On June 28, 2024, the Supreme Court decisively overruled Chevron in Loper-Bright Enterprises v. Raimondo, sparking a transformative shift in how courts assess agency authority. This 6-3 decision written by Chief Judge Roberts and supported by Justices Thomas, Alito, Gorsuch, Kavanaugh and Barrett, recalibrates the balance of power, significantly affecting the Federal Energy Regulatory Commission’s interpretation and execution of the Federal Power Act. 

The FPA governs aspects such as tariffs and business practices for wholesale power sales and interstate transmission services. The transition of the interstate power grid amidst climate policy — which is substantially driven on the state jurisdictional level — brings FERC’s authority under the FPA into sharper focus. The realignment of a Supreme Court majority in favor of limiting deference doctrines foreshadows a potential continuing reevaluation of the doctrine, including its various offshoots.

The Loper-Bright decision and its implications

The elimination of the Chevron deference necessitates cautious navigation by FERC, especially in situations where its assertion of jurisdiction overlaps with state-regulated matters.  FERC’s recent Order No. 1920, mandating revisions to how transmission providers conduct regional transmission planning to include assumptions and forecasts of what states may or may approve for their public policies relating to generation fuels and technologies, underscores potential conflicts arising from FERC's expanded regulatory scope. FERC’s initiative is geared towards supporting long-term infrastructure for future power generation but, depending on details that will emerge through a compliance filing process, may step on state-regulated domains such as integrated resource planning, generation facility certifications and transmission line siting.

Critics argue that FERC’s Order No. 1920 may prioritize certain power generation types for a form of subsidized transmission service, potentially leading to higher costs and skewing competitive processes relied upon by states.  Proponents contend that it might approach but does not cross any jurisdictional boundaries. This debate, which will be impacted by what FERC mandates through the compliance filing process, will ultimately play out in the appellate courts where significant questions will be called about the balance between federal authority and state rights in the context of resource and transmission planning.

The Future without Chevron

Chevron deference historically allowed agencies like FERC considerable leeway in interpreting ambiguous statutes, regulations and regulated agreements during judicial reviews. The Loper-Bright decision mandates that courts no longer assume agencies’ interpretations are correct when determining what the law provides. What the “law” is may vary on a case-by-case basis, but can include agency interpretation of regulated agreements, many of which do not require specialized administrative expertise, but instead involves merely construing the intent of the parties, which is something that courts can handle without disrespecting the technical “rate design” or other competencies of various federal agencies. Instead, under Loper-Bright, courts are to apply independent judgment to determine what the law provides in a given situation. This marks a significant move away from judicial deference, directing agencies, including FERC, to adopt a more conservative stance to avoid unfavorable judicial outcomes.

Judicial review and anticipated challenges

The post-Chevron era introduces substantial challenges for FERC, particularly how it justifies extending regulatory measures into traditionally state-governed areas.  Notably, in FERC v. Electric Power Supply Association (2015), the Supreme Court acknowledged the concept of “cooperative federalism” within Section 201 of the FPA, recognizing that FERC’s jurisdiction and state authority are interlinked and not entirely separate.  Therefore, FERC’s actions that influence state-regulated areas like transmission facility siting and construction do not inherently exceed its authority.  However, appellate court precedents, such as in South Carolina Public Service Authority v. FERC (2014), which have previously supported FERC’s jurisdiction over practices affecting tariff rates under Chevron deference, now rest on unstable grounds.  The courts have traditionally deferred to FERC’s interpretation of what constitutes practices “affecting” rates, but this deference is no longer guaranteed.

The legal challenges to Order No. 1920, with eleven petitions already filed, will be pivotal. These are set for review by the U.S. Court of Appeals for the Fourth Circuit, where the Loper-Bright decision will prominently feature.  The court will scrutinize FERC’s use of the “related to” principle for jurisdiction over long-term transmission planning.  FERC’s expertise in determining the connectivity of practices to actual transmission rates will now face de novo review — without the prior deference — raising questions about the influence of past precedents and reliance interests. 

Another critical aspect that will be under examination (although likely not with respect to Order No. 1920) will be the broader impact of Loper-Bright on other forms of judicial deference.  The Supreme Court clarified the judiciary’s role in definitively interpreting what the law requires or does not authorize, suggesting that interpretations by agencies, especially concerning jurisdictional contracts that do not involve complex rate designs, might no longer receive Chevron-like deference. 

In conclusion, the Loper-Bright ruling significantly redefines the judicial landscape, affecting how FERC and similar agencies interpret and enforce statutes.  As FERC navigates these transformed judicial parameters, the interplay between federal oversight and state authority will significantly influence future contours of U.S. energy regulation. This transition challenges existing regulatory frameworks and compels a reevaluation of how administrative law accommodates the nuanced, often intertwined scopes of federal and state powers.