New York v. Federal Energy Regulatory Commission

783 F.3d 946, 2015 U.S. App. LEXIS 6657, 2015 WL 1810416
CourtCourt of Appeals for the Second Circuit
DecidedApril 22, 2015
DocketDocket 13-2316-ag
StatusPublished
Cited by11 cases

This text of 783 F.3d 946 (New York v. Federal Energy Regulatory Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New York v. Federal Energy Regulatory Commission, 783 F.3d 946, 2015 U.S. App. LEXIS 6657, 2015 WL 1810416 (2d Cir. 2015).

Opinions

Judge JACOBS concurs in the judgment in a separate opinion.

REENA RAGGI, Circuit Judge:

The State of New York and the Public Service Commission of the State of New York (collectively, “New York”) petition this court for review of two final orders of the Federal Energy Regulatory Commission (“FERC”), insofar as the orders adopt standards and procedures for determining which power distribution facilities are subject to the agency’s regulatory jurisdiction and which facilities fall within the statutory exception for local distribution of electric energy. See Revisions to Electric Reliability Organization Definition of Bulk Electric System, Order No. 773, 141 FERC ¶ 61,236 (2012), clarified and reh’g denied, Order No. 773-A, 143 FERC ¶ 61,-053 (2013). New York contends that the standards and procedures are an unreasonable interpretation of the agency’s statutory grant of jurisdiction. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). It further challenges the standards and procedures as arbitrary and capricious under the Administrative Procedure Act. See 5 U.S.C. § 706. We conclude that these arguments are without merit and, therefore, deny the petition for review.

I. Background

A. The Governing Statute and Regulatory Regime

The Federal Power Act, as amended in 1935, see Pub.L. No. 74-333, tit. II, 49 Stat. 803, 838-54 (1935) (codified at 16 U.S.C. § 792 et seq.), grants the Federal Power Commission, and now its successor agency FERC, regulatory authority over interstate aspects of the nation’s electric power system. See 16 U.S.C. § 824(a). Congress specifically excluded from this jurisdictional grant “facilities used in local distribution or only for the transmission of electric energy in intrastate commerce.” Id. § 824(b)(1). Regulation of these exempted facilities is reserved to the states. See, e.g., New York v. FERC, 535 U.S. 1, 22, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002); Connecticut Light & Power Co. v. Fed. Power Comm’n, 324 U.S. 515, 518, 65 S.Ct. 749, 89 L.Ed. 1150 (1945). The statute [950]*950does not define “facilities used in local distribution.” Thus, from 1996 until the time of the challenged orders, FERC employed a seven-factor test (set out in the margin1) to identify facilities falling within the statutory exemption from jurisdiction. See New York v. FERC, 535 U.S. at 23, 122 S.Ct. 1012.

For many years, FERC exercised its statutory jurisdiction essentially as an economic regulator, overseeing the market for the sale of electricity in interstate commerce. See 16 U.S.C. § 824; see also Connecticut Light & Power Co. v. Fed. Power Comm’n, 324 U.S. at 524, 65 S.Ct. 749 (observing that purpose of Federal Power Act “was primarily to regulate the rates -and charges of the interstate energy”). After the northeast United States experienced a large-scale blackout in the summer of 2003, however, Congress expanded FERC’s regulatory authority by enacting the Electricity Modernization Act of 2005, Pub.L. No. 109-58, tit. XII, 119 Stat. 594, 941-86 (2005). That Act authorizes FERC to adopt and enforce mandatory technical reliability standards for facilities that make up the national energy grid. See 16 U.S.C. § 824o (authorizing FERC to impose reliability standards on facilities that comprise “bulk-power system,” defined to include “facilities and control systems necessary for operating an interconnected electric energy transmission network”). The Act does not require FERC to develop these standards for itself. Rather, it directs FERC to certify an outside organization to develop such standards subject to agency approval. See 16 U.S.C. § 824o (c), (d). To fill this role, FERC certified North American Electric Reliability Corporation (“NERC”), an organization that had preidously developed a series of voluntary technical standards for the industry.2

At the same time, however, the statute maintains the Federal Power Act’s jurisdictional exception by specifying that the bulk-power system “does not include facilities used in the local distribution of electric energy.” Id. § 824o (a)(1). Again, the statute neither defines “facilities used in ... local distribution” nor instructs as to how such facilities should be identified.

B. Development of the Challenged Orders

In 2007, FERC adopted a number of reliability standards proposed by NERC. See Mandatory Reliability Standards for [951]*951the Bulk-Power System, Order No. 693, 118 FERC ¶ 61,218 (2007). In so doing, however, FERC expressed concern that NERC’s proposed method for identifying facilities subject to the new standards— which involved deferring to the determinations of various regional councils — left gaps in coverage that would defeat the Electricity Modernization Act’s goal of ensuring a stable and reliable nationwide power grid. See id. ¶ 61,218, at ¶¶ 75-81. FERC therefore directed NERC to revise its proposed definition of the bulk electric system3 to eliminate regional discretion and, instead, to establish a uniform set of rules that include an operating voltage threshold, specific facility configurations to be included or excluded from the bulk electric system notwithstanding their operating voltage, and a process for facilities to seek exemptions from the regulations. See Revision to Electric Reliability Organization Definition of Bulk Electric System, Order No. 743, 133 FERC ¶ 61,-150, at ¶ 30 (2010). Various entities, including New York, argued that FERC’s directive would result in the agency exceeding its regulatory jurisdiction by presumptively subjecting local distribution facilities operating above a default voltage threshold to federal regulation. FERC rejected this argument and proceeded with its directive, clarifying that NERC would also develop criteria for determining which facilities operating above the default threshold might nevertheless qualify for the local distribution exclusion, and that FERC itself would conduct a factual inquiry on exemption where specified criteria failed to yield a determinative answer as to whether a facility was engaged in local distribution. See Revision to Electric Reliability Organization Definition of Bulk Electric System, Order No. 743-A, 134 FERC ¶ 61,210, at ¶¶ 18-25 (2011).

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783 F.3d 946, 2015 U.S. App. LEXIS 6657, 2015 WL 1810416, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-york-v-federal-energy-regulatory-commission-ca2-2015.