Protecting Customer Interests in a New Jurisdictional Framework

Sponsored and Written by: David Springe, Executive Director, NASUCA


David Springe

In the recent case Electric Power Supply Association v. Federal Energy Regulatory Commission  (EPSA), the Supreme Court determined that demand response (not selling energy) within the RTO framework was properly FERC jurisdictional because it “directly affected wholesale rates.” And while the court said “any other sale of energy is left to the state,” it is difficult to imagine what sale of energy (or arguably not selling energy through offering energy efficiency products) would not potentially be subject to a FERC jurisdictional claim under this standard.

In Hughes v. Talen Energy Marketing (Hughes), a case currently pending before the Supreme Court, the question is whether the FERC RTO scheme legally preempts a state public utility commission from offering subsidies as an incentive for local generation to be built. While no one benefits by trying to read the tea leaves of Supreme Court oral arguments, in this instance it seems a majority of justices may be siding with FERC preemption.

EPSA and Hughes may one day be looked back on as creating a foundational change in the jurisdictional boundaries between the states which have traditionally had plenary authority to regulate retail electric service, and the FERC with its traditional regulation of wholesale electric sales. It seems possible that FERC jurisdiction could likely be asserted over transmission, generation and other services (demand response and possibly energy efficiency) that loosely brush against or arguably “affect” wholesale electric markets.

I’m not going to try to wrestle with the legal subtleties of these two cases here, but rather I raise a question: With the nexus of regulatory authority at risk of moving away from states towards FERC and the RTOs, is our traditional state regulatory scheme up to the task of adequately representing retail customers?

For state PUCs, once stripped of authority over transmission, generation and other utility actions that might reasonably affect prices in the wholesale market, might you be left with only jurisdiction to regulate the wires of the electric distribution system not controlled by FERC? And while most state PUCs do participate in the RTO process, this participation is usually delegated to one or two commissioners and is less than comprehensive.

For consumer advocates, created by state legislatures to give voice to consumers’ interests  before the utility commissions and courts, few have the resources to participate in a sustained manner in the RTO process. Fewer still have the resources to move their litigation practice to the FERC. In the time I served as consumer advocate for the State of Kansas, I had neither the time nor the resources to meaningfully participate in the Southwest Power Pool. I was not alone, as no other state consumer advocate created a sustained presence at SPP.

The FERC for the first time recently approved RTO tariff funding for the Consumer Advocates of PJM States (CAPS). CAPS is an organization created by state consumer advocate offices in PJM states with the charge to facilitate its members’ participation in the PJM RTO stakeholder process. This funding (by tariff change) was supported by over 80% of PJM members, which is a testament to the good work and reputation of the CAPS organization and a recognition by PJM members that consumer advocates are a vital, necessary part of the overall regulatory process. Funding is limited to supporting consumer advocate participation in the RTO stakeholder process, but it does provide a means for consumer advocates to be at the table.

I’m not going to suggest that the CAPS funding model is the ultimate end-state for providing consumer representation in the RTO process, but it is at least recognition that the playing field is changing and that consumer advocates are an important part of making the regulatory process work. It’s a move in the right direction.

Ultimately, if we are to give true voice to the retail customers whom utility commissions and consumer advocates are charged with representing, we must find the resources and framework to meaningfully participate in this federal regulatory scheme. Else we relegate ourselves to quibbling over the few scraps of authority that may be left us by FERC and facing the unenviable task of trying to convince retail customers we truly matter.