A potentially watershed rebuke of a notably contentious and unconventional aspect of the Trump administration’s energy policy.
Among the Trump era’s energy initiatives, few were as distinctive and debated as pressing certain coal-fired plants slated for closure to stay online. From the outset, observers questioned whether the Department of Energy possessed the legal authority to issue such directives. In the case Michigan v. Department of Energy, a panel of the U.S. Court of Appeals for the D.C. Circuit held that it does not.
Judge Pillard authored the court’s opinion, with Chief Judge Srinivasan and Judge Wilkins concurring. Given the panel’s composition and the stakes for the administration, a petition for en banc rehearing or certiorari appears likely to be filed soon.
Judge Pillard’s introduction to the opinion runs to some length, yet it offers a helpful synthesis of the key questions. It is reproduced below the jump.
Consumers Energy Company is a private enterprise that owns and runs the J.H. Campbell Generating Plant, a decades-old coal-fired facility in Michigan that had been scheduled for retirement last year. The Company spent years developing plans and obtaining regulatory approval to retire the Campbell plant and replace it with a mix of expanded and new electricity-generation sources. Consumers Energy aligned its planning with Michigan regulators and the Midwest Independent System Operator (MISO)—the fifteen-state regional transmission organization in which Michigan and Consumers Energy participate. The company’s plan for closing Campbell and introducing substitute generation underwent thorough scrutiny from the public, the private sector, and expert regulators. After finding that Consumers Energy’s proposed replacements would meet reliability criteria, produce electricity with lower pollution and at reduced prices, and compensate for the generation lost when Campbell closed, both the Michigan Public Service Commission and MISO expressly approved the plan.
Shortly before Campbell’s retirement was due, the Department of Energy (DOE or the Department) unilaterally ordered the unit to remain in operation. The Department invoked a seldom-used, temporary federal emergency authority provided in section 202(c) of the Federal Power Act to compel Campbell to stay open. Michigan petitioned for review of DOE’s order. Illinois and Minnesota joined the petition, as did a coalition of environmental organizations, including the Sierra Club, the Natural Resources Defense Council, the Michigan Environmental Council, the Environmental Defense Fund, the Environmental Law and Policy Center, Vote Solar, the Ecology Center, the Urban Core Collective, and the Union of Concerned Scientists. Consumers Energy intervened to safeguard the company’s right to recover the costs associated with DOE’s order from ratepayers, a matter currently pending in separate proceedings before FERC regarding cost recovery and allocation. Resp.-Interv. Br. iv, 7.
We evaluate petitioners’ challenge to DOE’s interpretation of its emergency power under section 202(c) by looking to the statutory text and its structure. And we place those interpretive tools against the backdrop of states’ exclusive regulatory authority over electricity generation.
The plain meaning of the text confines the section 202(c) emergency authority to addressing a defined risk of a substantial energy-supply shortfall that calls for immediate action. Section 202(c) grants DOE limited power to bypass state authority over electricity generation to briefly compel generation or interconnection during times of war or other “emergency” scenarios. By its terms, section 202(c) authorizes DOE to order certain actions “[d]uring the continuance of any war in which the United States is engaged,” or when the Secretary determines that “an emergency exists” due to “a sudden increase in the demand for electric energy, or a shortage of electric energy or of facilities for the generation or transmission of electric energy, or of fuel or water for generating facilities, or other causes …” 16 U.S.C. § 824a(c)(1).
The architecture of the Federal Power Act and the historical allocations of regulatory authority between federal and state governments indicate that Congress intended to further curtail DOE’s section 202(c) emergency power to circumstances that require action by the DOE specifically, as opposed to action by the states.
Begin with the Act’s structure: The provisions immediately preceding section 202(c)—sections 202(a) and (b)—confirm the primacy of states and their utilities in planning to prevent and respond to emergency electricity shortfalls. First, section 202(a) facilitates planning by states and utilities to generate and contract for adequate electricity supplies. It accomplishes this by enabling coordination through voluntary participation in Regional Transmission Organizations (RTOs). Next, section 202(b) provides for federal action only at the request of states or their utilities, to ensure adequate supply. When “necessary or appropriate in the public interest,” a state or utility may urge that the Federal Energy Regulatory Commission (FERC) order a generator to connect to and sell or exchange energy with other facilities. Finally, section 202(c) authorizes DOE to intervene to temporarily order similar actions—connecting facilities and providing electricity—to avert an emergency. Congress’s placement of section 202(c) after subsections (a) and (b), which broadly authorize state-level tools for preventing and addressing emergency electricity shortfalls, strongly implies that the intended use of subsection (c) is as the last resort among the three.
Consider next the history of states’ jurisdiction over electricity generation: The last-resort character of section 202(c) is well supported by the respective regulatory powers of states and the federal government under the Federal Power Act. There is no dispute that for nearly a century states have exercised authority, preserved by the Federal Power Act, to regulate in-state power plants for the economic and environmental benefit of their citizens. It is the states—guided by federal, regional, and load-serving entities’ assessments of available supply and reliability needs—that bear the responsibility to plan for and prevent reliability risks on an ongoing basis. To that end, states decide which generation resources must be built, expanded, reduced, or shut down. The Act grants the federal government, in contrast, authority to regulate wholesale energy marketing and interstate transmission. This delineation of federal and state regulatory power further supports treating DOE intervention under section 202(c) as rare and appropriate only when states, their utilities, and RTOs are unable or unwilling to respond. That is precisely how the federal government has used its section 202(c) authority to date—to address short-term crises, such as blackouts caused by war or extreme weather, not as a substitute for the states’ long-term reliability planning.
Our interpretation of the text, structure, and history leaves us unconvinced by DOE’s expansive conception of its “emergency” authority under section 202(c). The Department’s view would empower it to select its preferred power sources in Michigan—or, presumably, in any state—and order them to operate without heed to the multiple procedural and substantive constraints embedded in state reliability-planning processes. We conclude that section 202(c) is best understood as applicable when the Department identifies a risk of substantial harm from an inadequate electricity supply that requires immediate action by DOE in particular, rather than action by the states. Because the circumstances DOE identified in the challenged order do not warrant resort to section 202(c) as properly interpreted, we grant the petitions for review and vacate the Order.
