Utility companies are confident they can successfully block the Supreme Court from siding with consumers, states and environmentalists who want to protect a landmark federal rule that pays consumers for reducing their electricity use when the grid is stressed, lowering electricity costs.
The demand-side management and compensation program was instituted a few years ago by the Federal Energy Regulatory Commission to create a way of managing the electric grid without building new, and sometimes, expensive power plants.
The result of the program, known as Order 745, would be to reduce electricity costs passed on to homeowners. Environmentalists argue that the rule would help states comply with the Environmental Protection Agency’s climate regulations for existing power plants.
But utility companies represented by the Electric Power Supply Association do not see it that way and managed to vanquish the rule in a 2014 decision EPSA, et al v. FERC by the U.S. Court of Appeals for the District of Columbia. The D.C. Circuit is the highest court in the U.S. for challenging government regulations ahead of the Supreme Court.
At the heart of the D.C. Circuit decision is a difference of opinion over jurisdiction. The court ruled that the commission overstepped its authority under the Federal Power Act in instituting the program by affecting the rates of customers, which are supposed to be set by states.
The commission’s jurisdiction is limited to the wholesale market, which is the domain of the federal government in utility regulation. But because the court said the order affects rates in the state-based retail markets, it was deemed an overreach by the D.C. Circuit court.
The power supply group and the utilities it represents oppose Order 745 because they argue it distorts the commission-overseen capacity markets that were designed to compensate power plant generators, not demand-side resources that do not generate electricity. They argue that the rule removes the incentive for power plants, which in the long term could cause reliability issues if fewer generators are available to dispatch electricity.
The Federal Energy Regulatory Commission, with a broad array of supporters, fought the Circuit Court’s decision, asking the D.C. Circuit to rehear the case which it refused to do in the fall.
Earlier this year, however, the commission and the U.S. solicitor general filed a petition with the Supreme Court to hear the case, and the D.C. Circuit has agreed to stay its mandate to repeal the regulation until after the high court rejects or accepts the case.
On Thursday, the Electric Power Supply Association and the utility industry will send the high court its response to the commission’s petition and the additional arguments filed by states, consumer groups and environmentalists seeking to reverse the D.C. Circuit’s decision.
The Natural Resources Defense Council, with 11 others consumer and environmental groups, filed amicus briefs Feb. 17 with the Supreme Court to uphold the Federal Energy Regulatory Commission’s order.
The council said in a blog post summarizing the brief that the order is “an important rule if you like to keep your heat on when the polar vortex attacks, save money on electricity, and promote clean energy.”
But a utility industry official privy to the case says the arguments that proponents are making to squash the D.C. Circuit’s decision are based on policy and not the law. And “this will be a legal decision,” not a policy decision.
The industry’s brief Thursday to the Supreme Court will underscore the strong legal case it has in the original May 2014 decision and urge the court to act accordingly to reject FERC’s petition for Supreme Court review.
The utility official says it is likely the case will be taken up by the high court. He said the Supreme Court has become more accustomed to ruling on environmental and energy regulations, noting in April that it will take up a case challenging EPA’s mercury and air toxics rule for utility companies.
