Court Rulings

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On August 22, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) vacated an order by FERC which had upheld the North American Electric Reliability Corporation’s (“NERC”) assessment of reliability based penalties on the Southwestern Power Administration (“SWPA”), an entity within the United States Department of Energy (“DOE”).  The D.C. Circuit explained that in order to authorize a monetary penalty against the federal government, the statute must unequivocally subject the government to monetary liability, something that the provisions of the Federal Power Act (“FPA”) which address enforcement of reliability do not do.

On July 18, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued a decision denying petitions for review of FERC’s orders related to Regional Transmission Organization (“RTO”) transmission expansion cost allocation for FirstEnergy Service Company (“FirstEnergy”) after it transitioned between two RTOs.  Specifically, the D.C. Circuit affirmed FERC’s rejection of FirstEnergy’s request for relief from the PJM Interconnection L.L.C.’s (“PJM”) annual allocation of transmission expansion plan costs for any project approved before FirstEnergy transitioned to that RTO. 

On July 8, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued an order denying petitions for review of FERC’s January 19, 2012 order requiring certain market mitigation measures in ISO New England Inc.’s (“ISO-NE”) Forward Capacity Market (“FCM”).  The D.C. Circuit instead deferred to FERC’s reasoning, holding that FERC based its buyer-side and supplier-side mitigation measures on substantial evidence and undertook its balancing responsibilities with appropriate consideration.  Notably, the D.C. Circuit upheld FERC’s prior decision that the FCM must have an offer-floor mechanism to keep “out of market” capacity from bidding as a price-taker and depressing market-clearing prices.

On June 23, 2014, the U.S. Supreme Court reversed the Environmental Protection Agency’s (“EPA”) “Tailoring Rule,” but affirmed EPA’s authority to regulate greenhouse gas (“GHG”) emissions under the Clean Air Act (“CAA”) Prevention of Significant Deterioration (“PSD”) permit program.  Writing for a five-member majority, Justice Antonin Scalia notably ruled that EPA could not “tailor” the PSD statutory permitting thresholds to exclude small GHG emitters from PSD program requirements.

On June 6, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“DC Circuit”) ruled that FERC’s environmental assessment of Tennessee Gas Pipeline Company, L.L.C.’s (“Tennessee Gas”) proposed “Northeast Project” violated the National Environmental Policy Act (“NEPA”).  Specifically, the DC Circuit held that FERC (1) failed to consider Tennessee Gas’ Northeast Project in conjunction with three other connected and interdependent Tennessee Gas pipeline projects, and (2) failed to provide a meaningful analysis of the cumulative impacts of all of the Tennessee Gas projects.

On June 4, 2014, the United States Court of Appeals for the Second Circuit denied an emergency motion requesting a stay of two FERC orders associated with the New York Independent System Operator, Inc.’s (“NYISO”) creation of a new capacity market local deliverability zone in the lower Hudson Valley.  The creation of the new zone requires that a certain amount of capacity serving that area be located within the zone, which could lead to higher capacity prices in that area.  The petitioners, Central Hudson Gas & Electric and the New York Public Service Commission (“NYPSC”), argued to the court that the implementation of the new capacity zone would unnecessarily expose consumers to considerably higher prices and that pending transmission developments would eventually make the zone unnecessary.

On May 23, 2014, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) vacated FERC Order No. 745, “Demand Response Compensation in Organized Wholesale Energy Markets” in its entirety as an ultra vires agency action, explaining that FERC’s rule overstepped its authority, “encroaching on the states’ exclusive jurisdiction to regulate the retail market.”  While the court based its decision on jurisdictional grounds, it said it would have vacated the order on substance also, concluding it was arbitrary and capricious to promulgate rules that over-compensate demand response providers.  The panel was split two to one.

On April 29, 2014, the United States Supreme Court (“Supreme Court”) reversed and remanded the D.C. Circuit’s 2012 decision that vacated the Environmental Protection Agency’s (“EPA”) Cross-State Air Pollution Rule (“CSAPR”).  The decision was 6-2 with Justices Antonin Scalia and Clarence Thomas dissenting.  Justice Samuel Alito recused himself from this case and therefore did not participate in the decision.

On April 15, 2014, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) fully upheld the Environmental Protection Agency’s (“EPA”) Mercury and Air Toxics Standards (“MATS”). As a result, all existing coal- and oil-fired electric utility units will be required to meet specific, numeric emission limits for mercury, particulate matter, and acid gases next year.