Last week, the US Court of Appeals for the DC Circuit in Public Citizen, Inc. v. FERC, No. 14-1244 (D.D.C.) declined to review the Federal Energy Regulatory Commission’s (FERC) approval of ISO New England’s (ISO-NE) eighth forward-capacity market auction (FCA 8). The circuit ruled that the commission’s deadlock in the matter – resulting in the approval of the FCA 8 rates – is neither a FERC order nor final agency action subject to judicial review. The panel expressed dismay with the result of its own decision, regretting that its hands are tied to review the outcome of the deadlock.

Section 205 of the Federal Power Act (FPA) requires utilities to file rate changes with FERC and authorizes the commission to hold hearings to determine whether the rates are just and reasonable.1 The state of Connecticut and consumer advocacy group Public Citizen sought commission review of the FCA 8 rates, citing concerns that they resulted from the undue influence of market power. FERC never set a hearing or “acted” to suspend the rates, and 61 days after filing the auction results (and thus the new rates), went into effect “by operation of law” according to the notice issued by FERC’s secretary confirming that the FCA 8 rates had become effective because the then-sitting four commissioners had deadlocked about whether to approve the rates or set them aside for a hearing.

Connecticut and Public Citizen sought review of FERC’s deadlock in the DC Circuit, arguing that the commission’s notice is an “Order” subject to judicial review under FPA Section 313(b).2 The court rejected that argument because “FERC did not engage in collective, institutional action when it deadlocked on the FCA 8’s rates.”3

The court also declined to apply its usual presumption in favor of judicial review of administrative action, saying that the presumption only applied to “final agency actions.”4 The court reasoned that, when the outcome for which review is sought is the result of deadlocked inaction, there is no final agency action it can review. The court rationalized that “the deadlock does not reflect an agency decision that fully resolved the issues or completed the process.”5

Finally, the court found that it lacked jurisdiction to review FERC’s approval of the FCA 8 rates under the Administrative Procedure Act (APA). Under the APA, inaction is reviewable where the agency failed to take action it is legally required to take.6 The court concluded that Section 205 “does not rise to an inexorable command” and “does not compel FERC to engage in nondiscretionary activity either by commanding FERC to set disputed rates for a hearing or by mandating FERC disapprove any unjust or unreasonable rates.”7

While unable to formally review the substance of FERC’s deadlock, the court echoed the petitioners’ criticism of then-FERC Chair Cheryl LaFleur, who had disclaimed authority to review the results of the FCA 8 just because ISO-NE conducted the FCA 8 in accordance with its tariff. In contrast, now-FERC Chairman Norman Bay, found that there were sufficient grounds for concerns about the abuse of market power to proceed to a hearing.

The decision raises concerns about the reviewability of future deadlocks by the commission, including one-to-one votes with one member voting present, in cases where the FPA or APA does not mandate a decision, even if the result of inaction is something other than the status quo. The court suggested that the case of Section 205 filings is unique because petitioners have an alternative avenue for relief (Section 206), which is not the case in most other proceedings. Section 206 of the FPA permits FERC review and third party challenge of rates that have already become effective.8 However, Section 206 proceedings pose a more stringent legal standard on petitioners and there is no assurance that a Section 206 proceeding in this or other cases would remove the same deadlock that led to it. In the end, even the court expressed concerns about the outcome of its own decision, saying it was “unfair[]”9 and calling on Congress to provide a remedy, laying out in detail how Congress provided for the judicial review of deadlocks under other statutes.