Governors' Wind Energy Coalition

A federal appeals court is upholding a Federal Energy Regulatory Commission order promoting the participation of energy storage technologies like batteries on the electric grid.

The U.S. Court of Appeals for the District of Columbia Circuit said the independent agency had acted squarely within its power in drafting Order No. 841 to reduce barriers for energy storage resources, or ESRs, to access the federal wholesale electricity market.

“If ‘directly affecting’ wholesale rates were a target, this program hits the bullseye,” Judge Robert Wilkins wrote in the opinion Friday.

Wilkins, an Obama appointee, refuted the arguments of the National Association of Regulatory Utility Commissioners (NARUC) and other groups that said the agency — which regulates wholesale markets — had infringed on states’ authority under the Federal Power Act to regulate energy distribution.

The order prevented states from broadly barring locally distributed energy storage resources from participating in a wholesale market (Energywire, May 6).

NARUC also critiqued the agency for not agreeing to include an opt-out option for states.

The court noted that while FPA divides jurisdiction for regulation between states and FERC, the federal agency has the exclusive right to determine participation in wholesale markets, and states can’t interfere with that.

“Because the challenged Orders do nothing more than regulate matters concerning federal transactions — and reiterate ordinary principles of federal preemption — they do not facially exceed FERC’s jurisdiction under the Act,” Wilkins wrote.

“Our decision today does not foreclose judicial review should conflict arise between a particular state law or policy and FERC’s authority to regulate the participation of ESRs in the federal markets.”

The D.C. Circuit’s ruling could help to further define the way courts differentiate state and federal authority under FPA, wrote Timothy Fox, vice president and research analyst at ClearView Energy Partners LLC, in a note to clients.

“Today’s ruling suggests to us that FERC’s regulatory decision may reach into the distribution system, so long as the Commission can prove that doing so serves the wholesale market interest and that it does not supersede state’s authority over the distribution system,” Fox wrote.

Chatterjee, Glick cheer

The judges emphasized that states would continue to operate and manage facilities with the same authority they had before the passage of the order. States can also force energy storage resources operators to choose whether to participate in interstate or intrastate markets, and were free to set safety and reliability requirements.

“I’m obviously very pleased,” said FERC Chairman Neil Chatterjee in a press call Friday following the decision.

He described the order as one of the “single most significant” actions taken by a federal agency for energy storage and ensuring a clean energy future.

Commissioner Richard Glick also cheered the decision on Twitter, calling the ruling “excellent news.”

“The court agreed that @FERC has authority over storage wholesales. We should also continue to work with states to ensure their voices are heard too,” he wrote.

NARUC did not comment on whether it planned to appeal the decision, saying the association was reviewing the decision and considering its options.

“We are, of course, disappointed in the Court’s decision,” said Regina Davis, a NARUC spokesperson.

Judges Judith Rogers and Merrick Garland also were part of the panel.

Reporter Arianna Skibell contributed.