On December 19, 2023, the U.S. Court of Appeals for the Sixth Circuit (“Sixth Circuit”), in Electric Power Supply Association; PJM Power Providers Group v. FERC, held that the former Chair of the Federal Energy Regulatory Commission (“FERC”), Richard Glick, exceeded his authority when he reinstated market design features including a stepped demand curve and an $850/MWh price ceiling for the PJM Interconnection, L.L.C. (“PJM”) Reserve Market, without the backing of his colleagues. This ruling was made by a split Sixth Circuit. In addition, on February 7, the Sixth Circuit denied Petitioners’ request for panel rehearing of the opinion.
In March 2019, PJM filed a request with FERC to modify its price caps for electricity resources sold in PJM’s reserve capacity market—which supplies power on short notice to help maintain grid reliability. In May 2020, the Commission agreed with PJM that the existing price cap reserves and stepwise demand curve were unjust and unreasonable, finding that PJM’s reserve market “systematically fail[ed] to acquire within market” reserves needed to operate its system reliably (see the May 28, 2020 edition of the WER). Then-Commissioner Glick dissented, arguing that the evidence did not indicate a flawed market structure and that PJM “failed to satisfy its burden of proof.” In November 2020, after several interested entities requested a rehearing of the Commission’s decision, the Commission denied their requests but issued a new order which confirmed its initial decision. As a result, several parties sought review of FERC’s orders in the U.S. Court of Appeals for the District of Columbia. In their opinion, the Sixth Circuit noted that after Commissioner Glick assumed Chairman of FERC in January 2021, “the agency’s composition shifted.”
On August 13, 2021, after Commissioner Glick assumed chairmanship of FERC, the Commission sought and was granted voluntary remand from the D.C. Circuit to reconsider its prior decisions on the issue. On remand, FERC found PJM’s evidence to be insufficient to show that the price caps for reserves and stepwise demand curves were unjust and unreasonable, and decided that PJM had not provided evidence of a genuine, non-hypothetical risk of shortages. As such, FERC reimposed the prior price caps for reserves and stepwise demand curves (see the January 18, 2022 edition of the WER). PJM and others sought rehearing, but the Commission rejected the request and issued a modified order reaching the same conclusion and provided additional reasoning as to why then-Chairman Glick had unilateral authority to make the remand motion (see the August 5, 2022 edition of the WER). Subsequently, the Electric Power Supply Association (“EPSA”), PJM Power Providers Group (“P3”) petitioned the Sixth Circuit for review, with PJM intervening on behalf of Petitioners.
Before the Sixth Circuit were two main questions: (1) whether then-FERC Chairman Glick exceed his authority in unilaterally moving for a remand, and (2) if not, whether the Commission’s underlying decisions were arbitrary and capricious agency actions. As to the first question, the Sixth Circuit held that the Chairman did exceed his administrative authority and remanded the matter to the agency to determine what should be done about this ultra vires action. As to the second question, the Sixth Circuit held that once FERC had the opportunity to resolve the first question, any interested party may renew the petition for review as to the merits of the underlying orders.
In its opinion, the Sixth Circuit noted that under the Department of Energy Organization Act (“Reorganization Act”), the Commission can only “transact business” with at least three commissioners present, and that a majority vote of the quorum is needed for agency actions. However, the Sixth Circuit found this did not happen in the instant proceeding. The court also found that then-Chairman Glick’s authority to unilaterally file a voluntary remand is narrower than FERC had claimed. The court therefore vacated that finding of FERC’s order, but left the rest of the challenged orders in place.
In a partially dissenting opinion, U.S. Circuit Judge Eric L. Clay agreed that then-Chairman Glick exceeded his authority, but said he would have vacated the challenged orders in their entirety. According to Judge Clay, because the Reorganization Act is unambiguous as to the Chairman’s legal authority, the court’s interpretation of this statute “does not implicate changed circumstances or new law” and therefore did not necessitate that the court “remand to the agency for it to apply its expertise.” Judge Clay further found that the instant case did not present the usual circumstances warranting partial vacatur, as FERC’s orders lacked an independent, severable issue. Finally, Judge Clay found that leaving the orders to stand would not constitute “harmless error,” because the ultra vires action affected both the procedure and substance of FERC’s orders.
During the time legal proceedings were underway at the Sixth Circuit, the D.C. Circuit’s proceedings were held in abeyance. Following the Sixth Circuit issuing their opinion, Constellation Energy petitioned the D.C. Circuit to vacate the voluntary remand order, a motion that FERC opposed. There, FERC argued that the D.C. Circuit lacked the authority to review its remand order as it would “nullify” the judgement of the Sixth Circuit. In response, EPSA filed a petition for rehearing in the Sixth Circuit asking the court to amend its opinion to make clear that its ruling does not bar the D.C. Circuit from acting on the remand order. EPSA argued that FERC misinterpreted the Sixth Circuit’s ruling by using it to restrict the D.C. Circuit’s ability to act on the remand proceedings. Additionally, EPSA’s petition proposed that the Sixth Circuit vacate the post-remand FERC orders entirely—which is an outcome initially recommended by U.S. Circuit Judge Eric Clay in his December 2023 partial dissent.
On February 7, 2024, in a short order, the Sixth Circuit declined to rehear its December ruling. A copy of the Sixth Circuit’s opinion can be found here.
