Source: http://book.dislib.info/b1-other/558480-1-syllabus-note-where-feasible-syllabus-headnote-will-released-bei.php
Timestamp: 2018-05-22 11:34:24
Document Index: 454832474

Matched Legal Cases: ['§824', '§824', '§35', '§35', '§824', '§824', '§824', '§824', '§791', '§824', '§824']

OCTOBER TERM, 2015 1
THE DISTRICT OF COLUMBIA CIRCUIT*
No. 14–840. Argued October 14, 2015—Decided January 25, 2016 The Federal Power Act (FPA) authorizes the Federal Energy Regulatory Commission (FERC) to regulate “the sale of electric energy at wholesale in interstate commerce,” including both wholesale electricity rates and any rule or practice “affecting” such rates. 16 U. S. C.
§§824(b), 824d(a), 824e(a). But it places beyond FERC’s power, leaving to the States alone, the regulation of “any other sale”—i.e., any retail sale—of electricity. §824(b).
In periods of high electricity demand, prices can reach extremely —————— * Together with No. 14–841, EnerNOC, Inc., et al. v. Electric Power Supply Association et al., also on certiorari to the same court.
2 FERC v. ELECTRIC POWER SUPPLY ASSN.
Syllabus high levels as the least efficient generators have their supply bids accepted in the wholesale market auctions. Not only do rates rise dramatically during these peak periods, but the increased flow of electricity threatens to overload the grid and cause substantial service problems. Faced with these challenges, wholesale market operators devised wholesale demand response programs, which pay consumers for commitments to reduce their use of power during these peak periods. Just like bids to supply electricity, offers from aggregators of multiple users of electricity or large individual consumers to reduce consumption can be bid into the wholesale market auctions. When it costs less to pay consumers to refrain from using power than it does to pay producers to supply more of it, demand response can lower these wholesale prices and increase grid reliability. Wholesale operators began integrating these programs into their markets some 15 years ago and FERC authorized their use. Congress subsequently encouraged further development of demand response.
Spurred on by Congress, FERC issued Order No. 719, which, among other things, requires wholesale market operators to receive demand response bids from aggregators of electricity consumers, except when the state regulatory authority overseeing those users’ retail purchases bars demand response participation. 18 CFR §35.28(g)(1). Concerned that the order had not gone far enough, FERC then issued the rule under review here, Order No. 745.
§35.28(g)(1)(v) (Rule). It requires market operators to pay the same price to demand response providers for conserving energy as to generators for producing it, so long as a “net benefits test,” which ensures that accepted bids actually save consumers money, is met. The Rule rejected an alternative compensation scheme that would have subtracted from LMP the savings consumers receive from not buying electricity in the retail market, a formula known as LMP-G. The Rule also rejected claims that FERC lacked statutory authority to regulate the compensation operators pay for demand response bids.
1. The FPA provides FERC with the authority to regulate wholesale market operators’ compensation of demand response bids. The Court’s analysis proceeds in three parts. First, the practices at issue directly affect wholesale rates. Second, FERC has not regulated retail sales. Taken together, these conclusions establish that the Rule complies with the FPA’s plain terms. Third, the contrary view would Cite as: 577 U. S. ____ (2016) 3
conflict with the FPA’s core purposes. Pp. 14–29.
(a) The practices at issue directly affect wholesale rates. The FPA has delegated to FERC the authority—and, indeed, the duty—to ensure that rules or practices “affecting” wholesale rates are just and reasonable. §§824d(a), 824e(a). To prevent the statute from assuming near-infinite breadth, see e.g., New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U. S. 645, 655, this Court adopts the D. C. Circuit’s common-sense construction limiting FERC’s “affecting” jurisdiction to rules or practices that “directly affect the [wholesale] rate,” California Independent System Operator Corp. v. FERC, 372 F. 3d 395, 403 (emphasis added). That standard is easily met here. Wholesale demand response is all about reducing wholesale rates; so too the rules and practices that determine how those programs operate. That is particularly true here, as the formula for compensating demand response necessarily lowers wholesale electricity prices by displacing higher-priced generation bids. Pp. 14–17.
(b) The Rule also does not regulate retail electricity sales in violation of §824(b). A FERC regulation does not run afoul of §824(b)’s proscription just because it affects the quantity or terms of retail sales. Transactions occurring on the wholesale market have natural consequences at the retail level, and so too, of necessity, will FERC’s regulation of those wholesale matters. That is of no legal consequence. See, e.g., Mississippi Power & Light Co. v. Mississippi ex rel.
Moore, 487 U. S. 354, 365, 370–373. When FERC regulates what takes place on the wholesale market, as part of carrying out its charge to improve how that market runs, then no matter the effect on retail rates, §824(b) imposes no bar. Here, every aspect of FERC’s regulatory plan happens exclusively on the wholesale market and governs exclusively that market’s rules. The Commission’s justifications for regulating demand response are likewise only about improving the wholesale market. Cf. Oneok, Inc. v. Learjet, Inc., 575 U. S.
___, ___. Pp. 17–25.
(c) In addition, EPSA’s position would subvert the FPA. EPSA’s arguments suggest that the entire practice of wholesale demand response falls outside what FERC can regulate, and EPSA concedes that States also lack that authority. But under the FPA, wholesale demand response programs could not go forward if no entity had jurisdiction to regulate them. That outcome would flout the FPA’s core purposes of protecting “against excessive prices” and ensuring effective transmission of electric power. Pennsylvania Water & Power Co.
v. FPC, 343 U. S. 414, 418; see Gulf States Util. Co. v. FPC, 411 U. S.
747, 758. The FPA should not be read, against its clear terms, to halt a practice that so evidently enables FERC to fulfill its statutory duFERC v. ELECTRIC POWER SUPPLY ASSN.
ties of holding down prices and enhancing reliability in the wholesale energy market. Pp. 25–29.
2. FERC’s decision to compensate demand response providers at LMP—the same price paid to generators—instead of at LMP-G, is not arbitrary and capricious. Under the narrow scope of review in Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29, 43, this Court’s important but limited role is to ensure that FERC engaged in reasoned decisionmaking—that it weighed competing views, selected a compensation formula with adequate support in the record, and intelligibly explained the reasons for making that decision. Here, FERC provided a detailed explanation of its choice of LMP and responded at length to contrary views. FERC’s serious and careful discussion of the issue satisfies the arbitrary and capricious standard. Pp. 29–33.
SCALIA, J. filed a dissenting opinion, in which THOMAS, J., joined.
ALITO, J., took no part in the consideration or decision of the cases.
Cite as: 577 U. S. ____ (2016) 1
The Federal Power Act (FPA or Act), 41 Stat. 1063, as amended, 16 U. S. C. §791a et seq., authorizes the Federal Energy Regulatory Commission (FERC or Commission) to regulate “the sale of electric energy at wholesale in inter­ state commerce,” including both wholesale electricity rates and any rule or practice “affecting” such rates. §§824(b), 824e(a). But the law places beyond FERC’s power, and leaves to the States alone, the regulation of “any other sale”—most notably, any retail sale—of electricity.
§824(b). That statutory division generates a steady flow of jurisdictional disputes because—in point of fact if not of law—the wholesale and retail markets in electricity are inextricably linked.
These cases concern a practice called “demand re­
sponse,” in which operators of wholesale markets pay electricity consumers for commitments not to use power at certain times. That practice arose because wholesale market operators can sometimes—say, on a muggy August day—offer electricity both more cheaply and more reliably by paying users to dial down their consumption than by paying power plants to ramp up their production. In the regulation challenged here, FERC required those market operators, in specified circumstances, to compensate the two services equivalently—that is, to pay the same price to demand response providers for conserving energy as to generators for making more of it.
Two issues are presented here. First, and fundamen­ tally, does the FPA 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 compensa­ tion? The court below ruled against FERC on both scores.
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