Xcel Energy Services Inc. v FERC, No. 20-1295 (D.C. Cir. 2022)
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Electricity grids are natural monopolies. To prevent utilities such as grid operators from abusing their market power, Congress has given the Federal Energy Regulatory Commission the responsibility to ensure that rates and rules under its jurisdiction are “just and reasonable[.]” 16 U.S.C. Section 824d(a).
The Public Service Corporation of Colorado is a grid owner and subsidiary of petitioner Xcel Energy Services, Inc. (collectively, “PS Colorado”). PS Colorado filed an application with the Commission to change how it processes power plant requests to interconnect—that is, to plug in—to its grid. The Commission denied PS Colorado’s request. It held that the proposal risked unduly preferring the company’s own power plants over would-be entrants to its grid.
The DC Circuit denied the petitions for review. The court held that the Commission reasonably explained its rejection of PS Colorado’s proposal. There was nothing arbitrary or capricious about its decision to bar a vertically integrated grid operator from adopting a rule that could favor its own generators and so cement its dominant market position. The Commission’s holding is consonant with decades of agency policy reflected in orders upheld by the Supreme Court and our court. The Commission also reasonably applied a different rule to a vertically integrated grid operator than it did to independent grid operators because vertically integrated operators have distinct competitive incentives.
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