## Facts

- FERC issued Order Nos. 841 and 841-A directing Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to remove barriers to participation by electric storage resources (ESRs) in FERC-jurisdictional wholesale markets.
- The orders required each RTO/ISO to create a participation model allowing ESRs to provide and be compensated for wholesale energy, capacity, and ancillary services on terms comparable to other market participants.
- FERC declined to adopt a “state opt-out” that would allow states to bar distribution-level or behind-the-meter ESRs from participating in RTO/ISO wholesale markets.
- State utility regulators and other petitioners sought review, arguing the orders intruded on state authority over local distribution facilities and exceeded FERC’s statutory jurisdiction.
- The court addressed Article III standing and ripeness, then reviewed the orders under the Federal Power Act (FPA) and the Administrative Procedure Act (APA).

## Issues

1. Whether petitioners had Article III standing and whether the challenge to Order Nos. 841 and 841-A was ripe before completion of all RTO/ISO compliance filings.
2. Whether the orders exceeded FERC’s authority under the FPA by effectively regulating local distribution facilities or behind-the-meter resources and by refusing to allow a state opt-out.
3. Whether FERC’s refusal to include a state opt-out was arbitrary and capricious under the APA.

## Decision

- Petitioners had standing because they showed a substantial risk of injury from the orders’ effects on wholesale market participation and related state/public power interests.
- The petitions were ripe because the jurisdictional question was fit for judicial review and delaying review would impose hardship.
- The court denied the petitions for review, holding the orders did not facially exceed FERC’s FPA jurisdiction.
- The court held the orders regulate wholesale market participation rules and compensation for wholesale services—matters within FERC’s authority—even if they have incidental effects on state-regulated distribution or retail matters.
- The court upheld FERC’s decision not to include a state opt-out as reasonably explained and not arbitrary or capricious.

## Legal Principles

- Under the FPA, FERC may regulate wholesale sales and practices directly affecting wholesale rates; states retain authority over retail sales and local distribution facilities.
- A FERC rule directed at wholesale market participation and wholesale compensation can be valid even if it affects resources interconnected at distribution level or located behind the meter.
- The absence of a state opt-out does not, by itself, convert a wholesale-market rule into unlawful regulation of local distribution; conflicts with state requirements are addressed through ordinary federal preemption doctrine.
- Under APA review, FERC must give a reasoned explanation for key policy choices; courts uphold the agency where it responds to significant comments and explains why alternatives (such as an opt-out) would undermine its statutory objectives.

## Conclusion

The D.C. Circuit sustained FERC’s storage-market reforms, ruling that Order Nos. 841 and 841-A permissibly regulate participation in federally regulated wholesale markets and that FERC reasonably declined to grant states an opt-out from ESR participation.


Nat’l Ass’n of Regul. Util. Comm’rs v. FERC, 964 F.3d 1177 (D.C. Cir. 2020)