United States Court of Appeals, District of Columbia Circuit
NRG Power Marketing, LLC, and GenOn Energy Management, LLC, Petitioners
Federal Energy Regulatory Commission, Respondent PSEG Energy Resources & Trade LLC, et al., Intervenors
May 12, 2017
Petitions for Review of Orders of the Federal Energy
Lee Shepherd, Jr. argued the cause for petitioners. With him
on the briefs were John N. Estes III, Paul F. Wight, Jeffrey
A. Lamken, Abraham Silverman, and Cortney Madea.
J. Banta, Senior Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on the
brief was Robert H. Solomon, Solicitor.
M. Flynn argued the cause for intervenors. With him on the
brief were Ryan J. Collins, Jennifer H. Tribulski, Gary J.
Newell, Larry F. Eisenstat, Richard Lehfeldt, Delia D.
Patterson, Randolph Elliott, Paul M. Breakman, Scott H.
Strauss, Jeffrey A. Schwarz, Stefanie Brand, Stuart A.
Caplan, Richard M. Zuckerman, Christopher S. Porrino,
Attorney General, Office of the Attorney General for the
State of New Jersey, Carolyn McIntosh, Deputy Attorney
General, Robert A. Weishaar, Jr., and Adrienne E. Clair.
Dennis Lane entered an appearance.
Brown and Kavanaugh, Circuit Judges, and Sentelle, Senior
KAVANAUGH CIRCUIT JUDGE.
Transmission Organizations are non-profit entities that
oversee the transmission of electricity from generators to
utilities. Under Section 205 of the Federal Power Act and
FERC's regulations, Regional Transmission Organizations
file their proposed rate schemes with FERC. 16 U.S.C. §
824d(c); 18 C.F.R. § 35.34(j)(1)(iii). Section 205
allows FERC to suggest "minor" modifications to a
proposal made by a Regional Transmission Organization.
Western Resources, Inc. v. FERC, 9 F.3d 1568, 1579
(D.C. Cir. 1993). Here, we must determine whether Section 205
allows FERC to suggest modifications that are more than
"minor" and, if not, whether FERC violated that
limitation on its authority.
Interconnection is a Regional Transmission Organization. In
this case, acting under Section 205, PJM filed with FERC a
package of proposed changes to PJM's rate structure. But
FERC did not accept PJM's proposal because FERC concluded
that the proposal as it stood was not just and reasonable.
See 16 U.S.C. § 824d(a). FERC then suggested
modifications to the proposal that would, in FERC's view,
make the proposal just and reasonable. FERC's
modifications created a new rate scheme that was
significantly different from PJM's proposal and from
PJM's prior rate design. PJM nonetheless accepted
electricity generators - NRG Power Marketing, GenOn Energy
Management, and PJM Power Providers - have petitioned for
review of FERC's decision. They argue that FERC's
proposed modifications exceeded the agency's authority
under Section 205 of the Federal Power Act.
agree. Section 205 does not allow FERC to make modifications
to a proposal that transform the proposal into an entirely
new rate of FERC's own making. Here, FERC contravened
that limitation on its Section 205 authority. We therefore
grant the petitions for review and vacate FERC's Orders
with respect to several aspects of PJM's proposed rate
structure - the self-supply exemption, the competitive entry
exemption, unit-specific review, and the mitigation period.
We remand the matter to FERC.
are three key players in modern wholesale electricity
markets: (i) the electricity generators that produce
electricity; (ii) the companies and utilities, known as Load
Serving Entities, that deliver electricity to retail
customers; and (iii) the non-profit organizations, known as
Regional Transmission Organizations, that manage the
transmission of electricity from generators to Load Serving
Entities. In modern wholesale electricity markets, generators
sell electricity, and Load Serving Entities buy that
electricity. Regional Transmission Organizations often set
the rates that generators charge and that Load Serving
are seven Regional Transmission Organizations across the
country. The largest of the seven is PJM Interconnection. PJM
administers the power grid in parts of 13 Mid-Atlantic and
Midwestern states and the District of Columbia.
helps set the price of wholesale electricity by conducting
competitive auctions. As relevant here, PJM runs
"capacity auctions" to set the price of wholesale
electricity three years into the future. The goal of the
capacity auctions is to ensure an adequate long-term supply
how PJM's capacity auctions work: PJM estimates the
demand for electricity three years into the future, and
electricity generators estimate their capacity for producing
electricity three years into the future. Generators then make
bids to sell their future capacity to PJM. Starting with the
lowest bid, PJM accepts bids until it has purchased enough
capacity to meet its estimate of future demand. The highest
accepted bid sets the "clearing price" in the
capacity market. The clearing price is the price that
generators receive from PJM when their bids are accepted by
PJM. Generators are paid the clearing price regardless ...