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Federal Feud

The jurisdictional battle rages on, with FERC and EPA squaring off against the states.

Fortnightly Magazine - November 2012

When Revolutionary War veteran Daniel Shays led an attack on the federal Springfield Armory in January 1787—the spark that ignited the federalist movement—he scarcely could’ve guessed that now, 225 years later, his spiritual descendants would still be fighting that very same battle.

OK, not quite the same battle. But nevertheless, the tension between federal and state authority has never really abated since the nation was founded. And in just the past few years, battles over jurisdictional boundary lines have flared up in many venues across the country. Fortnightly’s list of the Top 10 Legal Decisions of 2012 (below) illustrates this conflict along several of the industry’s contested fronts.

“There are a lot of stress points right now,” says Richard Lehfeldt, a partner with Dickstein Shapiro. “We’ve got a divided U.S., with the so-called organized markets and the rest of the country. And we have the traditional state police power, in the form of regulatory and legislative function, to ensure the resources the states want are actually developed. Superimposed on that are the evolving rules of the road, with federal oversight. It’s becoming an area of increased friction.”

And wholesale markets are just one front in the battle. In perhaps the biggest court decision of the year, the D.C. Circuit sided with Texas and several other states who challenged the way the Environmental Protection Agency (EPA) was implementing its Clean Air Act authority through the Cross-State Air Pollution Rule (CSAPR) (see #2, “The War on EPA”) . But other, similar skirmishes involving EPA authority have broken out recently, as in the case of California Communities Against Toxics v. EPA , where the 9th Circuit remanded to the agency—but didn’t vacate—a permitting rule that would prevent startup at a much-needed power plant in Southern California. Such cases exemplify federal policy at odds with state interests. Some others include:

• Curtailing off-peak wind generation that would force baseload coal plants offline (see #3, “The War on Wind”) ;

• Nuclear spent fuel (#5, “Spent Fuel Follies) and plant relicensing conflicts, including New York’s bid to block the Nuclear Regulatory Commission from granting the Indian Point facility another 20-year operating license (see “ Nuclear Faceoff ,” April 2012);

• Initiatives in New Jersey and Maryland to push power prices downward in the PJM market by subsidizing new power capacity development—and FERC’s response, the minimum-offer price rule (see Fortnightly’s ongoing coverage at www.fortnightly.com/search/node/MOPR);

• Reliability and security standards imposed by the North American Electric Reliability Corp. (NERC), and FERC’s apparent bid to extend its authority further down-line from what’s normally considered the “bulk power system” (#10, “Thou Shalt Not Shed Load) ; and

• Market pricing for demand-side resources, specifically via FERC Order 745.

This last issue prompted a remarkable alliance to form among the industry’s legendary rivals—the Electric Power Supply Association (EPSA), representing independent

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