Why Are Federal Energy Regulators Disrespecting States’ Rights?

An illustration of an eagle superimposed on a rooftop with solar panels.

By David J. Hayes
April 30, 2020

The Trump administration knows better than to disrespect states’ energy rights. In a recent Federal Register entry, the administration confirmed that the Federal Energy Regulatory Commission (FERC) is required to defer to state choices regarding electricity generation, quoting the Federal Power Act and Supreme Court opinions. The administration summarized the law as follows:

Congress limited the jurisdiction of FERC “to those matters which are not subject to regulation by the States,” including “over facilities used for the generation of electric energy.” Indeed, “the States retain their traditional responsibility in the field of regulating electrical utilities for determining questions of need, reliability, cost, and other related state concerns.” [84 Fed. Reg. 32530 (July 8, 2019)]

Based on this authority, FERC should be respecting and accommodating state energy generation choices when conducting wholesale electricity sales across state lines under the Federal Power Act.

FERC, however, is doing the opposite. The Commission is not treating state subsidies of clean power as the natural consequence of the broad authority that the Federal Power Act gives to the states “over facilities used for the generation of electric energy.” Instead, in the PJM minimum offer price rule (MOPR) decision, the administration’s hand-picked commissioners are treating state-supported clean energy as an “out-of-market” distortion that must be undone. FERC’s draconian remedy will boost capacity market payments to incumbent fossil fuel energy suppliers, while barring state-supported clean energy from receiving payments for providing similar services. Dissenting Commissioner Richard Glick aptly described the maneuver as forcing “a system of bureaucratic pricing ... so pervasive that it would have made the Kremlin economists in the old Soviet Union blush.”

We know what is going on here. The Commission is attacking state-supported clean energy because it is competing effectively against administration-favored fossil fuel sources. Clean energy is the villain in FERC’s eyes. Never mind that the federal government doles out massive subsidies to fossil fuel energy, and that coal and gas pay no market price for the climate damage they are causing.

So don’t buy the FERC argument that it is “leveling the playing field.” FERC is aggressively tilting the interstate electricity market against clean energy, undercutting clean energy preferences that the Federal Power Act authorizes states to implement, and significantly raising consumer electricity costs in the process.

State attorneys general, acting to protect their states’ rights to pursue state clean energy and climate goals in the PJM region, have had enough. They are taking their beef to the courts (see below).

There is more danger to states’ energy rights on the horizon, however. Earlier this month, FERC received an invitation to squash an important, state-based clean energy innovation that falls squarely within state authority under the Federal Power Act. Specifically, FERC has been asked to claim jurisdiction over energy produced by roof-top residential customers and other local, in-state energy generators.

In normal times, a petition of this sort would receive short shrift. After all, FERC has previously concluded that residential roof-top and other local generators are appropriately regulated at the state level through net metering arrangements. It is hard to imagine any pluses to having this Commission big-foot its way into these state waters.

These are not normal times at FERC, however. Many are concerned that FERC may look kindly on this petition and assert federal authority over net metering, given the Commission’s obvious antipathy for state-supported clean energy initiatives. So, not trusting this Commission and wasting no time, multiple state attorneys general have filed intervention papers (see below) to stop this politically active Commission from inserting itself in net metering matters.

In sum, it is evident that the Federal Energy Regulatory Commission has it out for state-supported clean energy. Thankfully, state attorneys general are committed to stopping the Commission from unlawfully and imprudently holding back state progress on clean energy matters. Follow this space; a lot is at stake.

David J. Hayes is a nationally recognized environmental, energy and natural resources lawyer who leads the State Energy & Environmental Impact Center.