Energy Sector Alert Series: Appellate Courts Hearing More Energy Cases

In this eight-week alert series, we are providing a broad look at current and emerging issues facing the energy sector. Attorneys from across the firm will discuss issues ranging from environmental disclosures and risk management in business transactions to insolvency, compliance programs and intellectual property. Please click here to read all of our recent publications.

Over the last several years, a number of important energy-related cases have reached the US Supreme Court or the federal courts of appeals. Many of these cases concern the scope of authority of the Federal Energy Regulatory Commission (FERC) and the Environment Protection Agency (EPA) to regulate in this area. And many of the agency actions challenged in these cases reflect responses to evolving conditions not necessarily addressed explicitly by the applicable statutes. While certain common themes are starting to emerge, it will likely be some time until the extent of each agency's jurisdiction is fully delineated.

FERC

Under the Federal Power Act, FERC has authority to regulate wholesale electricity rates and any rule or practice "affecting" such rates but not retail sales, authority over which is reserved to the states.1 To help reduce electric price volatility, mitigate generation market power, and enhance reliability, FERC has supported the practice of "demand response," which "pays consumers for commitments to curtail their use of power, so as to curb wholesale rates and prevent grid breakdowns."2 Earlier this term, the Supreme Court held in FERC v. EPSA that FERC has authority to regulate wholesale demand response even though it indirectly affects retail rates, and that FERC's order specifying that the price for wholesale demand response would equal the price paid for wholesale energy supply was reasonable.3 (WilmerHale submitted a brief on behalf of a group of demand-response providers and customers as amici curiae supporting FERC.)

Two other recent Supreme Court cases have raised related questions about the scope of FERC's authority. In Oneok v. Learjet, Inc., a group of natural gas purchasers claimed that interstate pipelines had violated state antitrust law by reporting false information to natural-gas indices.4 The Court held that these state-law claims were not preempted by the Natural Gas Act (which is structured like the Federal Power Act) because, although the conduct at issue affected both wholesale and retail sales, the claims were "directed at practices...