Following the Supreme Court's hearing of oral arguments on the Federal Energy Regulatory Commission's demand response rule this week, what's next for the regulation? On today's The Cutting Edge, Greenwire reporter Hannah Northey discusses the impact of yesterday's hearing on the commission and future rulemakings.
Monica Trauzzi: Welcome to The Cutting Edge. Following the Supreme Court's hearing of oral argument on FERC's demand response rule this week, what's next for the regulation? Greenwire's Hannah Northey has been following the rule and the case closely and is here with analysis. Hannah, FERC was appealing the D.C. Circuit Court's decision. What's the background on the case?
Hannah Northey: So this was the hottest case in energy for the Supreme Court, and it involved demand response, and that's a practice in which entities are compensated for pulling back energy use at critical times, maybe when there's a lot of demand on the electric grid. And the arguments yesterday really touched on jurisdiction. Did FERC overstep its boundaries when it created this rule? And as you know, the lower court did find that FERC did overstep its authority and went into areas traditionally regulated by states.
Monica Trauzzi: There were some key divisions among the justices hearing the case on Wednesday. What stood out to you as the most contentious issues that could weigh on a final decision?
Hannah Northey: Well, we did see a split between liberal appointees. They really seemed to be -- you know, to understand kind of where FERC was coming from or sympathize, whereas the more conservative appointees really questioned FERC's arguments. And what we had were eight justices. Justice Alito had actually recused himself, and so all eyes were on Justice Kennedy. He made a couple comments that some sources kind of took as, well, maybe not favoring FERC. He said that the agency's arguments were circular at one point, so some analysts said we could see a 4-to-4 split.
Monica Trauzzi: So how are the FERC commissioners weighing in and responding?
Hannah Northey: It's a mixed bag right now. Norman Bay, yesterday at the agency's meeting here in D.C., he wouldn't comment too much on the case, but he did say that he was supportive of the Supreme Court review. I talked to Commissioner Cheryl LaFleur. She also wouldn't say too much. Said some cases could be affected that are pending for the agency, but Commissioner Clark, a Republican from North Dakota, for example, he has -- we talked a lot about the implications of the case.
Monica Trauzzi: A decision is possible by the end of the year or early 2016. What are you hearing from your sources on what this all means for the commission and future rulemakings?
Hannah Northey: Well, it could have larger implications for federal agencies and how they deal with states, that federal-state jurisdiction just because, you know, some sources have said the Supreme Court wanted to take this case up in particular to deal with that issue, specifically for demand response. It's all about whether or not the practice actually survives under state programs. Former Chairman Wellinghoff, Jon Wellinghoff, for example, said that these -- that states have not been quick to take up really robust demand response programs, but FERC Commissioner Tony Clark said actually states are fine and they can move along and demand response will survive, just in another form.
Monica Trauzzi: Right, and this rule has been controversial since its inception, and really this could have impacts on demand response markets moving forward.
Hannah Northey: Right, and it just depends on who you talk to. Whereas Clark said they may not survive, Wellinghoff said that they will. So what we do know is that FERC -- if they -- if the court does not uphold the rule, then FERC may have to come back with guidance and ask the industry to weigh in. So we'll see at that time what happens.
Monica Trauzzi: All right, very interesting. Thanks, Hannah.
Hannah Northey: Thank you.
Monica Trauzzi: More Cutting Edge coming next Friday. We'll see you then.
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