 

 On rehearing the Commission again expressly rejected 

the IURC’s proposal, reiterating that “in Order No. 719, the 

Commission granted [PJM] substantial flexibility to develop 

procedures with respect to this issue.” Order on Rehearing, 

Clarification, and Compliance, 131 FERC P 61,069, ¶ 10 

(Apr. 23, 2010). The Commission found the IURC’s proposal 

“would require the implementation of a new, parallel process 

that could confuse, complicate, or delay” the participation of 

retail customers. Id. ¶ 11. 

*

 Consequently, we do not address whether, as the Commission 

contends, a still more deferential standard of review is appropriate 

under our precedents. Cf. Alcoa Inc. v. FERC, 564 F.3d 1342, 1347 

(D.C. Cir. 2009) (applying “highly deferential” standard of review 

to Commission’s ruling on a rate making).
11 

 

 We hold the Commission adequately addressed the 

IURC’s proposal and sufficiently explained its reasons for 

rejecting it. As PJM acknowledges in its brief in support of 

the Commission: 

Ultimately, a case probably could be made for 

having either the aggregator or the distributor 

perform the essentially ministerial task of 

checking the eligibility status of a customer 

that has asked to register [as an offeror of 

demand response] with PJM. But that 

underscores that the FERC’s action was 

reasonable. 

We endorse this summary view; it has the virtues of being 

both modest and correct.*

 

*** 

 For the foregoing reasons, we dismiss the petition insofar 

as it raises jurisdictional arguments under Section 201 of the 

Federal Power Act, 16 U.S.C. § 824, and we deny the petition 

in all other respects. 

So ordered.

*

 We do not address the claims of the intervenor American Electric 

Power Service Corporation (AEP), the parent company of I&M, 

because AEP did not seek Commission rehearing of the claims in 

its brief and, as we hold in Parts II and III, the IURC preserved for 

review only its argument about regulatory uncertainty. See 

California Dep’t of Water Resources v. FERC, 306 F.3d 1121, 

1126 (D.C. Cir. 2002).