United States Court of Appeals, District of Columbia Circuit
October 6, 2017
Petitions for Review of Orders of the Federal Energy
C. Parrish argued the cause for petitioner. With him on the
briefs were David G. Tewksbury, and Paul Alessio Mezzina.
Stephanie S. Lim entered an appearance.
Kenneth R. Carretta and Cara J. Lewis were on the brief for
intervenors PSEG Companies in support of petitioner.
R. Fulton, Attorney, Federal Energy Regulatory Commission,
argued the cause for respondent. With him on the brief was
Robert H. Solomon, Solicitor.
Marshall argued the cause for intervenors. With him on the
brief were Joseph Arnold Rosenthal, Rachel A. Goldwasser, and
Clare E. Kindall and Robert Louis Marconi, Assistant
Attorneys General, Office of the Attorney for the State of
Connecticut. Michael C. Wertheimer, Assistant Attorney
General, and John S. Wright, Attorney, Office of the Attorney
General for the State of Connecticut, entered appearances.
Before: Srinivasan and Wilkins, Circuit Judges, and Sentelle,
Senior Circuit Judge.
Wilkins, Circuit Judge
consider two Petitions for Review challenging Federal Energy
Regulatory Commission ("FERC" or "the
Commission") Orders denying complaints by two
electricity suppliers. See Order on Compl., New Eng.
Power Generators Ass'n, Inc. v. ISO New Eng. Inc.,
146 FERC ¶ 61, 039 (2014) ("Initial NEPGA
Order"); Order Denying Reh'g &
Clarification, New Eng. Power Generators Ass'n, Inc. v.
ISO New Eng. Inc., 150 FERC ¶ 61, 064 (2015)
("NEPGA Rehearing Order"); Order Denying Compl.,
Exelon Corp., et al. v. ISO New Eng. Inc., 150 FERC
¶ 61, 067 (2015) ("Initial Exelon Order");
Order Denying Reh'g, Exelon Corp., et al. v. ISO New
Eng. Inc., 154 FERC ¶ 61, 005 (2016) ("Exelon
challenge four FERC orders that uphold the current iteration
of the Tariff that governs electricity rates in New England.
To ensure future electricity capacity in New England,
electricity suppliers and distributors transact in a Forward
Capacity Market ("FCM"), a yearly auction in which
distributors pay suppliers for their production capacity
three years in the future. The Tariff, a patchwork of rules
and orders adopted by the Independent System Operator of New
England ("ISO-NE") and approved by FERC, governs
how FCM participants buy and sell future capacity.
Petitioners challenge two of the rules, which they contend
altered the structure of the FCM to the detriment of
Petitioners and other existing suppliers.
the New England Power Generators Association, Inc.
("NEPGA") and Exelon Corporation
("Exelon"), are electricity suppliers who
participate in New England's FCM Auction. Because they
have participated in the FCM in the past and are not
"new entrants, " they cannot reap the benefits of
the two rules challenged in this case, which benefit only new
suppliers. FERC denied complaints filed by each Petitioner
under 16 U.S.C. § 825e, and FERC subsequently denied
petitions for rehearing. Both Petitioners filed timely
appeals. This Court has jurisdiction under 16 U.S.C. §
825l(b). For the reasons explained below, the
Petitions for Review are granted.
Federal Power Act ("FPA") empowers FERC to regulate
the sale and transmission of electricity to ensure that
electricity is provided at a "just and reasonable"
rate. 16 U.S.C. § 824d(a). All rates for or in
connection with jurisdictional sales and transmission service
are subject to review by FERC to ensure that the rates are
just and reasonable and not unduly discriminatory or
preferential. Id. §§ 824d(e), 824e(a). A
public utility first proposes rates with FERC pursuant to
section 205 of the FPA, and the utility has the burden to
show that its rate is lawful. Id. §§
824d(c), 824d(e). A negatively affected party can challenge
the rate by filing a complaint with FERC, and the challenging
party then carries the burden to show that the existing rate
has become unjust or unreasonable. Id. §
824e(a), (b). If FERC agrees that the rate is unjust or
unreasonable, it must establish a new rate.
is not electricity itself but the ability to produce it when
necessary." Conn. Dep't of Pub. Util. Control v.
FERC, 569 F.3d 477, 479 (D.C. Cir. 2009) (internal
quotation marks omitted). Pursuant to the FPA, FERC regulates
capacity markets, "which dictate the amount of
electricity available for production and transmission when
needed." New Eng. Power Generators Ass'n v.
FERC (NEPGA I), 757 F.3d 283, 285 (D.C. Cir.
2014) (citing Conn. Dep't of Pub. Util. Control,
569 F.3d at 479). Order Number 888 is the bedrock of
FERC's electricity regulatory regime. In that order,
"FERC undertook to promote wholesale competition through
open access and nondiscriminatory transmission
services." Id. at 285-86. To accomplish that
goal, FERC "encouraged the formation of independent
systems operators (ISOs) to administer transmission services
and new markets for wholesale electricity transactions."
Sithe/Indep. Power Partners, L.P. v. FERC, 285 F.3d
1, 2 (D.C. Cir. 2002). ISOs manage the electricity grid on
behalf of transmission-owning member utilities,
"providing generators with access to transmission lines
and ensuring that the network conducts electricity
reliably." FERC v. Elec. Power Supply
Ass'n, 136 S.Ct. 760, 768 (2016).
provide open access to the transmission lines at rates
established by a single tariff. In setting the tariff, ISOs
"adopt transmission (and ancillary services) pricing
policies to promote the efficient use of, and investment in,
generation, transmission, and consumption of wholesale
electric power in specific energy capacity systems."
NEPGA I, 757 F.3d at 286 (internal quotation marks
omitted). Tasked with ensuring the reliability of electric
power for their geographic region, ISOs "must implement
a scheme that will incent resources to provide sufficient
energy capacity." Id.
ensure that there is sufficient electricity to meet demand in
the near-term future, ISO-NE administers a Forward Capacity
Auction ("FCA"). An FCA is a market where energy
suppliers sell their energy capacity to energy distributors
three years in advance of a year-long commitment period. Each
year, ISO-NE determines the amount of capacity that will be
required for system reliability in three years and requires
that amount (the installed capacity requirement or
"ICR") to be purchased at auction. The auctions are
"descending clock" auctions, where the starting
price is high and suppliers indicate how much capacity they
will provide at that price, then the price decreases in each
successive round of the auction resulting in the aggregate
quantity of capacity offered by suppliers decreasing as the
auction proceeds. The auction is over when the aggregate
amount of capacity offered equals the ICR. Suppliers who