Moving Past Dual Federalism to Advance Electric Grid Neutrality

In this short response piece to Sharon Jacobs's excellent article "Bypassing Federalism," I argue that the Federal Energy Regulatory Commission, by allowing retail participation of consumers' "non-use" of electricity in wholesale markets to reduce peak demand in lieu of increasing generation, is not bypassing federalism but is simply navigating a complex jurisdictional sphere that has long existed in energy law. In a rapidly changing technological world, it is time for energy law to definitively cast away its stagnant vestiges of dual federalism. Electricity has changed in so many ways since the passage of the Federal Power Act ("FPA") — a 1935 statute that allocated jurisdiction over electricity between states and the federal government — that the Act's division of state and federal authority is increasingly irrelevant and artificial. Indeed, the Act as originally written seemed to partially recognize the potential fuzziness of divisions of authority, giving FERC (which was then the Federal Power Commission) jurisdiction over wholesale electricity sales in interstate commerce but not over the vaguely-termed "any other sale of electric energy," with exceptions. And the definition of wholesale sales of electricity has changed dramatically since 1935 with expanded generator and consumer access to wholesale markets, including consumer access through demand response (reduced electricity use or "non-use" at certain times). Increasingly, electricity flows from small, medium, and large generators within and across state lines to small, medium, and large population centers. This flow is on an ever more "neutral" electricity transmission and distribution grid — one that is blind to whether the generator using the lines to transport electricity is the owner of a small wind farm or a massive coal-fired power plant — and that enables more competition in generation. Further, the energy flow on the grid is increasingly bi-directional: population centers are no longer passive consumers of electricity. Retail electric customers who once simply bought their electricity from utilities are now sophisticated participants in the energy system, offering electricity to utilities experiencing high demand or curtailing electricity use to alleviate this demand, thus creating "negawatts." With the growing participation of a geographically diverse array of small, medium, and large actors in the electricity system, the system is increasingly a national one. Private individuals, local governments, states, regional entities, and the federal government all play crucial roles within this national system. Attempting to sort out these roles through a dual federalism framework — one that clearly allocates authority to state or federal actors — is unrealistic and forced in light of current energy governance needs. Further, forcing electricity governance into artificial dual federal-state frameworks creates obstacles to the goal of expanding the number of negawatt generators in wholesale energy markets, deterring a beneficial trend that could decrease prices for customers and make electricity generation and consumption "greener" and more efficient.