High court to hear arguments in case challenging FERC electricity rule

The Supreme Court will hear arguments in two cases today that accuse a federal agency of regulatory overreach.

The combined cases, for which the justices have reserved an hour for arguments, question whether the Federal Energy Regulatory Commission (FERC) had the authority to issue a rule that requires electric utilities to pay end users to cut their consumption when demand rises and whether the rule is reasonable.

The Electric Power Supply Association and four other energy industry groups challenged the rule, arguing that FERC went too far and encroached on states’ exclusive authority to regulate the retail market.

In May, the D.C. Circuit Court of Appeals struck down the agency rule in a 2-1 ruling. FERC, which is now appealing that decision, argues that it has the authority under the Federal Power Act to regulate any practice that affects wholesale markets. It contends that it’s program, known as demand response compensation, reduces retail consumption and ultimately lowers wholesale prices.

In its decision, the D.C. Court of Appeals, however, disagreed. The majority said that, under FERC’s rationale, the agency would have the authority to regulate any number of areas, including the steel, fuel and labor markets.

“The commission’s authority must be cabined by something sturdier than creative characterizations,” Judge Janice Rogers Brown wrote.

The Supreme Court is now being asked whether FERC went too far and overstepped its regulatory authority. Justice Samuel Alito recused himself earlier this year when the court considered and ultimately decided to take the case, signaling that today’s arguments will likely be heard by a panel of eight.