Energy disputes have it all – States v Feds, markets v regulators, environment v economy – with liberals, conservatives and rabid partisans in each camp.

The FERC v EPSA (2016) US Supreme Court lawsuit was a flat out challenge to Federal Energy regulators right to make market rules. The agency acted (to authorize payments to energy customers who reduced consumption during peak times) and incumbent power generators sued.

Justice Kagan issued a clearly written decision on this complicated issue – vindicating the FERC rule about payments to customers who agree to trim electricity use during times of peak demand.

FEDERALISM – Feds can regulate electricity going across state lines, Congress explicitly authorized that. Within states though, only the public utility departments can make regulations. Those boundaries are easier to state on paper than in a heated big money dispute.

COST OF ELECTRICITY – Even in peak periods, when wholesale market costs surge, consumers pay the same rate for each unit of electricity. They feel no pinch, and so keep running the AC as before. Insulating consumers from price fluctuations in peak periods, compelled utilities to purchase more juice from pricey generators, consequently driving up wholesale prices

Wholesale demand response, pays consumers for commitments to curtail their use of power, so as to prevent grid breakdowns and curb wholesale rates.

FERC’s rule was challenged by those who want to sell electricity, not reduce its use, during peak use times, when prices are highest.

NOT PROHIBITED, NOT UNREASONABLE – The Supreme Court ruled that the FERC was allowed to make such demand response payment rules – their authority from Congress was limited but otherwise broad. Part of the agency rule respected State’s rights by permitting them to opt out.

The Court looked the Agency’s justification for its rule and decided it was adequately reasoned. It is not the job of the Courts to tinker with or modify agency rules. A court is not to ask whether a regulatory decision is the best one possible or even whether it is better than the alternatives. It made enough sense and was not prohibited – so the Supreme Court OK’d the rule.

The Commission, not this or any other court, regulates electricity rates. Demand response – payments for not using electricity survived its court challenge.

Federal Energy Regulatory Commission v. Electric Power Supply Association, Supreme Court 2016