In challenging Federal Energy Regulatory Commission orders that established rules for the participation of electric storage resources (ESRs) in the capacity, energy, and ancillary service markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs), the American Public Power Association and several other power industry groups are seeking to enforce the Federal Power Act’s jurisdictional divide, not veto FERC’s rate authority.
APPA, American Municipal Power, the Edison Electric Institute, and the National Rural Electric Cooperative Association recently emphasized this point in a joint reply brief filed with the U.S. Court of Appeals for the District of Columbia Circuit.
Groups filed opening brief in October
The groups on Oct. 30 filed their joint opening brief at the D.C. Circuit in their appeal of FERC Order Nos. 841 and 841-A. In that filing, the groups argued that the orders disregard the bright line between federal and state jurisdiction.
Order No. 841, issued in February 2018, adopted rules aimed at removing barriers to the participation of ESRs in wholesale power markets operated by RTOs and ISOs.
At the time, several organizations, including the Association, asked FERC to reconsider some aspects of Order No. 841, arguing that FERC was overstepping its jurisdictional authority and encroaching on state and local authority over distribution utilities and networks to the extent the orders would override restrictions on wholesale market participation for ESRs interconnected to an electric distribution system or behind a retail customer meter – what the groups referred to as “distributed storage.” FERC declined to reconsider its jurisdictional rulings, and the Association and others filed their appeal.
Reply brief filed on March 2
In a reply brief filed with the appeals court on March 2, APPA, AMP and the others responded to FERC arguments that its conclusions had been legally sound.
As a threshold matter, the groups responded to arguments by FERC that the power groups lack legal standing to challenge Order Nos. 841 and 841-A at this time. FERC maintained that the court should not hear the groups’ appeal because the relief they are seeking – the right for state and local regulators to prohibit distributed storage from participating in RTO/ISO markets – depends on the decisions of those regulators, not the court.
The Association and other parties explained that court review was necessary in order to ensure that a prohibition on distributed storage participation could even be considered by state and local regulators, arguing that, without relief from the court, “Petitioners could neither obtain nor implement a broad prohibition because the orders forbid it.” The groups also pointed out that some members of APPA, NRECA and AMP could act on their own to prohibit participation.
In response to FERC’s arguments that the agency properly applied its authority over wholesale sales of electricity in the storage rule, the groups reiterated their argument that the orders “impermissibly cross” the FPA’s bright jurisdictional line that maintains state authority over distribution facilities.
“Petitioners seek only to affirm a state’s FPA authority to broadly prohibit distributed storage wholesale market participation as an important tool to avoid adverse distribution systems impacts,” the groups told the court.
The power groups argued that, while FERC regulates wholesale rates, state and local authority over distribution facilities allows retail regulators to prohibit direct wholesale market participation by distributed storage. “Petitioners distinguish regulating ‘how’ resources participate in wholesale markets, which the FPA delegates to FERC, from ‘whether’ distributed storage can participate in those markets, which the FPA leaves with states,” they said.
The power groups said that they “do not seek veto power over FERC’s ‘how’ authority, but a ruling that FERC exceeded its authority by forbidding states from broadly prohibiting distributed storage participation in wholesale markets.”
With respect to the storage orders, FERC “exceeded its authority by essentially requiring that distribution facilities provide access for wholesale market participation, thereby depriving states of their FPA authority over those facilities.” Pointing to a prior ruling by the D.C. Circuit, the groups argued that “when faced with a similar question, this court found states retain authority to decide “whether” facilities they regulate should participate in wholesale markets.”
The groups also refuted FERC’s argument that the Commission properly declined to apply an “opt-in/opt-out” framework to distributed storage.
NARUC, TAPS also submitted reply briefs
The National Association of Regulatory Utility Commissioners (NARUC) also filed an appeal of Order Nos. 841 and 841-A, raising objections similar to the issues raised by APPA, EEI, NRECA, and AMP. NARUC’s appeal (No. 19-1142) has been consolidated with the appeal made by the power groups in the D.C. Circuit.
Transmission Access Policy Study Group (TAPS) intervened in the appeal in support of APPA, EEI, NRECA, and AMP.
NARUC and TAPS also filed reply briefs in the proceeding on March 2.
For its part, NARUC said that FERC is attempting to distract the court by framing its argument in terms of wholesale market rates, rather than jurisdiction. “FERC takes this a step further and asserts incorrectly that the appropriate standard of review is the ‘particularly deferential’ standard reserved for ratemaking and other technical matters.”
But the case is not about wholesale rates, however, NARUC said. Rather, it is about statutory interpretation of FERC and state jurisdiction under the FPA.
“The FPA unambiguously provides that FERC’s jurisdiction is limited to wholesale transactions in interstate commerce and does not extend to local facilities on the distribution system,” NARUC argued.
The language in the storage orders “that purports to ban states from prohibiting local storage resources from participating in wholesale markets is clearly an impermissible attempt by FERC to impinge on state jurisdiction.”
NARUC said the court should find that FERC cannot regulate state action in this way and should vacate that portion of the storage orders, which is unnecessary to achieve the objective of the orders of removing barriers in wholesale markets.
TAPS said that FERC in the storage orders failed to adequately address the new, real-world burden the orders will impose on distribution utilities.
The orders’ “generic statements about the benefits of wholesale market participation by electric storage resources in general do not constitute an adequate evaluation of the burden on distribution utilities” from the storage orders’ requirements related to a subset of those resources—i.e., those connected to distribution facilities or behind the retail meter (“distributed storage”).