Advisory Environmental
Pillsbury Winthrop Shaw Pittman LLP pillsburylaw.com | 1
August 4, 2016
Supreme Court’s Environmental and
Administrative Law Decisions in 2015-2016
Term
By Anthony B. Cavender, Amy L. Pierce and Brittney D. Sandler*
This Advisory briefly reports on some of the significant U.S. Supreme Court
actions from January through June 2016 related to environmental and
administrative law.
Review of U.S. Court of Appeals Decisions and Actions Interpreting Federal Law
Energy Regulation. On January 25, 2016, the U.S. Supreme Court reversed the D.C. Circuit Court of
Appeals and held, in FERC v. Electric Power Supply Association, that the Federal Power Act (FPA)
authorizes the Federal Energy Regulatory Commission (FERC) to regulate market operators’
compensation related to “the sale of electric energy at wholesale in interstate commerce.” This directly
affects wholesale electricity rates and action that affects such rates, but does not regulate retail sales or
“any other sale” of electricity, which is left to the states to regulate. Because electricity rates rise
dramatically during peak periods, market operators had created demand-response programs whereby
they paid consumers to reduce power use during peak periods. FERC had decided that demand-
response providers were to be compensated for conserving energy at the marginal locational price—or
the same price paid to generators for producing energy—instead of at the marginal locational price less
the rate for electricity, so long as the bids accepted by the providers saved consumers money. The D.C.
Circuit vacated the “demand-response” rule, deciding that FERC lacked authority to directly regulate the
retail electricity market, and that the compensation scheme was arbitrary and capricious. The Court
determined that the rule was not arbitrary and capricious given FERC’s detailed explanation for its
decision and lengthy response to competing views, and Chevron deference played no role in this
decision; the “Chevron deference” test is set forth in Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984). The Court noted that if FERC could not regulate wholesale demand-
response rates, it would run afoul of the FPA’s core purposes of ensuring the effective transmission of
electric power and protecting against excessive prices.
Energy Regulation. On April 19, 2016, the Court, in Hughes v. Talen Energy Marketing, affirmed a
decision that struck down a Maryland regulatory program that encouraged development of in-state
power generation as being preempted by the FPA. The FPA vests exclusive jurisdiction over interstate
Environmental
