Can Ferc Regulate Generation Resource Adequacy?

Michael Giberson

When it comes to providing for generation resource adequacy in U.S. regional power markets, FERC has generally walked a pretty fine line. On the one hand, FERC has tended to acknowledge the primary role that historically has been played by state law and policy. On the other hand, when regional power markets have sought to create capacity markets or other mechanisms to integrate resource adequacy into the regional markets, FERC has tended to support such actions.

Not so fast, said Connecticut state officials, after they concluded that the state was getting the short end of the stick in a regional New England capacity market plan accepted by FERC. Where exactly did FERC find its authority, Connecticut asked, to act on generation resource adequacy matters?

FERC’s first answer — that the New England’s system operator tariff and contractual documents provided FERC with authority to rule on the proposal — didn’t pass the sniff test. Obviously, Connecticut said in response, neither the tariff or a contract could provide FERC with statutory authority to regulate generation resource adequacy.

Connecticut took FERC to court, and FERC switched arguments to claim that Section 201 of the Federal Power Act gave them authority to act.

Not so fast, said the Court, which wanted to judge the agency’s decisions based on the reasoning contained in the agency’s orders, not post hoc rationalizations cooked up for the court. But the reasoning in the agency’s orders was inadequate, so the Court has sent the issue back to FERC. Try again, the Court said to FERC, to explain just where in the law the agency finds authority to regulate generation resource adequacy.

(HT to Energy Legal Blog, which has links to the order and various parties involved in the case.)

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