Supreme Court doubts federal authority to control peak demand for power

Richard Wolf | USA TODAY

WASHINGTON — A federal regulation designed to cut electricity consumption during hours of peak demand, reducing the risk of blackouts and saving consumers billions of dollars, ran into resistance at the Supreme Court Wednesday.

The problem, the court's conservative justices said, is that the federal government may not have the power to do it.

The case pits the Federal Energy Regulatory Commission's interest in balancing the supply and demand of electricity, particularly during hot summer and cold winter months, against power generators and electric service providers whose profits are affected. They contend the regulation is an intrusion into state power markets, which engage in their own efforts to control peak demand.

With billions of dollars at stake, the one-hour oral argument drew three of the nation's most experienced and high-powered litigators: U.S. Solicitor General Donald Verrilli and appellate lawyers Carter Phillips and Paul Clement, who between them have argued 200 cases at the Supreme Court.

The federal regulation encourages operators of the electric wholesale market to pay consumers in 24 states who agree to cut electricity use at peak demand times and places. The idea is to control demand rather than increase supply, which can be more expensive and less environmentally sound.

But what Verrilli called "cooperative federalism" between the federal and state governments and Phillips, arguing for private providers and regulators who back the rule, called an effort to "protect the reliability of the grid," Clement said was an illegal intrusion into state retail markets.

The court's conservative justices appeared to agree with the latter argument. Justice Antonin Scalia said the federal agency was "mucking around" in an area of state jurisdiction.

Chief Justice John Roberts likened it to offering a McDonald's customer $5 not to buy a $3 hamburger — effectively raising the retail price to $8 if the forfeited $5 is included. He said the federal agency was "directly affecting the retail price."

Because Justice Samuel Alito recused himself from the case, presumably because of a personal financial conflict, it will take only four votes to sustain a federal appellate court's ruling against the government.

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