How EPA’s Impending Climate Plan Conflicts with Congressional Intent as Evidenced by the Federal Power Act

Last week, the D.C. Circuit Court of Appeals ruled that the Federal Energy Regulatory Commission’s (FERC) demand-side response regulation impermissibly infringed on the States’ exclusive authority to regulate retail electricity markets.

Next week, the President is expected to “personally” unveil a climate plan for existing power plants that would, as reported, give the Environmental Protection Agency the authority to impose demand-side management programs on unwilling States.

This is a problematic contradiction.

To recap: Under the Federal Power Act, Congress limited the reach of federal energy regulators “only to those matters which are not subject to regulation by the States” (16 U.S.C. §824(a)).  And in a split 2-1 decision rendered last Friday, May 23^rd (Electric Power Supply Association v. FERC), the D.C. Circuit Court of Appeals determined that demand-side response is a “matter” left to States. But under the Clean Air Act, as understood by the Obama administration, the Congress empowered EPA—federal environmental regulators—to impose a demand-side response program on unwilling States. As reported by Bloomberg,  demand-side response is one of a number of “beyond the fence” or “system-wide” policies that EPA’s impending climate rule will allow States to choose from, in order to achieve mandated cuts in greenhouse gas emissions (somewhere around 25% to 35% below an as yet to be revealed baseline). Because the Clean Air Act gives EPA the power to reject State proposals and impose plans in their stead, the agency would thus gain the authority to force upon the States a demand-side response in the form of a federal implementation plan.

Indeed, most of EPA’s reported options for complying with its Clean Air Act climate plan—including efficiency rebates and renewable energy mandates—are “matters” which are subject to direct regulation by the States. Almost all States undergo some sort of multiyear utility planning, usually known as “Integrated Resource Planning,” under the purview of State regulatory bodies (see map directly below). It is accepted as a given that the Federal Power Act bars FERC from interfering from Integrated Resource Planning. However, under the current administration’s interpretation of the Clean Air Act, Integrated Resource Planning effectively would become subject to EPA oversight, and the agency would even gain the power to impose an IRP.

This raises a rather obvious question: Why would Congress give federal environmental regulators powers over state-wide energy markets that it refused to give to federal energy regulators?