D.C. Circuit Accepts FERC Regulatory Interpretation Previously Upheld under Chevron Step-Two 

In a long-awaited remand decision, the D.C. Circuit in Solar Energy Industries Ass’n v. Federal Energy Regulatory Commission upheld FERC’s regulatory interpretation of the Public Utility Regulatory Policies Act (“PURPA”).  The Circuit previously sided with FERC last year when it concluded the agency’s position was “reasonable” under Chevron Step Two, in light of supposed statutory ambiguity.  This week’s decision comes after the Supreme Court’s landmark overruling of Chevron in Loper Bright Enterprises v. Raimondo.  Yet despite the end of Chevron deference, the Circuit still concluded that FERC’s reading of the law reflected “the best view of the statute.” 

PURPA gives “small power production” facilities—defined by Congress to include any facility with “power production capacity . . . not greater than 80 megawatts”—certain regulatory benefits, including a guaranteed market or mandatory purchase obligation.  Solar Energy involved a power facility in Montana, which FERC certified as qualifying for this coveted status.  FERC’s determination relied on apparent ambiguity in the phrase “power production capacity.”   While the facility at issue produced and stored direct current at amounts exceeding the statutory cap—specifically, through operation of a 160-megawatt solar array and 50-megawatt battery storage system—the plant’s inverter system converted and exported alternating current at a total net capacity of only 80 megawatts. 

As explained in the Circuit’s decision last year, FERC adopted a “send-out approach” that “focused on grid-usable AC power,” rather than overall power production.  And because PURPA lacked any express language clarifying whether the relevant “capacity” in the phrase “power production capacity” referred to “individual subcomponents generating DC power” or “all of the facility’s components working together to produce grid-usable AC power,” the court deferred to FERC.  Judge Walker, in dissent, protested that “a lack of express language does not mean that the statute has no answer to the question presented,” as that would be “the path of ‘Chevron maximalism.’”  Instead, “courts must try every tool of statutory construction before declaring the text ambiguous and proceeding to agency deference.”  Loper Bright subsequently endorsed that view.  Chief Justice Roberts, writing for the majority, made clear that “courts [must] use every tool at their disposal to determine the best reading of [a]statute and resolve [any] ambiguity.”  That is the nature of the judicial role. 

On remand, under the new Loper Bright paradigm, the Circuit reiterated that FERC’s interpretation is the “best,” even without the benefit of Chevron deference.  It reached this conclusion based on a common-sense reading of the law, which centered on Congress’s facility-focused design of the statute, as well as its ultimate legislative purpose: 

As the Court explained, “[t]he best reading of ‘power production capacity’ of the facility refers to the amount of grid-usable electricity that it produces, in line with the statutory goal of regulating the regulations between power generators and the utilities they supply.”  That much was supported by statutory history and legislative purpose, as well as the fact that FERC “has consistently for 44 years defined ‘power production capacity’ as the amount of power that a facility as a whole sends out to the electrical grid.” 

Judge Walker dissented once more, in relevant part, on grounds that the facility actually produced “up to 130 megawatts” of power—the meaningful metric anticipated by the statute— and any limitations on the amount of power that could be exported to the grid or delivered to consumers (or whether such power was “direct” or “alternating” current) were irrelevant, atextual considerations.  And even on FERC’s parsing of “power production capacity,” the agency failed to account for the 50 megawatts generated and exported to the facility’s battery storage system for future use by grid customers.   

Judge Walker also highlighted that the government’s interpretation lacked any connection to a demonstrable technical or specialized industry meaning, which Congress intended to displace common usage in drafting the PURPA.  For these reasons, “[d]espite its pleas for Chevron deference, FERC was wrong before, and now that Chevron deference is verboten, FERC remains wrong today.” 

Regardless of whether the majority or Judge Walker got the interpretation of PURPA correct, this case illustrates well how courts may continue to uphold agency interpretations even in a post-Chevron world, and despite the fact an interpretation was previously justified as a permissible agency construction of a supposedly ambiguous statute. 

Read the full opinion here.