The Federal Energy Regulatory Commission (“FERC”) shares jurisdiction with the states over matters that fundamentally affect investment in critical energy infrastructure. In general, FERC’s policies have favored investment in assets that have the lowest short-term incremental cost, while state policies have tended to take a longer-term view and consider a variety of different factors, including fuel diversity, environmental impacts such as global warming emissions, security and sustainability of supply, economic development, stability of retail rates, and other public interest considerations.
Significant conflicts between FERC policies and state priorities have generally been resolved in favor of FERC by the federal courts. Courts have cited the Supremacy Clause of the U.S. Constitution, which requires state policies to yield in areas where FERC has exclusive jurisdiction. However, federal law also preserves important responsibilities to the states.
To the extent that federal policy could impede the accomplishment of the states’ legitimate objectives in areas traditionally reserved to them, a collaborative approach should be adopted. The November 2014 joint technical conference between FERC and the New York Public Service Commission (“NYPSC”) to discuss issues of mutual interest and concern regarding wholesale markets and energy infrastructure in New York is a good example of the type of collaboration that may become increasingly necessary to reconcile sometimes conflicting federal and state regulatory priorities, provide market participants a reasonable degree of market stability, and help avoid contentious litigation.
For more information, see Julia Sullivan, The Intersection of Federally Regulated Power Markets and State Energy and Environmental Goals, 26 Fordham Envtl. L. Rev. 474 (2015) (available at https://ir.lawnet.fordham.edu/elr/vol26/iss3/5/)