FERC v. Electric Power Supply Assn.

Summarized by:

  • Court: United States Supreme Court
  • Area(s) of Law: Administrative Law
  • Date Filed: January 25, 2016
  • Case #: 14-840
  • Judge(s)/Court Below: Kagan, J., delivered the opinion of the Court, in which Roberts, C.J., and Kennedy, Ginsburg, Breyer, and Sotomayor, JJ., joined. Scalia, J. filed a dissenting opinion, in which Thomas, J., joined. Alito, J., took no part in the consideration or decision of the cases.
  • Full Text Opinion

The FERC has authority to regulate demand response bids regarding wholesale market operators' compensation, and the Rule is valid.

The Federal Power Act (FPA) enables the Federal Energy Regulatory Commission (FERC) to regulate the sale of electric energy but leaves to the states the regulation of retail sale of electricity. Due to costs rising at periodic moments despite rules regulating market control, the FERC issued a “rule” that makes market operators pay the same price to demand response providers so long as the “net benefits test” is met, which ensures that bids save consumer’s money. The Court of Appeals for the District of Columbia vacated the rule, holding that the FERC lacked authority and the compensation scheme is arbitrary under the Administrative Procedure Act. The Supreme Court held that taken together, the FERC has authority to regulate demand response bids because wholesale rates are affected and retail sales are not affected. The FPA delegated authority to the FERC to make rates just and reasonable. As well, since the retail market will be affected by transactions at the wholesale market level, and Congress has no bar on this, it is within the FERC authority to do so. Finally, no other authority delegated by Congress can regulate the demand response and the prices of electricity would become excessive. The Court also held that the FERC engaged in “reasoned decision-making” and therefore the Court defers to the judgment of the FERC.

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