federal energy regulatory commission electric power supply association et argued october decided january federal power act fpa authorizes federal energy regulatory commission ferc regulate sale electric energy wholesale interstate commerce including wholesale electricity rates rule practice affecting rates places beyond ferc power leaving alone regulation sale retail sale electricity increasingly competitive interstate electricity market ferc undertaken ensure reasonable wholesale rates encouraging creation nonprofit entities manage regions nationwide electricity grid wholesale market operators administer portions grid ensure network conducts electricity reliably holds competitive auctions set wholesale prices auctions balance supply demand continuously matching bids provide electricity generators orders utilities entities lses buy power wholesale resale users bids supply electricity stacked lowest highest accepted order requests power met every electricity supplier paid price bid known locational marginal price lmp periods high electricity demand prices reach extremely high levels least efficient generators supply bids accepted wholesale market auctions rates rise dramatically peak periods increased flow electricity threatens overload grid cause substantial service problems faced challenges wholesale market operators devised wholesale demand response programs pay consumers commitments reduce use power peak periods like bids supply electricity offers aggregators multiple users electricity large individual consumers reduce consumption bid wholesale market auctions costs less pay consumers refrain using power pay producers supply demand response lower wholesale prices increase grid reliability wholesale operators began integrating programs markets years ago ferc authorized use congress subsequently encouraged development demand response spurred congress ferc issued order among things requires wholesale market operators receive demand response bids aggregators electricity consumers except state regulatory authority overseeing users retail purchases bars demand response participation cfr concerned order gone far enough ferc issued rule review order rule requires market operators pay price demand response providers conserving energy generators producing long net benefits test ensures accepted bids actually save consumers money met rule rejected alternative compensation scheme subtracted lmp savings consumers receive buying electricity retail market formula known rule also rejected claims ferc lacked statutory authority regulate compensation operators pay demand response bids appeals district columbia circuit vacated rule holding ferc lacked authority issue order directly regulates retail electricity market holding alternative rule compensation scheme arbitrary capricious administrative procedure act held fpa provides ferc authority regulate wholesale market operators compensation demand response bids analysis proceeds three parts first practices issue directly affect wholesale rates second ferc regulated retail sales taken together conclusions establish rule complies fpa plain terms third contrary view conflict fpa core purposes pp practices issue directly affect wholesale rates fpa delegated ferc authority indeed duty ensure rules practices affecting wholesale rates reasonable prevent statute assuming breadth see new york state conference blue cross blue shield plans travelers ins adopts circuit construction limiting ferc affecting jurisdiction rules practices directly affect wholesale rate california independent system operator ferc emphasis added standard easily met wholesale demand response reducing wholesale rates rules practices determine programs operate particularly true formula compensating demand response necessarily lowers wholesale electricity prices displacing generation bids pp rule also regulate retail electricity sales violation ferc regulation run afoul proscription affects quantity terms retail sales transactions occurring wholesale market natural consequences retail level necessity ferc regulation wholesale matters legal consequence see mississippi power light mississippi ex rel moore ferc regulates takes place wholesale market part carrying charge improve market runs matter effect retail rates imposes bar every aspect ferc regulatory plan happens exclusively wholesale market governs exclusively market rules commission justifications regulating demand response likewise improving wholesale market cf oneok learjet pp addition epsa position subvert fpa epsa arguments suggest entire practice wholesale demand response falls outside ferc regulate epsa concedes also lack authority fpa wholesale demand response programs go forward entity jurisdiction regulate outcome flout fpa core purposes protecting excessive prices ensuring effective transmission electric power pennsylvania water power fpc see gulf util fpc fpa read clear terms halt practice evidently enables ferc fulfill statutory duties holding prices enhancing reliability wholesale energy market pp ferc decision compensate demand response providers lmp price paid generators instead arbitrary capricious narrow scope review motor vehicle mfrs assn state farm mut automobile ins important limited role ensure ferc engaged reasoned decisionmaking weighed competing views selected compensation formula adequate support record intelligibly explained reasons making decision ferc provided detailed explanation choice lmp responded length contrary views ferc serious careful discussion issue satisfies arbitrary capricious standard pp reversed remanded kagan delivered opinion roberts kennedy ginsburg breyer sotomayor joined scalia filed dissenting opinion thomas joined alito took part consideration decision cases opinion notice opinion subject formal revision publication preliminary print reports readers requested notify reporter decisions washington typographical formal errors order corrections may made preliminary print goes press nos et al et al et al writs certiorari appeals district columbia circuit january justice kagan delivered opinion federal power act fpa act stat amended et authorizes federal energy regulatory commission ferc commission regulate sale electric energy wholesale interstate commerce including wholesale electricity rates rule practice affecting rates law places beyond ferc power leaves alone regulation sale notably retail sale electricity statutory division generates steady flow jurisdictional disputes point fact law wholesale retail markets electricity inextricably linked cases concern practice called demand response operators wholesale markets pay electricity consumers commitments use power certain times practice arose wholesale market operators sometimes say muggy august day offer electricity cheaply reliably paying users dial consumption paying power plants ramp production regulation challenged ferc required market operators specified circumstances compensate two services equivalently pay price demand response providers conserving energy generators making two issues presented first fpa permit ferc regulate demand response transactions rule impinge authority second even ferc requisite statutory power commission fail justify adequately demand response providers electricity producers receive compensation ruled ferc scores disagree federal regulation electricity owes beginnings one decisions early century state local agencies oversaw nearly generation transmission distribution electricity held public util attleboro steam elec commerce clause bars regulating certain interstate electricity transactions including wholesale sales sales resale across state lines ruling created became known attleboro gap regulatory void pointedly noted congress fill see congress responded invitation passing fpa act charged ferc predecessor agency undertaking effective federal regulation expanding business transmitting selling electric power interstate commerce new york ferc quoting gulf util fpc statute commission authority regulate transmission electric energy interstate commerce sale electric energy wholesale interstate commerce particular fpa obligates ferc oversee prices interstate transactions rules practices affecting prices statute provides rates charges made demanded received public utility connection interstate transmissions wholesale sales well rules regulations affecting pertaining rates charges must reasonable rate charge rule regulation practice contract affecting rate charge falls short standard commission must rectify problem shall determine reasonable impose order alongside grants power however act also limits ferc regulatory reach thereby maintains zone exclusive state jurisdiction pertinent provision gives ferc authority wholesale sales subchapter including delegation ferc shall apply sale electric energy accordingly commission may regulate either wholesale sales pertinent retail sales electricity sales directly users see new york state utility commissions continue oversee transactions since fpa passage electricity increasingly become competitive interstate business ferc role evolved accordingly decades ago state local utilities controlled power plants transmission lines delivery systems operating vertically integrated monopolies confined geographic areas longer independent power plants abound almost electricity flows local power networks past instead interconnected grid scope see electricity enters grid immediately becomes part vast pool energy constantly moving interstate commerce linking producers users across country new world ferc often forgoes traditionally used prevent monopolistic pricing commission instead undertakes ensure reasonable wholesale rates enhancing competition attempting recently explained break regulatory economic barriers hinder free market wholesale electricity morgan stanley capital group public util dist snohomish part effort ferc encouraged creation nonprofit entities manage wholesale markets regional basis seven wholesale market operators serve areas roughly country electricity load industry term amount electricity used see ferc energy primer handbook energy market basics energy primer administers portion grid providing generators access transmission lines ensuring network conducts electricity reliably see ibid still important present purposes operator conducts competitive auction set wholesale prices electricity wholesale auctions serve balance supply demand continuous basis producing prices electricity reflect value given locations times throughout day mechanism needed unlike products electricity stored effectively suppliers must generate every day hour minute exact amount power necessary meet demand utilities entities lses buy power wholesale resale users ensure happens wholesale market operators obtain orders lses indicating much electricity need various times bids generators specifying much electricity produce times much charge operators accept generators bids order cost least expensive first satisfy lses total demand price last unit electricity purchased paid every supplier whose bid accepted regardless actual offer total cost split among lses proportion much energy ordered example suppose august four plants serving washington produce amount electricity respectively suppose lses demand time place met operator accepts three cheapest bids first three generators receive amount think back econ marginal cost added cost meeting another unit demand price efficient market produce see kahn economics regulation principles institutions ferc calls cost jargon soon become oddly familiar locational marginal price market wholesale buyers demand electricity increases price must pay rises correspondingly times peak load grid reliability may also falter suppose august degrees every home store office people turning air conditioning keep providing power customers utilities lses must ask market operator electricity meet spike demand operator accept expensive bids suppliers operator agree bid spurned maybe beyond bids periods operators often must call extremely inefficient generators whose high costs production cause sit idle time see energy primer happens lmp price paid lses suppliers climbs ever higher meanwhile increased flow electricity grid threatens overload transmission lines see every consumer knows weather hottest need air conditioning acute blackouts brownouts service problems tend occur making matters worse wholesale electricity market lacks mechanism markets usually price product rises buyers naturally adjust reducing much purchase consumers electricity therefore utilities lses buying power wholesale respond price signals way use economic term demand electricity inelastic part electricity necessity ready substitutes temperature reaches degrees many people see option switch ac still many state regulators insulate consumers fluctuations wholesale prices insisting lses set stable retail rates see one might say normal rules economic behavior even peak periods costs surge wholesale market consumers feel pinch keep running ac means turn lses must keep buying power send users matter wholesale prices spiral control increased usage risks overtaxing grid alternative scenario consider happen wholesale market operators induce consumers refrain using lses buying electricity peak periods whenever costs less adding power operator bring electricity supply demand balance lower price simultaneously operator ease pressure grid thus protecting system failures idea behind practice issue wholesale demand response called pays consumers commitments curtail use power curb wholesale rates prevent grid breakdowns see demand response programs work operators regular auctions aggregators multiple users electricity well individual users like factories stores submit bids decrease electricity consumption set amount set time set price wholesale market operators treat offers like bids generators increase supply operators rank order bids produce refrain consuming electricity least expensive accept lowest bids supply demand come equipoise lses pick cost payments return prior example store submitted offer use unit electricity august operator accept bid calling generator offered produce unit power result lower lmp wholesale market price market operator avail demand response pledges see council harnessing power demand isos rtos integrating demand response wholesale electricity markets estimating one market demand response program reducing electricity usage peak hours lead price declines decrease risk blackouts service problems wholesale market operators began using demand response years ago soon assumed role overseeing wholesale electricity sales recognizing value demand response system reliability efficient pricing urged ferc allow implement programs see pjm interconnection order accepting tariff sheets modified ferc california independent system operator order conditionally accepting filing tariff revisions ferc demand response went effect market participants many kinds came view words respondent electric power supply association epsa important element robust competitive wholesale electricity markets app epsa comments proposed rule demand response compensation organized wholesale energy markets may congress added chorus voices praising wholesale demand response energy policy act stat epact declared policy demand response shall encouraged stat note particular congress directed deployment technology devices enable electricity customers participate demand response systems shall facilitated unnecessary barriers demand response participation energy markets shall eliminated spurred congress commission determined take active role promoting wholesale demand response programs ferc issued order among things requires wholesale market operators receive demand response bids aggregators electricity consumers except state regulatory authority overseeing users retail purchases bars demand response participation see fed reg codified cfr original order allowed operators compensate demand response providers differently generators chose party sought judicial review concerned order gone far enough ferc issued rule review one commissioner dissenting see demand response competition organized wholesale energy markets order fed reg rule codified cfr rule attempts ensure reasonable wholesale rates requiring market operators appropriately compensate demand response providers thus bring meaningful participation wholesale markets fed reg rule significant provision directs operators two specified conditions pay lmp accepted demand response bid successful supply bids see fed reg words rule requires demand response providers circumstances receive much conserving electricity generators producing two specified conditions ensure bid use less electricity provides value wholesale market bid make first demand response bidder must capability provide service offered must actually able reduce electricity use thereby obviate operator need secure additional power second paying lmp demand response bid must measured standard called net benefits test test makes certain accepting demand response bid supply bid actually save lses wholesale purchasers money situations even though accepting bid definition reduces lmp oversimplify bit lses share cost paying successful bidders reduced electricity use makes lses drop market placing proportionally greater burden left remaining lse may thus wind paying even though total bill lower said otherwise costs associated lse increased share compensating bids may exceed savings lse obtains lower wholesale net benefits test screens counterproductive demand response bids exempting rule compensation requirement see remains offers whose acceptance result actual savings wholesale purchasers along reliable service end users see rule rejected alternative scheme compensating demand response bids several commenters urged paying demand response provider operator subtract ordinary wholesale price savings provider nets buying electricity retail market otherwise commenters claimed demand response providers receive kind relative generators see proposal dissenting commissioner largely accepted became known lmp minus simply stands retail price electricity see moeller dissenting ferc explained conditions specified value accepted demand response bid wholesale market identical accepted supply bid succeeds balanc ing supply demand commission reasoned comparable value matter given ferc goal strengthening competition wholesale market rates reflect costs market participant incurs instead services provides see moreover rule stated compensating demand response bids actual value lmp help overcome various technological barriers including lack needed infrastructure impede aggregators users electricity fully participating demand response programs see rule also responded comments challenging ferc statutory authority regulate compensation operators pay demand response bids pointing commission analysis order rule explained fpa gives ferc jurisdiction bids directly affect wholesale rates citing nonetheless rule noted ferc continue order policy allowing state regulatory body prohibit consumers retail market taking part wholesale demand response programs see fed reg accordingly rule require action violate state laws regulations divided panel appeals district columbia circuit vacated rule ultra vires agency action held ferc lacked authority issue rule even though demand response compensation affects wholesale market commission jurisdiction regulate practices rates stated erase specific limit fpa imposes ferc regulation retail sales rule concluded exceeds limit luring retail customers wholesale market causing decrease levels retail electricity consumption rule engages direct regulation retail market appeals held alternatively rule arbitrary capricious administrative procedure act ferc failed adequately explain paying lmp demand response providers results compensation according ferc properly consider view payment give providers windfall leaving full lmp plus savings associated reduced consumption ibid quoting demand response competition organized wholesale energy markets order rehearing clarification order rehearing order ferc moeller dissenting dismissed hand idea comparable contributions reason equal compensation judge edwards dissented explained rules governing wholesale demand response direct effect wholesale electricity rates squarely within ferc jurisdiction setting rules argued ferc engage direct regulation retail market rather uthority retail rates remains vested solely internal quotation marks omitted finally judge edwards rejected majority view rule arbitrary capricious noted substantial deference due commission cases involving ratemaking concluded ferc provided thorough reasonable explanation choosing lmp appropriate compensation formula granted certiorari decide whether commission statutory authority regulate wholesale market operators compensation demand response bids whether rule challenged arbitrary capricious hold commission power rule adequately reasoned accordingly reverse ii analysis ferc regulatory authority proceeds three parts first practices issue rule market operators payments demand response commitments directly affect wholesale rates second addressing practices commission regulated retail sales taken together conclusions establish rule complies fpa plain terms third contrary view conflict act core purposes preventing use tool one even epsa disputes curb prices enhance reliability wholesale electricity fpa delegates responsibility ferc regulate interstate wholesale market electricity wholesale rates panoply rules practices affecting noted earlier act establishes scheme federal regulation sale electric energy wholesale interstate commerce see supra statute rates charges made demanded received public utility connection interstate wholesale sales shall reasonable shall rules regulations affecting pertaining rates charges ferc sees violation standard must take remedial action specifically whenever commission shall find rate charge rule regulation practice contract affecting rate charge unjust unreasonable commission shall determine reasonable rate charge rule regulation practice contract impose order means ferc authority indeed duty ensure rules practices affecting wholesale rates reasonable taken worth statutory grant extend ferc power surprising places noted markets electricity inputs steel fuel labor prominent among might affect generators supply power see edwards dissenting matter markets everything whole economy might influence lses demand indirect tangential impacts wholesale electricity rates sufficed ferc regulate one industry another changing vast array rules practices implement vision reasonableness justice imagine congress mind reason earlier circuit decision adopted approve construction fpa language limiting ferc affecting jurisdiction rules practices directly affect wholesale rate california independent system operator ferc emphasis added see edwards dissenting explained addressing similar terms like relating connection reading needed prevent statute assuming breadth see new york state conference blue cross blue shield plans travelers ins taken extend furthest stretch indeterminacy practical purposes statute never run course maracich spears slip phrase connection essentially indeterminat connections like relations stop nowhere internal quotation marks omitted commission incorporated circuit standard addressing authority issue rule see fed reg stating ferc jurisdiction wholesale demand response directly affects wholesale rates think right still rules governing wholesale demand response programs meet standard room spare general earlier described wholesale market operators employ demand response bids competitive auctions balance wholesale supply demand thereby set wholesale prices see supra operators accept bids bring wholesale rate displacing generation occurs often peak periods easing pressure grid avoidance service problems contributes lower charges see brief grid engineers et al amici curiae wholesale demand response short reducing wholesale rates rules practices determine programs operate particularly true formula operators use compensate demand response providers areas life greater pay leads greater participation rewarded lmp rather lesser amount demand response providers enter bids capable displacing generation thus necessarily lowering wholesale electricity prices commission found heightened demand response participation put downward pressure generators bids encouraging power plants offer product reduced prices lest come away bidding process fed reg ratchets rates wholesale purchasers pay compensation demand response thus directly affects wholesale prices indeed hard think practice conclusion end inquiry commission statutory authority uphold rule also must determine regulate retail electricity sales earlier described limit ferc sale jurisdiction wholesale reserving regulatory authority retail sales well intrastate wholesale sales new york emphasis deleted see supra ferc take action transgressing limit matter direct dramatic impact wholesale rates suppose take example commission issued regulation compelling every consumer buy certain amount electricity retail market rule necessarily determine load purchased wholesale market thus alter wholesale prices even given ineluctable consequence regulation exceed ferc authority defined specifies terms sale retail job yet ferc regulation run afoul proscription affects even substantially quantity terms retail sales fact economic life wholesale retail markets electricity every known product hermetically sealed contrary transactions occur wholesale market natural consequences retail level necessity ferc regulation wholesale matters cf oneok learjet slip noting similarly structured world natural gas regulation platonic ideal strict separation federal state realms exist ferc sets wholesale rate changes wholesale market rules allocates electricity wholesale purchasers short takes virtually action respecting wholesale transactions effect either short long term retail rates legal consequence see mississippi power light mississippi ex rel moore holding order regulating wholesale purchases fell within ferc jurisdiction preempted contrary state action even though clearly affected retail prices nantahala power light thornburg fpc louisiana power light holding similarly natural gas context ferc regulates takes place wholesale market part carrying charge improve market runs matter effect retail rates imposes bar setting rules demand response ferc done commission rule addresses addresses transactions occurring wholesale market recall demand response works forgive coming italics see supra wholesale market operators administer entire program receiving every demand response bid made operators accept bid mandated price bid provides value wholesale market balancing supply demand ly lower cost wholesale purchasers bid generate power fed reg compensation paid successful bid lmp whatever operator auction determined marginal price wholesale electricity particular location time see footing bill wholesale purchasers benefited lower wholesale price demand response participation produced see sum whatever effects retail level every aspect regulatory plan happens exclusively wholesale market governs exclusively market rules commission justifications regulating demand response improving wholesale market cf oneok slip considering target law aims determining whether state properly regulating retail instead improperly regulating wholesale sales order ferc explained demand response participation help create competitive wholesale electric energy market reduce wholesale power prices enhance reliability fed reg rule review ferc expanded theme listed several ways demand response organized wholesale energy markets help improve functioning competitiveness markets replacing inefficient generation exerting downward pressure generator bidding strategies support ing system reliability see notice proposed rulemaking order noting similar aims supra ferc focused wholly benefits demand response participation wholesale market bring wholesale market retail market figures rule goals mechanism rule operates epsa primary argument ferc usurped state power echoed dissent maintains rule effectively even though nominal ly regulates retail prices see brief respondents tr oral arg post argument begins universally accepted ground ferc set retail rates see fpc conway epsa concedes tenet alone make case ferc rule set actual rates continue make approve retail rates may insulate price fluctuations wholesale market see brief respondents still epsa contends rudimentary economic analysis shows rule functional equivalen setting particularly raising retail rates opportunity make demand response bids wholesale market changes consumers calculations deciding whether buy electricity retail consumers consider cost making purchase cost forgoing possible demand response payment epsa explains factory buy electricity earn buying power peak times effective retail rate times factory paid retail plus passed see thus increasing effective retail rates epsa concludes ferc trespasses ground modifier effective quite lot work argument work conventional understanding allows standard dictionary definition term rate used reference prices amount paid charged good service black law dictionary ed see oxford english dictionary ed rate means price cost sum paid asked thing set retail electricity rate thus establish amount money consumer hand exchange power nothing part fpa suggests expansive notion ferc sets rate electricity merely altering consumers incentives purchase neither anything caselaw decisions uniformly speak rates electricity else prosaic sense solicitor general summarized view rate tr oral arg price paid price paid plus cost forgone economic opportunity consider familiar scenario see odd epsa theory imagine flight overbooked airline offers passengers move later plane extra seats epsa view offer adds cost accepting airline proffered payment price every continuing passenger ticket person originally spent ticket decides reject airline proposal paid effective price passenger getting plane say paid fly highly unlikely airline lawyers regulators including many sure economics ph appear share view fact illegal increase price air transportation air transportation purchased consumer cfr safe bet airline ever gotten trouble offering payment epsa effective price increase claim fares even worse comes payments use electricity epsa universe wholesale demand response program raises retail rates compelling consumers pay price forgoing demand response compensation consumer even surprised air traveler learn price hike natural consequence wholesale demand response programs bring retail rates wholesale market operators accept demand response bids offers lower wholesale price see supra wholesale prices go retail prices tend follow state regulators mostly insist wholesale buyers eventually pass savings consumers epsa theoretical construct thus runs headlong real world electricity sales rule anything increase retail prices epsa second argument ferc intruded sphere historical purposive nature according epsa ferc deliberately lured retail customers wholesale markets ferc dissatisfied exercise undoubted authority regulate retail sales brief respondents see particular epsa asserts ferc disapproved many continued preference stable pricing insulating retail rates fluctuations wholesale costs promoting demand response programs epsa somewhat less neutral language forc ing retail customers respond wholesale price signals ferc acted express purpose overriding state policy claim initially founders true facts wholesale demand response came contra epsa commission invent practice rather described earlier impetus came wholesale market operators see supra designing newly organized markets operators recognized almost demand response lower wholesale electricity prices improve grid reliability quickly sought obtained ferc approval institute programs demand response emerged commission power grab instead innovation optimally balancing wholesale electricity supply demand years later congress endorsed practice ferc began play proactive role identical reason enhance wholesale retail electricity market like market operators ferc saw demand peak periods threatened network breakdowns compelled purchases inefficient generators consequently drove wholesale prices see fed reg see supra addressing problems demand response falls within sweet spot ferc statutory charge ferc took action promoting practice doubt ferc recognized connections running directions policies commission understood insulating consumers price fluctuations contributed wholesale market difficulties optimally balancing supply demand see fed reg supra ferc realized increased use demand response market definition inhibit retail sales otherwise subject state control see fed reg nothing supports epsa feverish idea commission interest wholesale demand response emerged yen usurp state authority impose regulatory agenda retail sales promoting demand response ferc follow dictates regulatory mission improve competitiveness efficiency reliability wholesale market indeed finishing blow epsa arguments comes ferc notable solicitude toward explained earlier rule allows state regulator prohibit consumers making demand response bids wholesale market see supra although claiming ability negate state decisions commission chose recognition linkage wholesale retail markets role overseeing retail sales see fed reg veto power thus granted belies epsa view ferc aimed obliterate regulatory authority override pricing policies brief respondents veto gives means block whatever effective increases retail rates demand response programs might thought produce wholesale demand response implemented rule program cooperative federalism retain last word feature rule removes conceivable doubt compliance allocation federal state authority one last point epsa position subvert fpa epsa jurisdictional claim may clear stretches far point single rule relating compensation levels exceeds ferc power instead epsa arguments rewarding energy conservation raises effective retail rates luring consumers onto wholesale markets aims disrupt state policies suggest entire practice wholesale demand response falls outside ferc regulate epsa proudly embraces point ferc declares business regulating response epsa theory ferc earlier order although never challenged also ultra vires requires operators open markets demand response bids ferc even approve operator voluntary plan administer demand response program see tr oral arg improperly allow retail customer participate wholesale market yet state commissions regulate demand response bids either epsa essentially concedes point see brief respondents may well true must fpa leaves room either direct state regulation prices interstate wholesales regulation indirectly achieve result northern natural gas state corporation state oversee offers made wholesale market operator auction help set wholesale prices effort kind preempted creates problem neither ferc regulate wholesale demand response definition one act electricity transaction proceed unless regulable someone earlier described congress passed fpa precisely eliminate vacuums authority electricity markets see supra act makes federal state powers complementary comprehensive private interests subvert public welfare louisiana power light said otherwise statute prevents creation regulatory man land fpc transcontinental gas pipe line see entity must jurisdiction regulate every practice takes place electricity markets demand response less reason upshot epsa view extinguish wholesale demand response program entirety fpa market operator must submit ferc proposed rules procedures see cfr assume epsa argues ferc authorize demand response program part package ferc simply allow plans go effect without consideration approval books programs wholesale electricity markets regulatory man land transcontinental fpa mandates ferc review ensure reasonableness every wholesale rule practice see supra ferc carry duty demand response programs go forward outcome flout fpa core objects statute aims protect excessive prices ensure effective transmission electric power pennsylvania water power fpc see gulf util fpc shown ferc amply explained wholesale demand response helps achieve ends bringing costs preventing service interruptions peak periods see supra one taking part rulemaking process even epsa seriously challenged account even objected ferc compensation formula commissioner moeller noted unanimity opinion demand response value owhere review comment hear testimony questioned benefit demand response resources participate organized wholesale energy markets point debate fed reg see also app epsa comments proposed rule avowing full support demand response participation wholesale markets economic operational benefits congress agreed encourag ing greater use demand response participation wholesale level epact stat undisputed judgment extinguishes last flicker life epsa argument read fpa clear terms halt practice evidently enables commission fulfill statutory duties holding prices enhancing reliability wholesale energy market iii cases present second narrower question ferc decision compensate demand response providers lmp price paid generators arbitrary capricious recall basic issue see supra wholesale market operators pay single price lmp successful bids supply electricity given time place rule orders operators pay identical price successful bid conserve electricity long bid satisfy net benefits test meaning sure bring costs wholesale purchasers mandating payment ferc rejected alternative proposal demand response providers receive lmp minus retail rate electricity according epsa others favoring approach demand response providers get windfall kind unless market operators subtract savings associated conserving electricity ordinary compensation level fed reg epsa claims ferc failed adequately justify choice lmp rather reviewing decision may substitute judgment commission scope review capricious standard narrow motor vehicle mfrs assn state farm mut automobile ins ask whether regulatory decision best one possible even whether better alternatives rather must uphold rule agency examine relevant considerations articulate satisfactory explanation action including rational connection facts found choice made ibid internal quotation marks omitted nowhere true technical area like electricity rate design afford great deference commission rate decisions morgan stanley commission gave detailed explanation choice lmp see fed reg relying eminent regulatory economist views ferc chiefly reasoned demand response bids get compensation generators bids provide value wholesale market see see also app reply affidavit alfred kahn kahn affidavit ferc noted market operator needs constantly balance supply demand either kind bid perform service way lowers costs wholesale purchasers see fed reg compensation system ferc concluded therefore place two kinds bids competitive par quoting kahn affidavit see also app kahn affidavit stating economic efficiency requires compensating two equally given equivalent function competitive power market supply demand response available equal terms operator select whichever bids whichever kind provide needed electricity lowest possible cost see rehearing order ferc ensuring receive compensation service expect final rule enhance competitiveness wholesale markets result reasonable rates rationale received added support ferc adoption net benefits test commission realized rulemaking circumstances demand response bid despite reducing wholesale rate provide value generation see fed reg described earlier happens distinctive costs associated compensating demand response bid exceed savings lower wholesale rate purchaser winds paying operator accepted best even though higher priced supply bid available see supra ferc developed net benefits test filter cases see fed reg standard place lmp paid demand response bids benefit wholesale purchasers words function alternative next generation thus commission approach demand response provider receive compensation generator fact providing service wholesale market see commission responded length epsa contrary view paying lmp even situation overcompensate demand response providers also effectively receiv ing retail rate need pay ferc explained compensation ordinarily reflects value service entity provides costs incurs benefits obtains process generator presents bid commission inquire costs benefits production different power plants different cost structures indeed plants receive tax credits similar incentive payments activities others see rehearing order ferc commission long since decided matters irrelevant paying lmp generators although walk away profit less encourages efficient supply demand decisions fed reg internal quotation marks omitted commission see economic reason treat demand response providers differently like generators experience range benefits costs benefits paying electricity costs using certain time ferc concluded immaterial increase competition optimally balance supply demand market operators compensate demand response providers like generators based contribution wholesale system see ibid ferc moreover ferc found paying lmp help demand response providers overcome certain barriers participation wholesale market see fed reg commenters detailed significant expenses associated demand response including cost installing necessary metering technology energy management systems see see also app viridity energy comments proposed rule demand response compensation organized wholesale energy markets may noting capital investments operational changes needed demand response participation commission agreed factors inhibit potential demand responders competing generators wholesale markets see fed reg concluded rewarding demand response lmp event price reflecting value market encourage competition turn bring wholesale prices see ibid finally commission noted determining formula easier proposed accomplished see retail rates vary across even within change time well accordingly ferc concluded requiring market operators incorporate prices even though perhaps feasible create practical difficulties ibid better impose administrative burden together enough commission regulates electricity rates disputed question involves technical understanding policy judgment commission addressed issue seriously carefully providing reasons support position responding principal alternative advanced upholding action discount cogency epsa arguments favor say opting lmp instead ferc made better call job render judgment reasonable minds differ important limited role ensure commission engaged reasoned decisionmaking weighed competing views selected compensation formula adequate support record intelligibly explained reasons making choice ferc satisfied standard iv ferc statutory authority extends rule issue addressing wholesale demand response rule governs practice directly affecting wholesale electricity rates although inevitably influencing retail market rule intrude power regulate retail sales ferc set terms transactions occurring organized wholesale markets ensure reasonableness wholesale prices reliability interstate grid fpa contemplates choosing compensation formula commission met duty reasoned judgment ferc took full account alternative policies proposed adequately supported explained decision accordingly reverse judgment appeals district columbia circuit remand cases proceedings consistent opinion ordered justice alito took part consideration decision cases scalia dissenting nos et al et al et al writs certiorari appeals district columbia circuit january justice scalia justice thomas joins dissenting believe federal power act fpa act et prohibits federal energy regulatory commission ferc regulating demand response retail purchasers power respectfully dissent holding contrary agree majority ferc authority regulate practices affecting wholesale rates mississippi power light mississippi ex rel moore also agree affecting jurisdiction limitless suppose even live direct effect test reasonable limit ante majority recognizes ante extratextual limit affecting jurisdiction merely supplements supplants limits already contained statutory text structure believe misconstrues primary statutory limit like majority think deference chevron natural resources defense council unwarranted statute clear act grants ferc authority regulate generation transmission electric energy interstate commerce sale energy wholesale yet majority frames issue thusly uphold ule also must determine regulate retail electricity sales ante formulation inverts proper inquiry pertinent question act whether rule regulates sales wholesale falls within ferc regulatory authority rule unauthorized whether happens regulate retail electricity sales exceptions material fpa prohibits ferc regulating sale electric energy wholesale emphasis added majority wisely ignores ferc specious argument rule regulate sale wholesale retail see brief petitioner paying someone conclude transaction otherwise without doubt concluded assuredly regulation transaction cf gonzales raich scalia concurring judgment properly framing inquiry matters think exists undefined category electricity sales ante proper framing inquiry important establish default presumption regarding scope ferc authority majority find every sale electric energy within ferc authority regulate unless transaction demonstrably retail sale statute actually excludes ferc jurisdiction sales electric energy except demonstrably sales wholesale exactly sale electric energy wholesale need guess act provides definition sale electric energy person resale emphasis added matter many times majority incants italicizes word wholesale ante nothing change fact vast majority likely participants ggregators multiple users electricity well individual users like factories stores ante resell electric energy consume ferc definition demand response aimed energy consumers resellers cfr therefore quite beside point challenged ule addresses addresses transactions occurring wholesale market ante ferc regulatory authority sales depends market transactions occu whatever means rather identity putative purchaser purchaser one resells electric energy customers transaction one wholesale thus within ferc authority least says statute long ago said parallel provision natural gas act line statute thus clear complete cut sharply cleanly sales resale direct sales consumptive uses exceptions made either category particular uses quantities otherwise panhandle eastern pipe line public serv majority makes textual response plain reading statute bidders indisputably resell energy customers follows rule regulate sales wholesale therefore forbids ferc regulate transactions see new york ferc whether transactions directly affect wholesale rates recently said another context adopt construction needlessly produces contradiction statutory text shapiro mcmanus slip faithful application principle compel conclusion ferc may forbidden slip analysis stop majority wrong even terms rule issue fact regulate retail electricity sales indisputably matters subject regulation therefore ferc see fpc conway panhandle eastern pipe line supra participants retail customers purchase electric energy solely consumption ferc scheme intentionally designed induce lower consumption electric energy words induce reduction retail electricity sales offering incentive payments customers cfr incentive payments effectively increase retail price electric energy participating customers must account opportunity cost using opposed abstaining using energy words literally costs buy energy retail market ferc conceded offering credits retail customers reduce electricity consumption impermissible intrusion retail market effect regulate retail rates cadc incentive payments identical substance majority resists elementary economic conclusion notwithstanding exhortation think back econ ante view dictates otherwise ante maybe easiest way see majority error take example airline passenger rejects voucher taking later flight consider following formulation example substance majority formulation hypothetical passenger exactly options outcomes available suppose airline said passenger proactively canceled ticket refunded account inconvenienced also deposited extra money use like insist repurchasing ticket flight must pay us return effective price ticket sometimes allegedly commonsensical intuition intuition often mistaken moving closer home recall participants must choose either purchase unit energy prevailing retail price say withhold purchasing unit receive instead incentive payment say two options thus present choice unit energy one hand bank repeat take energy poorer forgo energy richer definition price see black law dictionary ed amount money consideration asked given exchange something else fact majority definition price ante amount money consumer hand exchange power event majority appears recognize effective price indeed effective price airline ticket hypothetical ante recognition gives away game ferc prohibited directly setting modifying retail prices prohibited regulating retail sales matter means panhandle eastern pipe line supra whether ferc sets real retail price use majority idiosyncratic terminology ante effective retail price immaterial either way rule design induces participants forgo retail purchases otherwise made noted even ferc conceded offering credits retail customers impermissibly regulate retail sales majority blithely overlooks concession favor view retail pricing evading fact fiddling effective retail price electric energy incentive payments hypothetical credits regulates retail sales electric energy less direct ratesetting majority cites dicta several opinions expressing assumption state jurisdiction federal jurisdiction ferc cover field regulatory gap one entity must jurisdiction regulate every practice takes place electricity markets ante cases express principle respect federal power act predecessor natural gas act base surprise legislative history see fpc louisiana power light fpc transcontinental gas pipe line panhandle eastern pipe line one expect congressional proponents legislation assert comprehensive leaves stone unturned even one fan legislative history surely one rely upon generalities determining statute actually whether comprehensive leaves even minor regulatory gap surely depends says proponents hoped achieve imagine irrational interpretive principle following upon majority evidently relies hen dispute arises whether given transaction within scope federal state regulatory authority inclined approach problem negatively thus raising possibility man land created say borderline case congressional authority explicit must ask whether state authority practicably regulate given area find impelled decide federal authority governs transcontinental gas pipe line supra citation omitted extravagant method establishing regulatory jurisdiction necessary judgments invoked disappear memory hole suppose ferc decides eliminating middleman benefit public therefore promulgates rule allowing generators sell directly retail consumers across state lines fixing generation transmission retail rates sales think obvious hypothetical scheme forbidden ferc yet surely enact either ferc authority regulate transmission electric energy interstate commerce see also new york regulatory gap sales scheme fallen regulatory man land must ferc therefore allowed implement scheme applying majority logic yield nothing yesses yet majority acknowledges neither ferc regulatory jurisdiction scheme ante sales transactions involving mix retail wholesale players scheme regulated joint action call problem ante call inevitable consequence division created fpa majority evidently distraught affirming decision extinguish wholesale demand response program entirety ante alarmist hyperbole excluding ferc jurisdiction eliminate particular flavor demand response nothing prevents ferc tweaking scheme requiring incentive payments offered wholesale customers rather retail ones brief respondent electric power supply assn epsa et al brief respondents midwest entities programs run continue exist see brief respondent epsa et al brief respondents midwest entities fact congress seemed presuppose ferc run programs relevant provisions energy policy act stat et intended encourage coordinate regional basis state energy policies provide reliable affordable demand response services codified note emphasis added statute also imposes several duties secretary energy assist implementing programs stat context act therefore best read directing secretary eliminate unnecessary barriers adopting implementing systems majority contends praising wholesale demand response systems deployed regulated ferc ante emphasis added moreover rule allows forbid retail customers participate existing scheme cfr see brief petitioner majority accepts ferc argument merely matter grace claims puts finishing blow respondents argument prohibits scheme ante quite contrary remember majority believes ferc authority derives grants affecting jurisdiction yet provisions impose duty ferc ensure rules regulations affecting pertaining wholesale rates charges shall reasonable emphasis added see similar conway inducing retail customers participate wholesale transactions necessary render wholesale rates reasonable ferc consistent statutory mandate permit thwart participation see brief amicus curiae hughes talen energy marketing llc pending making argument similar cf new england power new hampshire although legally relevant fact ferc ordinarily jealous regulatory authority see brief amicus curiae willing let opt scheme serves highlight far rule intrudes retail electricity market ii found rule within ferc authority goes hold ferc choice compensating bidders locational marginal price arbitrary capricious strong arguments brief robert borlick et al amici curiae since however believe ferc rule ultra vires neither need desire analyze whether ultra vires reasonable foregoing reasons respectfully dissent footnotes together enernoc et al electric power supply association et also certiorari footnotes precise lmp generally includes addition price bid certain costs moving power grid costs relevant therefore disregard differently designed demand response programs operate retail markets example either encourage require utilities offer rebates customers curtailing electricity use times high load see energy primer dissent misreads subsection epact suggesting encourages use retail demand response rather wholesale programs issue see post opinion scalia supra prior subsection dissent notes promotes demand response epact switches gears subsection expressly addresses programs regional electricity entit ies wholesale market operators indeed provision lists markets operators run electricity market involved also capacity ancillary service markets established components wholesale system counterparts state level see energy primer explanation stylized version actual phenomenon reality lses rarely drop market entirely demand response instead merely order less electricity effect text total cost accepted bids spread among lses proportion units electricity purchase units decline remaining one bears greater share bill think ferc authority clear need address government alternative contention ferc interpretation statute entitled deference chevron natural resources defense council epsa additionally cites constraining commission authority see brief respondent epsa et al brief respondents provision adds nothing analysis section fpa declaration policy federal regulation electricity extend matters subject regulation often explained declaration serves frame act basic structure purpose see new york section broadly expresse act purpose quoting fpc southern cal edison section merely declaration great quoting connecticut light power fpc means applied issue merely points toward division regulatory authority carries operative provision counts dissent disputes framing issue criticism made neither epsa amici irrelevant deciding case according dissent fpa prohibits ferc regulating retail sales electricity agree also sales electricity aside wholesale sales see post dissent turns argue rule regulates kind sale electric energy whatever might rather dissent claims rule regulates retail sales see post exactly point address reject following pages event dissent framing issue wrong extent posits undefined category electricity sales falling within neither ferc regulatory authority sales electric energy come two varieties wholesale retail case dissent relies recognizes fact referring sales direct sales consumptive use panhandle eastern pipe line public serv ferc regulates interstate wholesale sales electricity regulate retail sales electricity ferc may also regulate practices rules affecting wholesale prices matters beyond wholesale sales long trespass authority regulate retail sales electric power see supra dissent offers alternatively definition price proves point price says dissent amount money consideration asked given exchange something else post quoting black law dictionary effective rates posited epsa dissent meet test actual rate unit retail electricity amount either asked given exchange power retail customer asked pay lse buys electricity gives lse contrast effective rate neither asked given anyone dissent replaces simple example convoluted fictitious one merely confirms point suppose dissent says airline cancels passenger ticket gives refund plus extra tells wants repurchase ticket must pay aha says dissent price see post well yes actual amount passenger hand airline receive ticket exchange dissent definition price amount asked given see supra words search intuitive way explain effective rate theory dissent must rely actual rate hypothetical highlight distance captured law real prices reflecting amounts paid effective ones reflecting opportunity costs dissent contests point complaining decades worth precedents affirming partly rely legislative history example dissent offers response misses mark see post dissent hypothesizes rule enabling generators sell directly consumers fixing generation transmission retail rates course neither ferc issue rule ferc interfere authority retail sales rates well generation state interfere ferc power transmission thus implement scheme need things ferc others one declined cooperate full scheme proceed goes show fpa divides regulatory power electricity matters ferc example nothing demonstrate electricity transactions proceed outside regulator authority epsa contends wholesale demand response unnecessary state regulators adopt programs reduce demand retail level see brief respondents example insist utilities give rebates customers using energy certain times see supra according commission market participants programs offer nearly benefits wholesale demand response individual utilities lack regional scope information needed identify demand response lower prices ensure reliability see fed reg energy primer brief nrg energy amicus curiae similarly ferc addressed rejected dissent suggestion wholesale market operators pay lses reduce electricity purchases lses lose revenues whenever demand goes demand response programs targeting actors highly inefficient see ferc assessment demand response advanced metering tr oral arg solicitor general noting lses engaged demand response cannibaliz ing profits footnotes although majority dismisses possibility fact appears think demand response category rejects conclusion rule regulates retail sales ante yet also implicitly rejects conclusion regulates wholesale sales otherwise rely ferc affecting jurisdiction rescue rule legitimacy