This Article interprets a trio of recent Supreme Court cases that addressed jurisdictional disputes in energy markets to identify which policies respect the Federal Power Act’s (FPA) allocation of jurisdiction and which do not. While judges and scholars have considered how these cases implicate various jurisdictional disputes, they have so far failed to articulate a coherent framework for understanding when state or federal policies violate the FPA’s jurisdictional silos.
This Article provides that framework. It argues that the Supreme Court’s energy law trio lays the foundation for a doctrinally coherent and normatively compelling interpretation of the FPA. Specifically, these three cases do not, as scholars have maintained, reflect a doctrinal shift away from the venerable “bright line” jurisdictional division that has characterized the FPA since 1935. Those cases instead apply this bright line to the twenty-first-century electricity sector, which has been transformed by technological innovations and by regulatory attempts to introduce competitive forces. The FPA continues to prohibit state and federal energy regulators from interfering with matters reserved to the other’s exclusive jurisdiction. The Court has simply clarified how the FPA applies in light of technological and economic developments that have created situations that implicate the responsibilities of state and federal regulators simultaneously. Rather than create regulatory gaps that would prevent energy regulators from supervising transactions over which the FPA expressly grants those regulators jurisdiction, the Court has prohibited only those unusual policies that (a) expressly decide an issue that the FPA leaves to the other regulator to resolve (for example, setting a rate in a market that is outside of the regulator’s sphere of jurisdiction), (b) “aim at” or “target” matters that the FPA reserves to the other regulator, or (c) render it impossible for FERC to control matters within its regulatory domain. Recognizing that the bright line is alive and well resolves the doctrinal confusion that has plagued courts and clarifies which energy policies are permissible and which are not.
In the past decade, state and federal regulators have taken ambitious steps to reshape the electricity sector. As of August 2020, thirty states and seven territories had committed to procuring a certain percentage of their electricity from clean or renewable sources.1×1. See, e.g., Renewable Energy Standard and Tariff, Ariz. Admin. Code §§ 14-2-1801, -1804 (2020); Renewable Energy Portfolio Standards Act, Del. Code Ann. tit. 26, §§ 351, 354 (2020); Future Energy Jobs Act, 2016 Ill. Laws 4581–82; Alternative Energy Production Law, Iowa Code §§ 476.41–.45 (2020); Clean Energy Standard, 310 Mass. Code Regs. 7.75 (2020); Clean and
Renewable Energy and Energy Waste Reduction Act, Mich. Comp. Laws §§ 460.1001, .1028 (2020); Renewable Energy Objectives, Minn. Stat. § 216B.1691 (2019); Renewable Energy
Standard, Mo. Ann. Stat. §§ 393.1020–.1030 (West 2020); Montana Renewable Power Production and Rural Economic Development Act, Mont. Code Ann. §§ 69-3-2001, -2004 (2019); Electric
Renewable Portfolio Standard, N.H. Rev. Stat. Ann. §§ 362-F:1 to :3 (2020); N.J. Stat. Ann. § 48:3-87 (West 2020); Renewable Energy and Energy Efficiency Portfolio Standard, N.C. Gen. Stat. § 62-133.8 (2020); Renewable Portfolio Standards, Or. Rev. Stat. §§ 469A.050–.055 (2020); Alternative Energy Portfolio Standards Act, 73 Pa. Stat. and Cons. Stat. § 1648.3 (West 2020); Renewable Energy Standard, 39 R.I. Gen. Laws § 39-26-4 (2020); Tex. Util. Code Ann. § 39.904 (West 2019); Vt. Stat. Ann. tit. 30, §§ 8004–8005 (2020); State Renewable Portfolio
Standards and Goals, Nat’l Conf. of St. Legislatures (Apr. 17, 2020), https://www.ncsl.org/
research/energy/renewable-portfolio-standards.aspx [https://perma.cc/XU6E-FGHV]. At least thirteen of those states and territories, including California and New York, have pledged to procure one hundred percent of their electricity from carbon-free sources by 2050 or earlier.2×2. See, e.g., Cal. Pub. Util. Code § 454.53 (West 2020); D.C. Code § 34-1432 (2020); Guam Pub. L. 35-46 (2019); Haw. Rev. Stat. § 269-92 (2019); Me. Rev. Stat. Ann. tit. 35-A,
§ 3210(1-A)(B) (2020); Nev. Rev. Stat. § 704.7820(2) (2020); N.M. Stat. Ann. §§ 62-15-34(A)(3)(c), 62-16-4(A)(6) (West 2020); Puerto Rico Energy Policy Act, 2019 P.R. Laws Act No. 17; Va. Code Ann. § 56-585.5(C) (2020); Wash. Rev. Code §§ 19.405.010, .050 (2020); S. 6599, 242d Leg., Reg. Sess. (N.Y. 2019) (enacted) (codified at N.Y. Env’t Conserv. Law §§ 75-0101 to -0119 (McKinney 2020)); Conn. Exec. Order No. 3 (Sept. 3, 2019); Wis. Exec. Order No. 38 (Aug. 16, 2019). At least one other state is considering similar legislation. See Clean and Renewable Energy Standard (CARES), S. 265, 2020 Gen. Assemb., 441st Sess. (Md. 2020). Those plans build on a host of other measures, including renewable portfolio standards,3×3. Renewable portfolio standards require utilities to purchase a certain percentage of electricity from clean energy sources. See sources cited supra note 2. cap-and-trade programs,4×4. Cap-and-trade programs set an upward limit on emissions — often on emissions from industrial activity. See, e.g., AB 32 Global Warming Solutions Act of 2006, Cal. Air Res. Bd. (Sept. 28, 2018), http://www.arb.ca.gov/cc/ab32/ab32.htm [https://perma.cc/HL63-RM7X]. and net metering policies,5×5. Net metering policies compensate homeowners for installing rooftop solar panels. See State Net Metering Policies, Nat’l Conf. of St. Legislatures (Nov. 20, 2017), https://www.ncsl.org/research/energy/net-metering-policy-overview-and-state-legislative-updates.aspx [https://perma.cc/7MSD-2X43]. that are designed to reduce power sector pollution. For its part, the Federal Energy Regulatory Commission (FERC) has ordered grid operators to allow emerging resources to compete with incumbent power providers on a level playing field.6×6. See, e.g., Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 841, 83 Fed. Reg. 9,580, 9,582 (Mar. 6, 2018) (codified at 18 C.F.R. pt. 35) [hereinafter FERC Order No. 841] (ordering energy markets to accommodate storage resources); see also Rich Glick & Matthew Christiansen, FERC and Climate Change, 40 Energy L.J. 1, 16–24 (2019) (discussing the Commission’s efforts to break down barriers to competition and new technologies). Those state and federal efforts to shape the electricity sector are arguably the single most significant step the United States is taking to address climate change.7×7. See William Boyd & Ann E. Carlson, Accidents of Federalism: Ratemaking and Policy Innovation in Public Utility Law, 63 UCLA L. Rev. 810, 816–17, 891–93 (2016).
State and federal regulators are pursuing these policies against a backdrop of unprecedented change in the electricity sector. New technologies, including batteries and distributed energy resources,8×8. Distributed energy resources are generally resources that participate in the electricity grid at the local level — rooftop solar panels, residential appliances, such as water heaters and air conditioning units, and, perhaps in the not-too-distant future, electric cars. See Tanuj Deora, Lisa Frantzis & Jamie Mandel, Distributed Energy Resources 101: Required Reading for a Modern Grid, Advanced Energy Econ. (Feb. 13, 2017, 9:45 AM), https://blog.aee.net/distributed-energy-resources-101-required-reading-for-a-modern-grid [https://perma.cc/J64M-Z94U]. along with maturing technologies, such as wind and solar, are reshaping the generation mix in a way that is rapidly rendering obsolete the regulatory and economic models that prevailed for nearly a century. Together, the combination of technological change, competitive forces, and state efforts to address climate change has the potential to create an electricity sector that would have been virtually unrecognizable just a few years ago. We’ll call this the transition to the electricity grid of the future.
But getting to the electricity grid of the future will not be easy. Efforts to reshape the grid are already encountering a host of political, regulatory, and legal obstacles. This Article analyzes what could be the principal legal impediment to state and federal efforts to shape modern electricity markets — a New Deal statute with a vaguely Orwellian name: the Federal Power Act9×9. 16 U.S.C. §§ 791a–828c. (FPA). The FPA was enacted in the midst of the Great Depression10×10. The FPA was enacted in 1920 as the Federal Water Power Act to regulate hydroelectric plants. See 16 U.S.C. § 791; Federal Water Power Act, ch. 285, 41 Stat. 1063 (1920). It was amended in 1935, when Congress passed the Public Utility Act. See Public Utility Act of 1935, tit. II, ch. 687, 49 Stat. 803, 838–63 (codified as amended at 16 U.S.C. §§ 791a–828c). and with the primary goal of protecting customers from economic exploitation at the hands of monopoly utilities.11×11. See, e.g., Joshua C. Macey, Zombie Energy Laws, 73 Vand. L. Rev. 1077, 1098 (2020); see also id. at 1096–1105 (showing that numerous energy doctrines originated in the utility era to protect consumers). The law gave the federal government near plenary authority over sales of electricity from power plants and over the transmission facilities that moved that electricity long distances to the people who consume it.12×12. See 16 U.S.C. § 824(b)(1). The primary exception was for sales of electricity that were not in interstate commerce. See id. At the same time, Congress explicitly reserved oversight of several important parts of the electricity sector for exclusive regulation by the states,13×13. See id. § 824(a). including retail sales of electricity and the facilities that generate electric power.14×14. See id. § 824(b)(1). In the 1930s, those lines demarcated clear federal and state spheres of authority. For that reason, the FPA was often described as drawing a “bright line” between state and federal jurisdiction.15×15. See, e.g., Miss. Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, 374 (1988) (“Congress has drawn a bright line between state and federal authority in the setting of wholesale rates and in the regulation of agreements that affect wholesale rates.”); FPC v. S. Cal. Edison Co., 376 U.S. 205, 215–16 (1964) (“Congress meant to draw a bright line easily ascertained, between state and federal jurisdiction . . . .”).
How things have changed. Today’s electricity sector has matured into the “most complex machine ever made.”16×16. Phillip F. Schewe, The Grid: A Journey Through the Heart of Our Electrified World 1 (2007). And that machine is now evolving faster than at any point in its century-plus history. Since the mid-1990s, both federal and state regulators have pursued concerted campaigns to take advantage of rapid technological change and introduce competition into what had always been a monopoly industry.17×17. See Paul L. Joskow, The Difficult Transition to Competitive Electricity Markets in the United States, in Electricity Deregulation: Choices and Challenges 31, 31–32 (James M. Griffin & Steven L. Puller eds., 2005). Those efforts have redrawn the industry along lines that no longer trace the neat jurisdictional divisions laid out in 1935. In addition, a host of relatively new technologies — including batteries, low-cost wind and solar facilities, and technologies that allow customers to respond to price fluctuations — are rapidly being deployed across the grid.18×18. See, e.g., Coley Girouard, Time Varying Rates: An Idea Whose Time Has Come?, Advanced Energy Econ. (Mar. 12, 2015, 1:33 PM), https://blog.aee.net/time-varying-rates-an-idea-whose-time-has-come [https://perma.cc/DC63-WMTU]; Pippa Stevens, The Battery Decade: How Energy Storage Could Revolutionize Industries in the Next 10 Years, CNBC (Dec. 30, 2019, 3:25 PM), https://www.cnbc.com/2019/12/30/battery-developments-in-the-last-decade-created-a-seismic-shift-that-will-play-out-in-the-next-10-years.html [https://perma.cc/4ZES-3YG7] (estimating that the market for storage provided by lithium-ion batteries could reach $426 billion in the next decade). While these technologies promise enormous economic and environmental benefits, they likewise do not fit easily within the jurisdictional lines drawn in 1935. As a result, some have argued that what was once a “bright line” between federal and state jurisdiction has become a “hazy” one.19×19. Robert R. Nordhaus, The Hazy “Bright Line”: Defining Federal and State Regulation of Today’s Electric Grid, 36 Energy L.J. 203, 207 (2015) (noting that the bright line is no longer “easily ascertained”); see also Steven Ferrey, Supreme Court Strips States of Their Power over the World’s Second Most Important Technology, 69 Baylor L. Rev. 315, 317 (2017) (describing the “impenetrable” bright line once created by the Supreme Court).
The bounds of that line — whether bright or hazy — have become increasingly consequential as the industry transitions to the electricity grid of the future. In recent years, entities that stand to lose out from particular efforts to address climate change and increase competition in electric power markets have sought to weaponize the FPA’s division of authority, repeatedly arguing that state or federal policies are invalid because they exceed their progenitor’s jurisdiction.20×20. See, e.g., North Dakota v. Heydinger, 825 F.3d 912, 926 (8th Cir. 2016) (finding that the FPA preempts a Minnesota clean energy law). Battles about the electricity grid of the future are thus being waged over a jurisdictional line that Congress drew nearly a hundred years ago.
For example, in just the past few years, several state clean energy policies have been challenged — and some invalidated — on preemption grounds.21×21. See Coal. for Competitive Elec. v. Zibelman, 906 F.3d 41, 54 (2d Cir. 2018); Elec. Power Supply Ass’n v. Star, 904 F.3d 518, 522–24 (7th Cir. 2018); Heydinger, 825 F.3d at 926; see also New Eng. Ratepayers Ass’n, 168 FERC ¶ 61,169, para. 43 (Sept. 19, 2019) (finding that “the FPA preempts” a New Hampshire clean energy law because the law “sets an interstate wholesale rate, contravening the [FPA’s] division of authority between state and federal regulators” (alteration in original) (quoting Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1297 (2016))); Nat’l Ass’n of Regul. Util. Comm’rs v. FERC (NARUC), 964 F.3d 1177, 1181 (D.C. Cir. 2020). Federal regulations have also been challenged, with a major case involving a FERC rule to facilitate energy storage resources’ (for example, batteries’) participation in energy markets decided just last year.22×22. See NARUC, 964 F.3d at 1182–83. At least two other major jurisdictional disputes are pending in the courts of appeals. See Petition for Review, Sierra Club v. FERC, No. 20-1333 (D.C. Cir. Aug. 31, 2020); Petition for Review of FERC Orders, Ill. Com. Comm’n v. FERC, No. 20-1645 (7th Cir. Apr. 20, 2020); Zack Hale, 7th Circuit, Not DC Circuit, to Hear Challenges to PJM Capacity Market Overhaul, S&P Glob. Mkt. Intel. (May 6, 2020), https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/7th-circuit-not-dc-circuit-to-hear-challenges-to-pjm-capacity-market-overhaul-58484554 [https://perma.cc/MG3P-QWBY]. Faced with that reality, some have argued that the FPA is out of date and only dramatic revisions can prevent it from becoming a barrier to state and federal efforts to adapt to the changing electricity grid.23×23. See, e.g., Sharon B. Jacobs, Bypassing Federalism and the Administrative Law of Negawatts, 100 Iowa L. Rev. 885, 940–42, 944 (2015) (endorsing a legislative amendment to clarify federal authority over demand response in wholesale markets); Sharon B. Jacobs, The Energy Prosumer, 43 Ecology L.Q. 519, 522 (2016) (“[K]ey statutory language in energy law is, at least at the federal level, badly out of date.”); Nordhaus, supra note 19, at 215 (“If Congress is unable to address the issues presented by the current regulatory division of labor, then the FERC and the courts will have to try, if they can, to make the existing framework function. Whether this is even possible is a significant question. But in any case, muddling through will entail litigation, uncertainty, and delay . . . .”); Ari Peskoe, Easing Jurisdictional Tensions by Integrating Public Policy in Wholesale Electricity Markets, 38 Energy L.J. 1, 5–6 (2017) (“The FPA, written in 1935, does not explicitly contemplate wholesale auction markets, let alone demand response programs in those markets that have proliferated due to advances in computing and communications technologies.”); see also William W. Buzbee, Federalism Hedging, Entrenchment, and the Climate Challenge, 2017 Wis. L. Rev. 1037, 1110 (“[A] modest statutory amendment to . . . federal . . . energy laws, or a freestanding enactment addressing state climate and clean energy regulatory authority would help ensure that state and regional clean energy and climate regulation efforts do not run afoul of federal statutory law . . . .”).
We disagree. As it stands, the FPA should catalyze the transition to the energy grid of the future, not impede it. A trio of recent Supreme Court cases has the potential to create an enduring jurisdictional framework that can accommodate the transition to the electricity grid of the future while respecting the FPA’s federalist vision. In 2015 and 2016, the Supreme Court issued three decisions addressing jurisdictional challenges to various state and federal energy laws.24×24. See Hughes, 136 S. Ct. at 1298 (stating that states cannot “second-guess the reasonableness of interstate wholesale rates”); FERC v. Elec. Power Supply Ass’n (EPSA), 136 S. Ct. 760, 776 (2016) (“[A] FERC regulation does not run afoul of § 824(b)’s proscription [of FERC regulating retail rates] just because it affects — even substantially — the quantity or terms of retail sales.”); Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 1599–600 (2015) (finding that the Natural Gas Act (NGA), 15 U.S.C. §§ 717–717z, did not preempt state antitrust law because the “target at which the state law aims,” Oneok, 135 S. Ct. at 1599 (emphases omitted), is not a matter reserved to FERC’s jurisdiction). Scholars have argued that these cases adopted a “functionalist approach to managing . . . jurisdictional and federalism concerns,”25×25. Matthew R. Christiansen, Essay, FERC v. EPSA: Functionalism and the Electricity Industry of the Future, 68 Stan. L. Rev. Online 100, 101 (2016); see id. at 101–02. “recognized agency authorization for concurrent federal-state jurisdiction,”26×26. Jim Rossi, The Brave New Path of Energy Federalism, 95 Tex. L. Rev. 399, 403 (2016). and embraced “a federal-state relationship that is ‘complementary’ and ‘marked by interdepen-dence.’”27×27. Peskoe, supra note 23, at 19 (first quoting EPSA, 136 S. Ct. at 780; and then quoting Hughes, 136 S. Ct. at 1300 (Sotomayor, J., concurring)); see also Joel B. Eisen, Dual Electricity Federalism Is Dead, but How Dead, and What Replaces It?, 8 Geo. Wash. U. J. Energy & Env’t L. 3, 3 (2017); Daniel A. Lyons, Protecting States in the New World of Energy Federalism, 67 Emory L.J. 921, 924–26 (2018). Regardless of whether the trio of Supreme Court cases marks a departure from past practice (we think it does not), such observations are only the first step. An additional challenge lies in developing a coherent framework that applies the FPA’s jurisdictional divide to the host of legal, economic, and technological challenges presented by the modern electricity sector.28×28. We are not the first to try to harmonize these three cases. See, e.g., Joel B. Eisen, The New (Clear?) Electricity Federalism: Federal Preemption of States’ “Zero Emissions Credit” Programs, 45 Ecology L. Currents 149, 162 (2018) (“A useful decision rule would allow the states and FERC to proceed independently as long as neither attempts to consciously disregard the other.”); Lyons, supra note 27, at 949–50 (describing the Supreme Court’s triumvirate as a “Venn diagram” of overlapping jurisdiction, id. at 949, and arguing that “the key question is the purpose of the regulation at issue[, which] contrasts with the dual federalism approach of asking whether the regulation had effects outside its sphere,” id. at 950); Rossi, supra note 26, at 457 (“[T]he Supreme Court has replaced energy field preemption with an assessment of obstacle preemption (in the setting of wholesale rates, under FERC’s substantive jurisdiction) or conflict preemption (in assessing FERC’s exercise of remedial jurisdiction over practices affecting rates).”).
This Article provides that framework. The Supreme Court’s trio of energy law cases29×29. Two of these cases involve the FPA, Hughes, 136 S. Ct. at 1292; EPSA, 136 S. Ct. at 773, and the third involves the NGA, Oneok, 135 S. Ct. at 1594, which was enacted three years after the FPA and was largely modeled after the FPA, including in its allocation of jurisdiction, see Lyons, supra note 27, at 924 nn.1–2, 928–31. Given the similarities between the two statutes, the Supreme Court “has routinely relied on NGA cases in determining the scope of the FPA, and vice versa.” Hughes, 136 S. Ct. at 1298 n.10. recognized that economic and technological developments have produced an electricity sector that no longer follows the “Platonic ideal” of neatly divided state and federal spheres of jurisdiction.30×30. Oneok, 135 S. Ct. at 1601 (explaining that the natural gas sector does not adhere to a “Platonic ideal” of the “clear division between areas of state and federal authority” that undergirds both the FPA and the NGA). As FERC and the states have broken down barriers to competition and allowed new technologies to displace incumbent generators, the electricity sector has evolved such that many of the most critical issues lie “at the confluence of State and Federal jurisdiction.”31×31. Demand Response Compensation in Organized Wholesale Energy Markets, Order No. 745, 76 Fed. Reg. 16,658, 16,676 (Mar. 24, 2011) (codified at 18 C.F.R. pt. 35) [hereinafter FERC Order No. 745]. As a result, now more than ever, the federal and state spheres of jurisdiction are, to use Justice Kagan’s memorable phrase, “not hermetically sealed.”32×32. EPSA, 136 S. Ct. at 776. As discussed below, it has always been true that state regulations affect the federal sphere and vice versa. See infra p. 1412. Our point is that the transition to the electricity grid of the future is making those effects more pronounced. A jurisdictional framework that prevents cross-jurisdictional effects would necessarily handicap at least one sovereign — and perhaps both — in a way that is inconsistent with the FPA’s dual-federalist structure.
The Court’s trio of energy law cases avoids that result. It establishes a theoretical framework that balances the two sovereigns’ respective interests in a way that preserves the FPA’s division of jurisdiction in the modern electricity sector. Equally important, it does so while remaining consistent with ninety years of FPA jurisprudence demarcating a bright line between state and federal authority. The bright line divide prohibits state and federal energy regulations only when they actually regulate a matter over which the other sovereign has exclusive jurisdiction. That occurs in only two situations. First, state and federal regulators cannot “directly regulate” a matter over which the other sovereign has exclusive jurisdiction. The phrase “directly regulate” has a precise meaning here. It prohibits a federal or state regulator from expressly deciding an issue left to the other regulator to resolve. Thus, a state cannot “set” a wholesale rate, and FERC likewise cannot set a retail rate or prohibit the development of generation or distribution facilities.33×33. See EPSA, 136 S. Ct. at 778 (“Our decisions uniformly speak about rates, for electricity and all else, in only their most prosaic, garden-variety sense.”). Second, state and federal regulators cannot implement policies that “aim at” or “target” matters that Congress reserved to the other sovereign.34×34. Hughes, 136 S. Ct. at 1298 (emphasis omitted) (first quoting Oneok, 135 S. Ct. at 1600; and then quoting id. at 1599). “Aiming at” is not a matter of legislative intent. It is rather a test to determine whether a policy is actually regulating a matter over which the other sovereign has jurisdiction. See Va. Uranium, Inc. v. Warren, 139 S. Ct. 1894, 1905–06 (2019); Miles Farmer, Response, State Motives Do Not Control the Preemption Inquiry Under the Federal Power Act, 91 N.Y.U. L. Rev. Online 27, 27–29 (2016). This prohibition is a limited one. It closes the loophole that would arise if energy regulators were permitted to pass laws that nominally regulate one aspect of the electricity sector but that in practice regulate a matter over which the sovereign lacks jurisdiction. For example, a state cannot use its authority over distribution facilities to dictate the terms of resources’ participation in wholesale markets.35×35. Nat’l Ass’n of Regul. Util. Comm’rs v. FERC (NARUC), 964 F.3d 1177, 1187–88 (D.C. Cir. 2020).
When a state or federal regulator transgresses either of those limitations, it prevents the other sovereign from supervising matters that are within that other sovereign’s exclusive jurisdiction. Such transgressions are inconsistent with the bright line approach not because they affect matters over which the other sovereign has jurisdiction, but because they regulate matters over which the other sovereign has jurisdiction. When a state policy does not cross the bright line but nevertheless affects a matter over which FERC has jurisdiction, only the doctrine of conflict preemption determines whether the policy is consistent with the FPA.36×36. Cf. EPSA, 136 S. Ct. at 776 (“When FERC regulates what takes place on the wholesale market, as part of carrying out its charge to improve how that market runs, then no matter the effect on retail rates, § 824(b) imposes no bar.”). Because the Supremacy Clause of the U.S. Constitution provides a rule of decision in which federal law prevails over a conflicting state law, see Armstrong v. Exceptional Child Ctr., Inc., 135 S. Ct. 1378, 1383 (2015), an irreconcilable conflict resulting from cross-jurisdictional effects can result only in preemption of the state law, and not vice versa. Conflict preemption refers to situations in which state law poses an obstacle to federal law. See Stephen A. Gardbaum, The Nature of Preemption, 79 Cornell L. Rev. 767, 775 (1994). A subset of conflict preemption that is especially relevant to the FPA is impossibility preemption, which recognizes that state law is conflict preempted when it is actually impossible to comply with both state and federal law simultaneously. See Miss. Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, 372–73 (1988) (explaining that a state may not prevent a utility from recovering through retail rates the costs of paying a rate that FERC has already found to be just and reasonable); Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 966 (1986) (“Once FERC sets such a rate, a State may not conclude in setting retail rates that the FERC-approved wholesale rates are unreasonable.”); FPC v. La. Power & Light Co., 406 U.S. 621, 631–34 (1972) (explaining that Congress gave the Federal Power Commission, FERC’s predecessor, authority to create a uniform national system for establishing curtailment plans to address natural gas shortages, meaning that individual state law programs to do the same would conflict with the federal scheme); see also Oneok, 135 S. Ct. at 1601–02 (describing Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, and FPC v. Louisiana Power & Light Co., 406 U.S. 621, as conflict preemption cases); infra pp. 1400–02. Courts’ application of conflict preemption under the FPA has always accommodated state policies that simply affect but that do not control matters within FERC’s exclusive jurisdiction. The FPA conflict preempts a state policy only if the state law makes it truly impossible to comply with federal energy regulations. See infra section II.B.3, pp. 1399–405.
Conflict preemption must be invoked judiciously. If the FPA barred state and federal energy regulators from implementing policies that affect matters reserved to the other sovereign, as some have suggested,37×37. See EPSA, 136 S. Ct. at 786 (Scalia, J., dissenting). both federal and state regulators would be severely handicapped, unable to achieve the FPA’s vision of an electricity sector that is just and reasonable and not unduly preferential or discriminatory.38×38. See id. at 780 (majority opinion) (“[T]he statute prevents the creation of any regulatory ‘no man’s land.’” (quoting FPC v. Transcon. Gas Pipe Line Corp., 365 U.S. 1, 19 (1961))). Moreover, such an overly strict interpretation would create regulatory gaps in which no regulator would have authority to supervise important parts of the industry, again contrary to the text and history of the FPA.39×39. See id. Recognizing that such an aggressive approach to conflict preemption would undermine the FPA’s federalist structure, the Court has found state policies conflict preempted only when the policy makes it actually impossible for an entity to comply with the FPA or FERC’s regulations.40×40. See infra section II.B.3, pp. 1399–405.
This Article’s core insight is that the Supreme Court has not replaced the bright line approach that governed energy market jurisdiction for nearly a hundred years. Instead, the Court has applied that framework in a way that accommodates the technological and market developments that are revolutionizing the energy sector. Under that framework, every dispute involving the FPA’s jurisdictional line can be resolved by answering no more than three questions.
The first question asks whether an action directly regulates a matter over which the regulator has jurisdiction. If the answer is yes, we proceed to the second question. If the answer is no — that is, if the action directly regulates a matter left to the other sovereign to decide — then it is categorically invalid. For example, a FERC regulation setting a retail rate or a state regulation setting a wholesale rate is invalid without any further analysis.
The second question asks whether the regulator has nevertheless aimed at or targeted a matter that the FPA gives the other sovereign exclusive jurisdiction to resolve. As the Court explained in its most recent FPA case, a law that nominally regulates one aspect of the electricity sector can, in practice, be used to regulate another aspect of the electricity sector entirely.41×41. See Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1299 (2016) (noting that a regulation that nominally governs generation facilities “operates within” the wholesale market, indicating that it aims at matters within FERC’s exclusive jurisdiction (emphasis added)); see also N. Nat. Gas Co. v. State Corp. Comm’n, 372 U.S. 84, 89, 91–92 (1963) (explaining that a state’s regulations dealing with wellhead purchases of natural gas, while nominally regulating only production facilities, in practice “necessarily deal with matters which directly affect the ability of the Federal Power Commission to regulate comprehensively and effectively the transportation and sale of natural gas, and to achieve the uniformity of regulation which was an objective of the Natural Gas Act,” id. at 91–92, and “therefore invalidly invade the federal agency’s exclusive domain,” id. at 92). Where that is the case, the regulation in question is invalid, just as if the regulator had directly regulated within the other sovereign’s sphere.42×42. See N. Nat. Gas Co., 372 U.S. at 91–92. This “aiming at” inquiry is an objective one that turns on what the regulation does and the justification given, not on an assessment of the regulator’s subjective intent.43×43. See Va. Uranium, Inc. v. Warren, 139 S. Ct. 1894, 1905 (2019) (“[T]his Court has generally treated field preemption inquiries like this one as depending on what the State did, not why it did it.” (citing, inter alia, Hughes, 136 S. Ct. 1288)); cf. Dep’t of Com. v. New York, 139 S. Ct. 2551, 2573–74 (2019) (explaining that a court reviewing agency action under the Administrative Procedure Act will not conduct an extra-record “judicial inquiry into ‘executive motivation,’” id. at 2573 (quoting Village of Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 268 n.18 (1977)), absent a “strong showing of bad faith or improper behavior,” id. at 2574 (quoting Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420 (1971))). The explanation given for the law or regulation — whether in the form of the rationale provided for an administrative order or in any findings included in the text of a state statute — will typically inform how that law or regulation works in practice and what it actually regulates. If a FERC regulation survives these first two questions, it is consistent with the FPA’s allocation of jurisdiction and that is the end of the jurisdictional inquiry.44×44. Step three applies only to state actions. When it is impossible to comply with a state and federal regulation simultaneously, the Supremacy Clause means that the federal action trumps the state action. See Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 963–64, 966 (1986).
A state regulation that survives the first two steps of this inquiry faces one additional question: whether the state law has made compliance with the FPA or a FERC regulation actually impossible. If so, then the state law is conflict preempted. If not, then the law is consistent with the FPA’s allocation of jurisdiction.
Just because the FPA’s dividing line is bright, however, does not mean that applying that line will always be easy. To the contrary, many jurisdictional questions may prove challenging, especially where one sovereign is alleged to have aimed at the other’s jurisdiction. The enduring feature of the bright line is that it provides a strict delineation between federal and state authority based on the matter that is regulated, not the effects of that regulation.45×45. See Jeffery S. Dennis, Suedeen G. Kelly, Robert R. Nordhaus & Douglas W. Smith, Federal/State Jurisdictional Split: Implications for Emerging Electricity Technologies 4 (2016), https://www.energy.gov/sites/prod/files/2017/01/f34/Federal%20State%20Jurisdictional%20Split–Implications%20for%20Emerging%20Electricity%20Technologies.pdf [https://perma.cc/F4NF-MU69] (“The ‘bright line’ in Part II of the FPA uses factors such as transaction and customer type (wholesale v. retail), facility type (generation v. transmission v. distribution), geography (interstate commerce v. intrastate commerce), and regulatory action (e.g., rate regulation v. facility permitting) to divide exclusive regulatory responsibilities between federal and state regulators.”). As a result, jurisdictional inquiries under the FPA turn on the single question of what is the object of the regulation, not on the sort of multifactor balancing tests that characterize other jurisdictional boundaries in administrative law.46×46. See, e.g., County of Maui v. Haw. Wildlife Fund, 140 S. Ct. 1462, 1469–70, 1476–77 (2020) (holding that the scope of certain permitting requirements under the Clean Water Act turns on a multifactor balancing test, as opposed to a “bright-line” standard, id. at 1470 (quoting Brief for Petitioner at 28, County of Maui, 140 S. Ct. 1462 (No. 18-260))); id. at 1478–79 (Kavanaugh, J., concurring) (explaining his view that the statutory text requires the consideration of multiple factors rather than a “bright-line” rule). That is the sense in which the line is “bright.”
The framework advanced in this Article departs from most existing scholarship in significant respects. Most importantly, we do not think that the Supreme Court has abandoned the bright line in favor of a more nebulous approach based on concurrent jurisdiction. Indeed, our framework leaves no role for concurrent jurisdiction and only a vanishingly small one for conflict preemption. It may be doctrinally correct to observe that state and federal regulators occasionally share jurisdiction over the same resources, and that the instances in which they do are becoming more common as the electricity sector evolves. But that does not mean that they share jurisdiction over the same issues. Instead, federal and state regulators retain separate spheres of exclusive jurisdiction.
This Article proceeds in three parts. Part I describes the origins of the FPA, the bright line jurisdictional divide that governed energy markets for the better part of ninety years, and the changes that have challenged this jurisdictional division. Part II analyzes three Supreme Court cases — Hughes v. Talen Energy Marketing, LLC,47×47. 136 S. Ct. 1288 (2016). FERC v. Electric Power Supply Ass’n48×48. 136 S. Ct. 760 (2016). (EPSA), and Oneok, Inc. v. Learjet, Inc.49×49. 135 S. Ct. 1591 (2015). Scholars have adopted different capitalization practices when citing Oneok. Some have capitalized all of the letters. See, e.g., Rossi, supra note 26, at 405 (“ONEOK”). Others have capitalized some of the letters. See, e.g., Shelley Welton, Electricity Markets and the Social Project of Decarbonization, 118 Colum. L. Rev. 1067, 1120 (2018) (“OneOK”). Recognizing that eminently reasonable minds may differ here, we will follow the Supreme Court’s practice of capitalizing only the first letter. See Hughes, 136 S. Ct. at 1298 (“Oneok”); EPSA, 136 S. Ct. at 776 (same). — and argues that these cases have established that the bright line is alive and well, and that conflict preemption should apply only when a state regulation renders it impossible to comply with a state and federal regulation simultaneously. Part III explains how to apply the bright line framework to jurisdictional disputes arising under the FPA. Part IV applies this framework to recent energy disputes in which lower courts have struggled to apply the FPA’s federalist system to modern energy disputes.
∗ Matthew Christiansen is currently a Legal Advisor to FERC Commissioner Richard Glick. The views expressed herein do not necessarily represent those of the Commission, individual Commissioners, or Commission Staff.
∗∗ Joshua Macey is an Assistant Professor at the University of Chicago Law School. Many thanks to Norman Bay, Lisa Bernstein, William Boyd, Jeff Dennis, Joel Eisen, William Eskridge, Miles Farmer, Sharon Jacobs, Hajin Kim, Alexandra Klass, Saul Levmore, Jerry Mashaw, Erica Hough, Jacob Mays, Ari Peskoe, Randy Picker, Eric Posner, Matt Price, Jim Rossi, Jackson Salovaara, David Spence, Steven Wellner, Shelley Welton, Anand Viswanathan, and Avi Zevin. We are also grateful to the Harvard Law Review for outstanding feedback and editorial assistance. Any errors are our own.
This Article is dedicated to Judge Stephen F. Williams, who, in his over thirty years on the bench, did more than anyone else to develop the jurisprudence of the Federal Power Act and Natural Gas Act.