Dive Brief:

• The U.S. Supreme Court's decision last month to uphold FERC Order 745 could bode well for the Clean Power Plan, legal experts say, should the federal carbon regulations end up in the nation's high court.
• Bloomberg BNA spoke with several legal scholars who say there are similarities between how the court ruled on Order 745 and how it might rule on the Clean Power Plan, focusing on the concept of judicial deference to agency interpretation of law. 
• The court ruled 6-2 in January that FERC did not exceed its authority under the Federal Power Act when it issued Order 745, which set demand response compensation levels equal to the locational marginal price of generation. 

Dive Insight:

We're still a long way from the Supreme Court hearing a challenge to the Clean Power Plan, but over at Bloomberg they're trying to figure out if the recent decision on Order 745 could give any indication about a future ruling on the federal carbon rules.

In the Supreme Court's decision, issued Jan. 25, the majority ruled that demand response is primarily a wholesale market product and FERC Order 745 only addresses wholesale market transactions. In doing so, the court deferred to FERC's interpretation of the underlying statute — the Federal Power Act— and Bloomberg reports similar ruling could occur on the Clean Power Plan.

Both FERC and the EPA are "trying to manage modern problems with an older statute and interpret the law in a way that is consistent with its authority but also appropriate for the contemporary problems it faces,” Jody Freeman, a professor at Harvard Law School, told Bloomberg.

The key precedent is the 1984 case Chevron U.S.A. Inc. v. Natural Res. Def. Council, which established the concept commonly called "Chevron deference." The principle requires the court to defer to interpretations of laws made by government agencies charged with enforcing them, unless those interpretations are unreasonable.

The court's Order 745 opinion "shows a kind of pragmatic approach to legal interpretation where the purpose of the law matters,” Freeman said. “That's also going to be helpful to the government when it argues that what EPA is doing is in line with a necessary purpose of the Clean Air Act.”

But while the analysts quoted by Bloomberg sounded optimistic about the court's attitude toward Chevron deference, the justices sent the opposite message this past summer when they remanded the EPA's Mercury and Air Toxics Standards back to a federal court of appeals.

After that decision, legal experts told Utility Dive that the court appeared to be taking a more skeptical view toward agency interpretation of the law, an ominous sign for the Clean Power Plan's legal chances. 

“It would not at all be a stretch to imagine whenever we get a CPP challenge that [Chief Justice John Roberts] says, ‘Look, this is an equally important matter of public policy, this is a huge regulatory undertaking, and on these instances there is no Chevron deference,’” Notre Dame law professor Bruce Huber said.

While the Clean Power Plan is widely expected to reach the Supreme Court, the D.C. Circuit must first hear the case. Last month, a three-judge panel denied a stay on the carbon regulations and set June 2 as the date for oral arguments on the plan.