FERC v. Electric Power Supply Assn. (14-840)
argument 14-840FERC v. Electric Power Supply Assn.
Supreme Court of the United States
59 min
4 speakers
8 chapters
transcribed 5 days ago
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What statutory authority does the Federal Power Act give FERC over wholesale electricity rates?
We will hear argument next in case 14840, the Federal Energy Regulatory Commission versus the Electric Power Supply Association and the consolidated case.
General
Varilli? Mr.
Chief Justice, and may it please the Court, the Federal Power Act expressly authorizes FERC to regulate the process that sets wholesale rates for electricity. And that is exactly what FERC's wholesale demand response rules do. Demand response is a resource that is bid into the wholesale auction and the wholesale market operators that run those auctions rely on the bids to balance wholesale supply and demand, to set wholesale rates, and they particularly rely on those bids in periods of peak demand to avoid price spikes and to avoid blackouts and brownouts.
If there were a student in economics one Uh I it seems to me that he would conclude and his professor would conclude that wholesale affects retail, retail affects wholesale. They're interlinked. Which means you win the case, except that the statute makes the distinction. We have to make a distinction. Can you tell us what the distinction is that marks the end of So I I I have several
answers to that, Justice Kennedy. First, I we completely agree that What any action that FERC takes at the wholesale level in some sense is going to affect the retail market. All things equal, if FERC sets a h uh FERC rules at a higher wholesale rate, there's going to be a higher retail price. But that can't be a basis, those kinds of effects can't be a basis for denying FERC's jurisdiction. And the case I would particularly point your honor to is the Mississippi Power case. Now there was a case in which What FERC did was conclude that a utility could recover at wholesale its investment in a nuclear power plant. And what the Court held in Mississippi power was that That had the effect of denying the state regulator the ability to deny that utility
recovery of those costs in the retail rates, even though under state law they would have been imprudent costs and not recoverable. That was a very direct effect on the exercise of state regulatory jurisdiction, which you do not have here, by the way. So I think A forciori, this is certainly permissible under the rationale Mississippi.
I find that a pretty fuzzy line. Very direct effect, I um It it it seems to me that There is a distinction between affecting retail rates, which as Justice Kennedy has pointed out Always happens. And using Uh Using uh effect upon retail rates as a means of uh regulating wholesale rates. And the argument here is that that is what has occurred, that effectively FERC has raised the retail price during peak hours, because somebody who wants to purchase at retail during peak hours not only pays Uh you know. Гас торго. the benefit that that person would otherwise get from FERC's programme. Uh that raises the price at retail. And that is the means of achieving what FERC wants to achieve. Yes, FERC has the has the power to uh regulate uh wholesale rates, but but the argument is not
Through the fiddling around with retail rates, which is what
is asserted is happening here. So I think three points to be made in response to that argument, Justice Scalia. First The the authority that is exclusively reserved to States by Section 824B of the Federal Power Act is the authority over retail sales. Every retail sale that occurs in the regime under FERC's wholesale demand response regime is a retail sale that will occur at the rate that the State Regulator has set and under the terms and conditions that the State Regulator has set. Every single sale that occurs, that is true about. Second, what they have said is that this changes the effective rate. But what I would say in response to that, Your Honor, is that if I go out and buy a Ferrari for one hundred thousand dollars.
Everybody thinks that the price of the Ferrari is $100,000. Nobody thinks that the price of the Ferrari is actually $107,000 because I am foregoing the seven thousand dollar tax credit I can get if I bought an electric car. The rate is what it is. It's $100,000.
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Chapters
8 chapters
1
What statutory authority does the Federal Power Act give FERC over wholesale electricity rates?
0:00–6:58
2
How does the Mississippi Power case illustrate FERC’s jurisdiction over wholesale rate recovery?
6:58–14:59
3
Why do the parties argue that FERC’s demand‑response rules affect retail rates, and is that a jurisdictional problem?
14:59–22:08
4
What is the “Ferrari” analogy and how does it explain the relationship between wholesale and retail electricity pricing?
22:08–28:43
5
How does the Federal Power Act’s Section 824B draw a line between state‑regulated retail sales and federal‑regulated wholesale markets?
28:43–37:08
6
What are the arguments about the “direct effect” of FERC’s rules on retail customers versus wholesale market conduct?
37:08–45:13
7
How do the parties use the Walmart‑hypothetical to illustrate potential gaps or overlaps in state and federal jurisdiction?
45:13–53:47
8
Why do the respondents claim that FERC’s compensation formula (LMP‑minus‑G) is arbitrary and capricious, and how does the net‑benefits test factor in?
53:47–1:00:06