Important Environmental Victory in U.S. Supreme Court

Jerry Elmer

Note:  This blog, originally posted on January 25, was updated on February 2 with the addition of a new final paragraph, which appears below in italics.

Earlier today, the United States Supreme Court ruled 6-2 to uphold the legal authority of the Federal Energy Regulatory Commission (FERC) to regulate Demand Response (DR) in wholesale, interstate electricity markets.  On both of the major issues in the case, the Supreme Court agreed completely with the positions taken in an amicus curiæ brief filed with the Court by CLF and other environmental organizations.

This was a major victory for the environment, because it will have the effect of substantially reducing carbon emissions from the electricity sector; and it was a major victory for electricity ratepayers because it will have the effect of substantially reducing the electricity bills of customers.

You can see detailed background on the case in my February 19, 2015 blog, including an explanation of what DR is and exactly how it reduces both carbon emissions and electricity bills.

In my May 7, 2016 blog, I reported that the Supreme Court had agreed to hear the case (as CLF and others had requested), and I explained the two specific questions that the Supreme Court agreed to address:

  • Does FERC have jurisdiction (that is, legal authority) to regulate DR in wholesale markets? (CLF said “yes.”)
  • If yes, was FERC’s decision to require relatively generous compensation for DR “arbitrary and capricious” (a legal term meaning not legally acceptable). (CLF said “no”; that is, FERC’s mandate for generous compensation was fine.)

And in my October 18 blog, I reported on the oral argument at the U.S. Supreme Court, which I was honored and privileged to attend. Note that mid-way through that blog, I pointed out that, in its amicus curiæ brief, CLF had observed that in the Energy Policy Act of 2005 Congress had specifically given FERC jurisdiction to regulate DR – and that, at oral argument, Justice Kagan had been careful to mention this fact. In my October blog I observed that Justice Kagan was absolutely correct, and that that fact ought to decide the case.

Today the Supreme Court issued its decision, and the decision was written by Justice Kagan. And this is what she said:

In the Energy Policy Act of 2005, [Congress] declared as the policy of the United States that demand response shall be encouraged. In particular, Congress directed, demand response systems shall be facilitated, and unnecessary barriers to demand response participation in energy markets shall be eliminated.

Slip Opinion, at 9; statutory citation and internal quotation marks omitted.

The Supreme Court held, unequivocally, that FERC has jurisdiction to regulate DR; and then it went on to rule that the relatively generous compensation that FERC has ordered by given to DR was perfectly legal and proper. In short, the Supreme Court ruled on both issues exactly as CLF and other environmental organizations had asked it to rule. You can see the full text of the Supreme Court’s opinion here.

This case saw an identity of interests between environmentalists and ratepayer advocates that will become increasingly frequent in the future.  Environmentalists urged the Supreme Court to support DR, because DR reduces carbon emissions and other dangerous air pollutants. Consumer advocates and attorneys general from many states urged the Supreme Court to support DR, because DR saves ratepayers literally (not figuratively) billions of dollars. It was deeply gratifying to have had the opportunity to work on this case that saw a joint effort by environmentalists and ratepayer advocates.

New paragraph added Feb. 2:  When I originally posted this blog on Jan. 25, I made two principal points:  that the Supreme Court’s ruling in the EPSA case was broad, and that it was in the public interest.  I was therefore gratified when, three days later, the New York Times published an editorial about the case that came to the same conclusions:

In this decision, like in previous rulings upholding pollution regulations issued by the Environmental Protection Agency, the Supreme Court is clearly saying that regulators have broad discretion to enforce federal laws.  Their job is not to protect the profits of a segment of an industry.  Regulators ought to do what is in the public interest, which is exactly what the energy commission’s rule [on DR] does. 

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