Appeals Court Vacates Dept. Of Energy 202(c) Emergency Generation Order (Costs Of Such Orders Are Generally Allocated To LSEs)

The U.S. Court of Appeals for the D.C. Circuit vacated an order from the U.S. Department of Energy which had directed, based on DOE's assertion of emergency power, continued operation of Consumers Energy's Campbell coal-fired power plant.

While the court's order only addresses the Campbell unit (located in MISO), the court's order more broadly implicates any such DOE emergency orders under section 202(c) of the Federal Power Act, whose costs in PJM are generally allocated to LSEs and, as previously reported, are, in some states, not being included in full requirements SOS bids, but rather are being assumed by the utility as a pass-through to SOS customers

In brief, the Court found that DOE's emergency powers to compel generation operation are limited to, "a narrow, last-resort backstop," which was not the case for Campbell which was subject to a planned retirement

The Court said that any broader DOE emergency power would disturb the Federal Power Act's intentional preservation of the states’ jurisdiction over electricity generation

The Court said, "The statutory limits in section 202(c) confine DOE’s authority to temporary emergencies that the [DOE] Secretary reasonably determines are and will be unmet by the state’s resource planning."

"We hold that a section 202(c) 'emergency' means a grid-reliability risk that calls for an immediate response by DOE in particular. If the Department finds the state has not and will not timely take steps that must be taken immediately to avert unacceptable risk to reliability, the need for immediate action can trigger statutory authority for DOE to step in," the Court said

Citing statutory text, DOE had argued that a "sudden increase in the demand for electric energy", or a, "shortage of electric energy or of facilities," allows DOE to use its emergency powers.

But the Court said that, "the mere possibility of an electricity supply shortfall -- with no specifics about its potential severity, timing, location, or likelihood -- does not warrant an emergency federal response. Rather, reasonable alternatives to DOE’s intervention were available, and in fact appear to have forestalled outages".

"Permitting DOE to compel generation in a situation that can be resolved through the ordinary resource adequacy planning mechanisms or a request under section 202(b) would render meaningless the constraints on federal power that Congress imposed throughout the Act," the Court said

The Court concluded that, "the Department’s reading of 'emergency' invites frequent federal interventions that are unsupported by the statute and threaten the stability of the energy market. By directing a generator approved for retirement to remain operative while effectively walling it off from planning and market frameworks, the Order challenged here interferes with ordinary methods to assess a region’s true generation capacity and distorts price signals that otherwise prompt appropriate capacity investments."

Docket No. 25-1159