Commissioner James Danly Statement
October 5, 2021
Docket No. ER21-1343-000
I dissent from today’s order that unlawfully denies LS Marketers’ request for a Category 1 Seller designation in violation of the unambiguous text of our regulations.[1] This appears to be a matter of first impression.[2]
Section 35.36(a)(2) of the Commission’s regulations sets forth criteria for Category 1 status and applies either to a wholesale power marketer or a wholesale power producer.[3] An entity must meet all criteria to qualify as a Category 1 Seller.
At issue here is the requirement set forth in 35.36(a)(2)(iii) that the entity “[i]s not affiliated with anyone that owns, operates or controls transmission facilities in the same region as the Seller’s generation assets . . . .”[4] While LS Marketers’ affiliate owns transmission facilities in the Central region, LS Marketers state that they do not have generation assets in the Central region.[5]
The majority, however, relies on the Commission’s own interpretation of the revised regulation that was issued concurrently in Order No. 816,[6] which states:
the Commission proposed to clarify that a power marketer with no generation assets may qualify as a Category 1 seller in any region where: . . . (2) it is not affiliated with anyone that owns, operates or controls transmission facilities . . . . The Commission noted the above is consistent with the Commission’s treatment of power marketers since the issuance of Order No. 697.[7]
While the Commission employed this language as part of the body of Order No. 816, it failed to make a corresponding revision to the regulatory text as part of the rulemaking proceeding.[8] As LS Marketers rightfully argue, it is “axiomatic that an agency is bound by its own regulations.”[9] And judicial precedent is clear that an agency’s own interpretation of its regulation cannot alter the text of that regulation.[10]
The proper response of the Commission would be to modify the regulatory text in a rulemaking. Another option would be for the Commission to retract its statement in Order No. 816 at P 316 regarding power marketers with no generation assets. A third option, which I do not particularly favor, would be to clarify the statement in Order No. 816 to conform to the current text of the regulation. And while I would be reluctant to support such a maneuver, there is Commission precedent for this third option. In Order No. 672, the Commission amended the Commission’s regulations to implement section 215(e) of the FPA.[11] In the body of Order No. 672, the Commission clarified that any settlement of an alleged violation of a Reliability Standard that the Electric Reliability Organization (ERO) files with the Commission should be filed for informational purposes only and that these settlements will not be subject to Commission review pursuant to section 39.7(e) of our regulations.[12] Just over two years later, the Commission issued a Statement of Administrative Policy modifying that statement stating that “[a]ny settlement filed by the ERO after the date of this order will be subject to Commission review pursuant to section 39.7(e) . . . .”[13]
Straightforward application of the regulation compels granting Category 1 seller status to LS Marketers. The majority cannot properly rely upon the Commission’s interpretation of unambiguous text that effectively rewrites our regulations outside of the rulemaking process. This order is unlawful.
For these reasons, I respectfully dissent.
[1] LS Power Marketing, LLC, 177 FERC ¶ 61,011 (2021) (LS Power Marketing). LS Marketers are LS Power Marketing, LLC, Bolt Energy Marketing, LLC, Columbia Energy, LLC and LifeEnergy, LLC. The majority refers to these entities as LS Companies.
[2] LS Marketers March 12, 2021 Transmittal at 4 (“because this issue appeared to be one of first impression, Commission Staff suggested that the LS Marketers submit a request for exemption from Category 2 Status . . . The LS Marketers respectfully request that the Commission dismiss this Request as unnecessary if it agrees that they are already eligible for Category 1 Seller status.”).
[3] 18 C.F.R. § 35.36(a)(2).
[4] 18 C.F.R. § 35.36(a)(2)(iii) (emphasis added).
[5] LS Marketers March 12, 2021 Transmittal at 3 (“The LS Marketers and their affiliates do not own or control generation facilities in the Central region.”).
[6] 18 C.F.R. § 35.36(a)(2); Refinements to Policies & Procedures for Mkt.-Based Rates for Wholesale Sales of Elec. Energy, Capacity & Ancillary Servs. by Pub. Utils., 153 FERC ¶ 61,065 (2015) (Order No. 816), order on reh’g and clarification, 155 FERC ¶ 61,188 (2016) (Order No. 816-A).
[7] LS Power Marketing, 177 FERC ¶ 61,011 at P 14; see Order No. 816, 153 FERC ¶ 61,065 at P 316; see also Mkt.-Based Rates for Wholesale Sales of Elec. Energy, Capacity & Ancillary Servs. by Pub. Utils., Order No. 697, 119 FERC ¶ 61,295, at PP 848-850 & n.1000, clarified, 121 FERC ¶ 61,260 (2007), order on reh’g, Order No. 697-A, 123 FERC ¶ 61,055, clarified, 124 FERC ¶ 61,055, order on reh’g, Order No. 697-B, 125 FERC ¶ 61,326 (2008), order on reh’g, Order No. 697-C, 127 FERC ¶ 61,284 (2009), order on reh’g, Order No. 697-D, 130 FERC ¶ 61,206 (2010), clarified, 131 FERC ¶ 61,021, aff’d sub nom. Mont. Consumer Counsel v. FERC, 659 F.3d 910 (9th Cir. 2011).
[8] Order No. 816, 153 FERC ¶ 61,065 at P 320.
[9] LS Marketers March 12, 2021 Transmittal at 4 & n.10 (citing Panhandle E. Pipe Line Co. v. FERC, 613 F.2d 1120, 1135 (D.C. Cir. 1978) (citations omitted)).
[10] See, e.g., Auer v. Robbins, 519 U.S. 452, 461 (1997) (a federal agency’s interpretation of its own regulation is “controlling” unless it is “plainly erroneous or inconsistent with the regulation.”); Decker v. Nw. Envtl. Def. Ctr., 568 U.S. 597, 617 (2013) (Scalia, J., concurring in part and dissenting in part) (“But of course whenever the agency’s interpretation of the regulation is different from the fairest reading, it is in that sense ‘inconsistent’ with the regulation . . . Auer deference is Chevron deference applied to regulations rather than statutes.”); see also Kisor v. Wilkie, 139 S.Ct. 2400, 2414, 204 L. Ed. 2d 841 (2019) (“Auer deference is not the answer to every question of interpreting an agency’s rules. Far from it. As we explain . . ., the possibility of deference can arise only if a regulation is genuinely ambiguous.”); Nat. Parks Conserv. Ass’n v. FERC, 6 F.4th 1044, 1050 (9th Cir. 2021) (“deference to an agency’s interpretation of its own regulation is warranted as long as the regulation is genuinely ambiguous”); but see Talk Am. v. Mich. Bell Tel. Co., 564 U.S. 50, 68-69 (2011) (Scalia, J., concurring) (“On the surface, it seems to be a natural corollary—indeed, an a fortiori application—of the rule that we will defer to an agency’s interpretation of the statute it is charged with implementing.[] But it is not . . . [D]eferring to an agency’s interpretation of its own rule encourages the agency to enact vague rules which give it the power, in future adjudications, to do what it pleases.” (citation omitted)).
[11] Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards, 114 FERC ¶ 61,104 (Order No. 672), order on reh’g, 114 FERC ¶ 61,328 (2006) (Order No. 672-A).
[12] Order No. 672 at P 598 (“Further, pursuant to section 39.7(b)(4) of the Final Rule, the ERO should file, for informational purposes only, any settlement of an alleged violation regardless of whether the agreement contains an admission by the settling user, owner or operator. Settlements will be made public. This is consistent with our own procedures in which enforcement settlements are made public. Settlements will not be noticed for public comment; nor will they be subject to Commission review pursuant to section 39.7(e) regarding Commission review of a notice of penalty.”) (emphasis added).
[13] Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards, Docket Nos. RM05-30-002, et al., Statement of Administrative Policy on Processing Reliability Notices of Penalty and Order Revising Statement in Order No. 672, 123 FERC ¶ 61,046, at PP 1, 17 (2008) (Statement of Administrative Policy).