United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 13, 2011 Decided January 17, 2012
No. 10-1313
INDIANA UTILITY REGULATORY COMMISSION,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
AMERICAN PUBLIC POWER ASSOCIATION, ET AL.,
INTERVENORS
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Eric A. Eisen argued the cause and filed the briefs for
petitioner.
Steven J. Ross and Steven T. Nourse were on the brief for
intervenor American Electric Power Service Corporation in
support of petitioner. Randolph L. Elliott entered an
appearance.
2
Samuel Soopper, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
the brief was Robert H. Solomon, Solicitor.
Barry S. Spector and Paul M. Flynn were on the brief for
intervenor PJM Interconnection, L.L.C. in support of
respondent. Robert A. Weishaar Jr. entered an appearance.
Before: GINSBURG, * HENDERSON, and KAVANAUGH,
Circuit Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
GINSBURG, Circuit Judge: The Indiana Utility Regulatory
Commission petitions for review of an order of the Federal
Energy Regulatory Commission approving the tariff of PJM
Interconnection, L.L.C.. We dismiss the petition insofar as it
challenges the order on grounds the IURC did not raise with
sufficient specificity in its request for rehearing by the
Commission, 16 U.S.C. § 825l(b). In all other respects, we
deny the petition because the IURC has not shown the
Commission acted unreasonably.
I. Background
Advancements in metering technology now enable retail
customers to reduce their usage of electricity in response to
short-term fluctuations in demand and price. This so-called
“demand response” in effect returns energy to the market
when it is most needed, thereby reducing the volatility of
electricity prices and minimizing the likelihood of a
*
As of the date the opinion was published, Judge Ginsburg had
taken senior status.
3
shortage. * In recognition of these benefits the Congress in
2005 declared it is “the policy of the United States that time-
based pricing and other forms of demand response ... shall be
encouraged ... and unnecessary barriers to demand response
participation in energy, capacity and ancillary service markets
shall be eliminated.” 16 U.S.C. § 2642 note.
The Federal Energy Regulatory Commission has
implemented this policy in part through its Order 719, which
requires operators of wholesale electricity markets to allow
trading in retail as well as wholesale demand response. See
Wholesale Competition in Regions with Organized Electric
Markets, 73 Fed. Reg. 64,100-01 (Oct. 28, 2008) (codified as
amended at 18 C.F.R. § 35.28). Specifically, the Commission
required the operators to grant access to third-party
“aggregators of retail customers” (ARCs), except where “the
laws or regulations of the relevant electric retail regulatory
authority do not permit the customers aggregated [by the
ARC] to participate,” Order 719, ¶ 155. * The Commission
said it included this exception in order to be clear that its
“intent was not to interfere with the operation of successful
[retail] demand response programs, [to] place an undue
burden on state and local retail regulatory entities, or to raise
new concerns regarding federal and state jurisdiction.” Id.;
see also 16 U.S.C. § 824(b) (preserving states’ jurisdiction to
regulate “facilities used in local distribution”). The
Commission further stated it would not “require a [state
*
Depending upon context, “demand response” may refer either to
the practice of reducing energy usage in response to price, or to the
amount by which the customer reduces its demand, or to a third
party’s sale of that energy in an organized market.
*
Henceforth we refer to the “relevant electric retail regulatory
authority” as the “state regulator.”
4
regulator] to make any showing or take any action in
compliance with [Order 719],” nor place the operator of a
wholesale market “in the position of interpreting the laws or
regulations” of any state. Order 719, ¶¶ 155, 158(g) n.212.
Other than exempting the state regulator and the operators of
wholesale markets from the obligation to verify retail
customers’ eligibility to sell demand response, the
Commission did not specify how or by whom that task was to
be performed.
The petition for review now before us arises from a
dispute between the Indiana Utility Regulatory Commission
(IURC) and PJM Interconnection, L.L.C., which, subject to
the Commission’s oversight, operates the market for
wholesale electricity in the District of Columbia and all or
parts of 13 states, including Indiana. See 101 FERC P 61,345
(2002) (authorizing PJM to serve as a regional transmission
organization); Illinois Commerce Comm’n v. FERC, 576 F.3d
470, 473 (7th Cir. 2009) (explaining role of such
organizations in general and of PJM in particular). See
generally Promoting Wholesale Competition Through Open
Access Non-Discriminatory Transmission Services by Public
Utilities, Order No. 888, 61 Fed. Reg. 21540 (1996) (creating
regional electricity markets organized under open-access
tariffs). Over 500 market buyers, sellers and traders of
electricity participate in PJM’s market. FERC, Electric Power
Markets: PJM, http://www.ferc.gov/market-oversight/mkt-
electric/pjm.asp (last visited Dec. 26, 2011).
In 2009, PJM filed with the Commission a revised tariff
implementing the changes required of it by Order 719.
Section 1.5A.1 of the revised tariff permits a member of PJM
to act as an ARC on behalf of “multiple individual end-use
customer[s]” for the purpose of selling demand response
“unless the [state regulator] prohibit[s] their participation.”
Section 1.5A.3 provides that after it has accepted an ARC’s
5
application, PJM will “notify the appropriate electric
distribution company or Load Serving Entity” for each
customer the ARC represents, and that company, typically a
retail utility, will have ten business days to object on the
ground the customer is not eligible under state law to sell its
demand response. If the retail utility fails to raise a timely
challenge, or if it fails to produce sufficient documentary
evidence the customer is ineligible to sell its demand
response, then PJM will “assume” state law does not prohibit
the customer’s participation. The tariff thus requires the retail
utility to determine whether a customer is eligible and, if it is
not, then to compile documentary evidence substantiating its
objection.
In response to the revision of PJM’s tariff, the IURC
issued an order enjoining retail customers in Indiana from
selling demand response in the wholesale market without the
IURC’s prior approval. See Order on Requests for Interim
Relief, IURC Cause No. 43566 (Feb. 25, 2009). The IURC
reasoned the injunction was necessary because retail
customers in Indiana obtain electricity through a traditionally
regulated monopoly utility, Indiana Michigan Power (I&M),
and allowing retail customers to aggregate demand response
for sale through PJM “would at least partially bypass” the
IURC’s oversight of the retail market. Id. Noting the
complexity of the “relationship of demand response with
integrated resource planning and other aspects of state
ratemaking,” the IURC required that “the status quo be
maintained” pending its further investigation. Id.
The IURC then filed with the Commission a Notice of
Intervention and Protest regarding PJM’s tariff and attached a
copy of its own order. The IURC alleged the Commission
would “step over the line drawn by the Federal Power Act”
between federal and state jurisdiction if it approved the new
provisions, which “directly interfere with the regulatory
6
authority of the IURC.” The IURC also challenged the
requirement that a retail utility “object and prove” a particular
customer of an ARC is ineligible to participate in the ARC’s
offer to sell demand response. PJM answered the protest,
defending its tariff as “just and reasonable” and consistent
with Order 719.
The Commission conditionally accepted PJM’s proposed
tariff revisions. 128 FERC P 61,238 (2009). The
Commission held PJM’s tariff did not encroach upon the
IURC’s jurisdiction but it nonetheless required PJM to make
certain revisions to recognize that some states may require a
retail customer to obtain regulatory approval before allowing
an ARC to sell its demand response in the wholesale market.
The Commission also accepted the provision imposing upon
the retail utility the burden to “object and prove” a particular
customer is ineligible to sell demand response because Order
719 had afforded PJM “substantial flexibility to develop
procedures with respect to this issue.”
After the Commission had denied its petition for
clarification and rehearing, the IURC petitioned this court for
review. Because the Commission contends certain of the
IURC’s arguments are not properly before us, we first address
the matter of our jurisdiction, mindful of the strict limitation
imposed by Section 313 of the Federal Power Act, 16 U.S.C.
§ 825l.
II. Jurisdiction
The IURC’s primary argument is that the revisions to
PJM’s tariff, if approved, would “encroach on Indiana state
jurisdictional authority,” in violation of Section 201 of the
Federal Power Act, 16 U.S.C. § 824. First, by “presuming”
every customer is eligible to sell demand response, the tariff
allegedly “creat[es] an irreconcilable conflict with an Indiana
Commission order that requires precisely the opposite”;
7
second, by “burdening” Indiana’s monopoly utility (I&M)
with the task of objecting to the participation of each
individual customer, the tariff “impermissibly cross[es] the
state-federal jurisdictional line.” The Commission responds
that the IURC did not preserve these arguments for our review
because the IURC did not raise them with specificity in its
request for rehearing. We agree.
Section 313 of the Federal Power Act limits our review to
objections that were “urged before the Commission in [an]
application for rehearing[,] unless there is reasonable ground
for [the petitioner’s] failure so to do.” 16 U.S.C. § 825l(b).
Additionally, because an application for rehearing must “set
forth specifically the ground or grounds upon which such
application is based,” 16 U.S.C. § 825l(a), our jurisdiction is
limited by the extent to which a petitioner objected “with
specificity,” Allegheny Power v. FERC, 437 F.3d 1215, 1220
(D.C. Cir. 2006).
In its brief the IURC objects to “the presumption and
objection burden placed on the state jurisdictional retail
utilities,” but in the IURC’s request for rehearing we find only
this single statement alluding to a jurisdictional objection:
The IURC has argued and continues to assert
that having the retail utility bear this
certification requirement is an impingement on
the IURC’s jurisdictional authority over the
retail utility.
For openers, we note this statement makes no reference to the
allegedly unlawful “presumption of eligibility”; clearly, we
cannot consider the IURC’s after-thought challenge to the
presumption.
8
Whether the IURC preserved its jurisdictional challenge
to the “objection burden” is an only slightly more difficult
question. The IURC mentioned the issue in its request for
rehearing, but it did so by “referring only in a general way” to
an argument it had made in other filings; that is not sufficient.
Conn. Dep’t of Pub. Util. Control v. FERC, 593 F.3d 30, 36
(D.C. Cir. 2010). See also Pub. Serv. Elec. & Gas Co. v.
FERC, 485 F.3d 1164, 1170 (D.C. Cir. 2007) (request for
rehearing had “merely noted the alleged error in a single
opaque sentence”); Allegheny, 437 F.3d at 1220 (request for
rehearing had raised objection only “indirectly” by referring
to previous arguments). Indeed, at oral argument the IURC
conceded it was perhaps not “as articulate as one would wish
to be” in a request for rehearing. The IURC nevertheless asks
us to cut it some slack because the Commission was “not
unaware that it was navigating a jurisdictional border” when it
issued Order 719, and in fact was “specifically made aware”
of the IURC’s objections in filings made prior to its request
for rehearing.
We must, of course, decline any invitation to exceed the
jurisdiction conferred upon the court by statute; here, the
relevant constraint limits our review to the grounds for
objection “set forth specifically” in the petitioner’s request for
Commission rehearing. 16 U.S.C. § 825l(a). It therefore
matters not what the Commission knew or should have known
at the time. In this regard the jurisdictional provisions of the
Federal Power Act “differ[] fundamentally” from “routine
judicial-review statutes” under which we might excuse a
petitioner’s failure to exhaust a claim when an agency has
considered the argument at the urging of another party.
ASARCO, Inc. v. FERC, 777 F.2d 764, 774 n.7 (D.C. Cir.
1985); accord Pub. Serv. Co. of N. M. v. FERC, 863 F.2d
1021, 1022 (D.C. Cir. 1988) (Ginsburg, J., concurring in
denial of rehearing en banc) (jurisdictional requirement in
9
Natural Gas and Federal Power Acts is not a “mere
restatement of the judicial exhaustion requirement, subject to
the same exceptions”). Compare CTIA-Wireless Ass’n v.
FCC, 466 F.3d 105, 117 (D.C. Cir. 2006), with Save Our
Sebasticook v. FERC, 431 F.3d 379, 381-82 (D.C. Cir. 2005).
With our purview limited to the four corners of the
IURC’s request for rehearing, we conclude the IURC has not
satisfied the requirements of Section 313 with respect to
either of its contentions regarding the division between
federal and state jurisdiction. See Pub. Serv. Elec. & Gas Co.,
485 F.3d at 1170 (dismissing statutory claim raised in
petitioner’s brief where request for rehearing had “made no
argument to substantiate the allegation of error, never
confronted the language of [the statute], offered no analysis,
and cited no legal authority”). We therefore dismiss the
IURC’s petition insofar as it argues the Commission
encroached upon the state’s jurisdiction.
III. The Merits
Turning to the portion of the petition properly before us,
we can see readily that we must uphold the Commission’s
order approving the disputed tariff. Our review of this matter
is deferential: We will not set aside an order of the
Commission unless it is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5
U.S.C. § 706(2)(A); accord Midwest ISO Transmission
Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004).
Furthermore we afford substantial deference to the
Commission’s interpretation of Order 719 as it applies to
PJM’s tariff. See Consumers Energy Co. v. FERC, 428 F.3d
1065, 1067-68 (D.C. Cir. 2005) (“In evaluating FERC’s
interpretation of its own orders, we afford the Commission
substantial deference, upholding the agency’s decision unless
its interpretation is plainly erroneous or inconsistent with the
10
order” (internal quotation marks omitted)). The Commission’s
order plainly satisfies our standard of review. *
As recounted above, the Commission approved PJM’s
allocating to the retail utility the burdens of objection and
proof as an exercise of the “substantial flexibility” afforded
PJM under Order 719. In its request for rehearing the IURC
maintained “the certification requirement should be placed on
the ARC” rather than the retail utility for the “additional
reason” that such a rule would reduce “regulatory
uncertainty.” According to the IURC, requiring the ARC to
confirm a customer’s eligibility to sell demand response
would “assure the ARC is aware of and provides information
to” retail customers about a state’s “customer eligibility
requirements,” thereby reducing the “likelihood of confusion,
miscommunication, and frustration that can thwart an end-use
customer’s ability and motivation to participate in demand
response.”
On rehearing the Commission again expressly rejected
the IURC’s proposal, reiterating that “in Order No. 719, the
Commission granted [PJM] substantial flexibility to develop
procedures with respect to this issue.” Order on Rehearing,
Clarification, and Compliance, 131 FERC P 61,069, ¶ 10
(Apr. 23, 2010). The Commission found the IURC’s proposal
“would require the implementation of a new, parallel process
that could confuse, complicate, or delay” the participation of
retail customers. Id. ¶ 11.
*
Consequently, we do not address whether, as the Commission
contends, a still more deferential standard of review is appropriate
under our precedents. Cf. Alcoa Inc. v. FERC, 564 F.3d 1342, 1347
(D.C. Cir. 2009) (applying “highly deferential” standard of review
to Commission’s ruling on a rate making).
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We hold the Commission adequately addressed the
IURC’s proposal and sufficiently explained its reasons for
rejecting it. As PJM acknowledges in its brief in support of
the Commission:
Ultimately, a case probably could be made for
having either the aggregator or the distributor
perform the essentially ministerial task of
checking the eligibility status of a customer
that has asked to register [as an offeror of
demand response] with PJM. But that
underscores that the FERC’s action was
reasonable.
We endorse this summary view; it has the virtues of being
both modest and correct. *
***
For the foregoing reasons, we dismiss the petition insofar
as it raises jurisdictional arguments under Section 201 of the
Federal Power Act, 16 U.S.C. § 824, and we deny the petition
in all other respects.
So ordered.
*
We do not address the claims of the intervenor American Electric
Power Service Corporation (AEP), the parent company of I&M,
because AEP did not seek Commission rehearing of the claims in
its brief and, as we hold in Parts II and III, the IURC preserved for
review only its argument about regulatory uncertainty. See
California Dep’t of Water Resources v. FERC, 306 F.3d 1121,
1126 (D.C. Cir. 2002).