## Facts

- FERC issued Order No. 888 to remedy discriminatory practices in interstate electricity transmission by requiring open-access transmission service and “functional unbundling” of wholesale transmission and generation services.
- The order required utilities to offer non-discriminatory transmission service under a single open-access tariff that the utility must also use for its own wholesale transactions.
- FERC extended open-access requirements to unbundled retail transmission in interstate commerce (where transmission is billed separately from energy).
- FERC declined to impose the same requirement on the transmission component of bundled retail sales (where transmission and energy are sold together).
- States (including New York) and other entities challenged FERC’s jurisdiction and policy choices; the D.C. Circuit upheld Order No. 888.
- The Supreme Court granted review and considered consolidated challenges to the order.

## Issues

1. Whether the Federal Power Act authorizes FERC to require open-access, non-discriminatory service for unbundled retail transmission in interstate commerce.
2. Whether the Federal Power Act required FERC to extend open-access requirements to the transmission component of bundled retail sales.
3. Whether regulating unbundled retail transmission impermissibly intrudes on state authority over retail sales and local distribution preserved by the Federal Power Act.

## Decision

- The Supreme Court affirmed the D.C. Circuit in a 6–3 decision authored by Justice Stevens.
- The Court held that FERC has jurisdiction under the Federal Power Act to regulate unbundled retail transmission in interstate commerce and to require open-access transmission service for that transmission.
- The Court held that FERC was not required to regulate bundled retail transmission and permissibly declined to extend Order No. 888 to that category.
- The Court rejected the argument that FERC’s regulation of unbundled retail transmission violated the statute’s federal–state division of authority.

## Legal Principles

- The Federal Power Act grants FERC jurisdiction over “the transmission of electric energy in interstate commerce,” distinct from jurisdiction over retail sales.
- Open-access requirements directed at interstate transmission may apply even when the end user is a retail customer, so long as the regulation targets transmission service rather than retail rate-setting.
- Unbundled retail transmission can be treated as a separate transmission service within federal jurisdiction when separated from the retail sale of electric energy.
- Courts may defer to FERC’s reasonable construction of ambiguous provisions in the Federal Power Act when the agency addresses complex, changing industry conditions.
- The Federal Power Act does not compel FERC to regulate to the outer boundary of possible jurisdiction; FERC may reasonably decline to regulate bundled retail transmission where it provides a rational explanation.

## Conclusion

The Court upheld FERC’s open-access regime in Order No. 888 by confirming federal authority over unbundled retail transmission in interstate commerce while permitting FERC to leave bundled retail transmission to state regulation, maintaining the statute’s division between federal control of interstate transmission and state control of retail sales and local distribution.


New York v. Fed. Energy Regul. Comm’n, 535 U.S. 1 (2002)