Energy Law Journal – Is EPA The New Energy Regulator?

In The Environmental Protection Agency and the Clean Power Plan: A Paradigm Shift in Energy Regulation Away from Energy Regulators, published in the current issue of the Energy Law Journal, William S. Scherman (former FERC general counsel) and Jason J. Fleischer theorize that the Clean Power Plan will upset the balance of energy regulation in the U.S.  The two authors, both currently in private practice, argue that if the CPP survives legal challenges, it will result in EPA becoming the nation’s new energy regulator, fundamentally shifting the nature of energy regulation by undermining the powers of state regulators and FERC.

Scherman and Fleischer argue that historically there have been two foundations of energy regulation in the U.S. The first foundation is a regulatory compact, in which utilities receive a fair rate of return while consumers obtain reliable power free from monopolistic prices.  The second foundation is a line separating state and federal energy regulation (even if there are ongoing questions of where exactly that line should be drawn).  The authors claim that the CPP upends both.  According to their analysis, the math of the CPP will constrain state regulators and FERC-approved energy markets by effectively mandating the market shares for different generation fuel types.  Scherman and Fleischer conclude that this will both change the basis of the traditional regulatory compact and cross the federal-state regulatory line, disrupting the existing paradigm of energy regulation.

Their arguments echo what some of the petitioners have been urging in front of the D.C. Circuit. While it remains to be seen how these arguments fare in court, the article provides an interesting take on this perspective.

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