Summary
The United States Court of Appeals for the District of Columbia Circuit reviewed FERC's approval of a PJM tariff amendment that ended Energy Efficient Resources' eligibility to bid in future capacity auctions. The court held that the amendment was prospective rather than impermissibly retroactive under the filed-rate doctrine and rule against retroactive ratemaking. It also rejected claims that FERC acted arbitrarily and capriciously by accepting PJM's updated load forecast, discounting the benefits of EER participation, or inadequately considering reliance interests.
Topics
Practice areas
Questions Presented
- Whether FERC's approval of PJM's tariff amendment impermissibly applied retroactively or violated the filed-rate doctrine by preventing Affirmed from bidding EERs in the 2026/27 and 2027/28 capacity auctions.
- Whether FERC arbitrarily and capriciously relied on PJM's updated load forecast without critically reviewing it or conducting its own analysis.
- Whether FERC arbitrarily and capriciously failed to consider the benefits of EER participation and the possible effect of eliminating capacity-payment incentives on EER investment.
- Whether FERC arbitrarily and capriciously failed to consider and reasonably weigh providers' reliance interests, including Affirmed's investments.
Holdings
- FERC's approval of PJM's tariff amendment was not impermissibly retroactive and did not violate the rule against retroactive ratemaking because the amendment applied only to future capacity auctions and did not alter past legal consequences, revoke past eligibility, or require repayment of past auction payments.
- FERC did not act arbitrarily or capriciously in relying on PJM's updated load forecast because it critically reviewed PJM's submission and explained why the forecast was reasonably fit for its intended purpose.
- FERC reasonably considered the benefits and incentive effects of EER participation and was not required to accept those benefits as outweighing the cost and reliability considerations supporting the amendment.
- FERC reasonably considered and weighed EER providers' reliance interests against the benefits of ending EER auction eligibility.
Key quotations
“An order that merely “upsets expectations based on prior law is not retroactive.”” (19)
“We believe FERC met its duty to critically review PJM’s submission.” (23)
“Where, as here, the agency has recognized and reasonably balanced the reliance interests at stake, we do not replace its judgment with our own.” (32)
Factual background
PJM's tariff historically allowed providers of Energy Efficient Resources to bid those resources in capacity auctions and, after a bid cleared, to offer the resource in up to three additional consecutive auctions. PJM proposed ending EER eligibility after updating its load forecast to account for EER effects without the former four-year lag, concluding that continued EER auction participation increased consumer costs without reducing the reliability requirement. Affirmed had bid EER projects that cleared the 2023/24 and 2024/25 auctions and claimed that it relied on the tariff's multi-year eligibility provision and had invested approximately $50 million in EER projects.
Procedural history
FERC approved PJM's proposed amendment to its tariff, allowing PJM to exclude Energy Efficient Resources beginning with the auction for the 2026/27 delivery year. Affirmed protested the filing, sought rehearing and a stay, and then petitioned the D.C. Circuit for review of FERC's orders. FERC denied rehearing by operation of law and later issued an order addressing the rehearing arguments and denying a stay. The court denied the petition for review.