Environmental regulations on America’s energy sector may face a rebuke from the Supreme Court. It heard oral arguments Wednesday regarding encroachment on state’s rights to regulate the retail energy market.
The case challenges recent attempts by the Federal Energy Regulatory Commission (FERC) to require utility companies to pay commercial consumers who reduce their electricity use during peak times. The regulations are designed to alleviate stress on the power grid in order to lessen the occurrence of blackouts and brownouts. Utilities object however, arguing the rules impact the retail market, where FERC has no regulatory authority.
The regulations could cost energy companies billions and will directly affect retail prices for energy consumption. The Obama administration argued that FERC only applies to the wholesale market and demand-response providers, however this claim was met with skepticism by many of the justices, according to Bloomberg.
Justice John Roberts told U.S. Solicitor General Donald Verrilli that “FERC is directly affecting the retail price.”
The case is being heard by an eight man bench, as Justice Samuel Alito recused himself from preceding’s due to conflicting financial stakes in the energy sector. Bloomberg reports that Alito owns shares in Johnson Controls Inc., whose subsidiary is supporting FERC in the case.
In a 2-1 ruling in May, the D.C. Court of Appeals ruled against FERC. With Alito missing, the Supreme Court could deliver a split decision which would affirm the May decision and strike down the rule.
Justice Anthony Kennedy, known for straddling the ideological divide of the court, will most likely deliver the deciding vote in the case, reports The Wall Street Journal. Kennedy questioned FERC’s methods, insinuating that it may be using this rule to lure consumers into the wholesale market.
Kennedy is expected to rule somewhere in the middle, indicating he wants FERC to clarify its regulations and draw a more concrete line on where federal authority ends and state’s rights begin. Allison Clements, director of the Sustainable FERC Project told Bloomberg, “I think it’s a close call.”
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