The approach, called demand response, requires electric market operators to compensate customers who lower their consumption of electricity during peak demand hours.
But FERC’s actions were challenged by electricity generators who said that FERC may only regulate wholesale sales of electricity and that its program intrudes on the retail market, which is the exclusive province of state regulators.
But the court ruled 6 to 2 that FERC was within its powers.
“FERC set the terms of transactions occurring in the organized wholesale markets so as to ensure the reasonableness of wholesale prices and the reliability of the interstate grid,” wrote Justice Elena Kagan, who said that is just what the Federal Power Act envisions.
She was joined by Chief Justice John G. Roberts Jr. and justices Anthony M. Kennedy, Ruth Bader Ginsburg, Stephen G. Breyer and Sonia Sotomayor.
Justices Antonin Scalia and Clarence Thomas dissented. Justice Samuel A. Alito Jr. recused himself from the case.
The Obama administration, environmental groups and some large consumers say demand response is a key mechanism for getting people to use less energy overall and, thus, reducing emissions of carbon dioxide or other pollutants.
Total electricity demand varies greatly, and when it peaks — usually in the afternoon or evening each day, but also seasonally, such as on very hot days — power companies have to bring additional power plants online to service that peak load.
In doing so, the companies address the need for more electricity by adding more supply. But demand response also can reduce how much power people or companies use during these peak times.
“We applaud the Supreme Court’s decision and look forward to the continued growth of demand response programs across the country,” said Casey Roberts, staff attorney at the Sierra Club, in a statement Monday. “FERC’s demand response programs make energy cheaper, ensure the reliability of the grid and protect our air and water from fossil fuel pollution.”
The administration claimed that the program was an example of federal-state cooperation that had saved billions of dollars in wholesale costs and was an effective tool in preventing blackouts and brownouts.
The case is Federal Energy Regulatory Commission v. Electric Power Supply Association.
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Review: Emerging Market
Formulations & Research Unit, Flagship Records.
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