In a 6-2 decision on Monday, the Supreme Court ruled in favor of the Federal Energy Regulatory Commission’s (FERC) Order No. 745, or “demand response” programs, which incentivize large consumers to conserve electricity when the nation’s power grid nears peak capacity.
The decision overturned the D.C. Circuit Court of Appeals ruling from May 2014 which held that FERC over-stepped its regulatory authority in issuing Order No. 745, as its jurisdiction is limited to the wholesale power market.
Power supply companies in the Northeast and Midwest sued FERC arguing that Order No. 745 was the type of regulation that should be handled at the state-level.
Beyond the technicalities of the law, power operators have come under financial pressure in recent years as commodity prices have declined. The demand programs, if implemented, would further cut into the electric industry’s profits.
The majority opinion, written by Justice Kagan, said that the Federal Power Act “should not be read . . . to halt a practice that so evidently enables FERC to fulfill its statutory duties of holding down prices and enhancing reliability in the wholesale energy market.”
Kagan continued, “[T]he rule does not intrude on the State’s power to regulate retail sales.”
In dissent, Justice Scalia fired back at Kagan:
“[T]he majority is wrong even on its own terms, for the rule at issue here does in fact regulate ‘retail electricity sales,’ which are indisputably ‘matters . . . subject to regulation by the States’ and therefore off-limits to FERC.”
Both of the Court’s “moderate” Justices, John Roberts and Anthony Kennedy, voted with the majority. Justice Samuel Alito recused himself from the case.
The FERC v. Electric Power Supply Association decision is considered a win for both environmental advocates and the alternative energy business, as traditional sources of power are continuing to be used less and are not as profitable for the operators.
Allison Clements of the Natural Resources Defense Council commented after the ruling was issued that, “demand response is flexible and fast-acting, it enables the affordable integration of more wind and solar power into the electricity transmission grid.”
FERC’s Order No. 745 is expected to reduce electricity usage in the U.S. by 17,000 megawatts over the winter, according to the North American Electricity Reliability Corp.
[Politico] [The Hill]