The Supreme Court has upheld a four-year-old federal program that pays large electric customers to save energy during times of peak demand. The justices ruled 6-2 on Monday that the Federal Energy Regulatory Commission has the authority to issue directives aimed at conserving energy and preventing blackouts. Writing for the court, Justice Elena Kagan said the commission acted within its authority and was not attempting to regulate retail sales. The ruling is a win for the Obama administration, environmental groups, and other supporters who said the plan saved billions in energy costs, improved reliability of the power grid, and reduced air pollution since its 2011 implementation. Utility companies challenging the rule argued it was too generous and trampled state rights over retail electricity sales; a federal appeals court had ruled 2-1 last year that the plan intrudes on state power over retail electricity sales.
The demand response program pays large electricity consumers to reduce energy consumption on hot summer days and other times of peak demand. The reduction in power use means electric utilities don't need to turn on backup power plants, which cost more to run and boost electricity prices. The program saved customers in the mid-Atlantic region nearly $12 billion in 2013, per PJM Interconnection, which manages the wholesale power supply for all or part of 13 states. But the rule also meant millions in lost profits for utilities, and those companies argued that the program impermissibly targets retail customers. Federal law gives the commission authority to regulate wholesale markets, while retail sales are governed by states. Antonin Scalia dissented, joined by Clarence Thomas. Samuel Alito, meanwhile, didn't take part: Financial disclosures indicate he owns stock in Johnson Controls Inc., which has a subsidiary, EnergyConnect Inc., that's part of a group defending the commission's regulation.