[JURIST] The US Supreme Court [official website] ruled [opinion, PDF] 6-2 Monday in favor of the Federal Energy Regulatory Commission (FERC) [official website] in the case of FERC v. EPSA [SCOTUSblog materials], upholding a 2011 rule regulating the market for wholesale demand response. Demand response is a program in which consumers receive a payment for reductions in electricity use during peak times. In Monday’s ruling, the court reversed and remanded a May 2014 decision [opinion, PDF] by the US Court of Appeals for the District of Columbia Circuit that struck down the FERC rule, known as FERC Order 745 [rule, PDF]. Justice Elena Kagan authored the opinion for the majority, while Justices Antonin Scalia and Clarence Thomas joined in a dissenting opinion. Justice Samuel Alito did not take part in the case. The court explained its reasoning in three points: first, the regulation of demand response under Order 745 directly affects wholesale rates; second, FERC has not regulated retail sales; and third, these two aforementioned conclusions establish that FERC Order 745 complies with the agency’s authority under the Federal Power Act (FPA). The opinion notes that Order 745 enables FERC to fulfill its statuary duty to maintain just and reasonable electricity prices, while enhancing reliability in the wholesale energy market: “FERC’s statutory authority extends to the Rule at issue here addressing wholesale demand response. The Rule governs a practice directly affecting wholesale electricity rates. And although (inevitably) influencing the retail market too, the Rule does not intrude on the States’ power to regulate retail sales.”
Collectively, recent federal legislation and technological innovation reduced barriers to entry in the electricity supply market leading to new developments such as demand response [JTLP student note], which triggered new legal challenges over the jurisdictional divide between the federal government and the states in US power markets. The court heard oral argument [JURIST report] in FERC v. EPSA on October 14. On behalf of FERC, the Solicitor General argued that Order 745 is a strong example of cooperative federalism, and the policy brings about billions of dollars in consumer benefits by lowering wholesale rates [SCOTUSblog op-ed]. The Electric Power Supply Association (EPSA) [official website] argued that Order 745 lures retail electricity consumers to participate in the wholesale market, which is prohibited by the FPA. The court granted certiorari in this case [JURIST report] and consolidated the dispute with another challenge from the EPSA, EnerNOC, Inc. v. EPSA [SCOTUSblog materials], in May.