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 The court heard oral arguments in an appeal filed by the U.S.
Federal Energy Regulatory Commission seeking to reverse a May 2014
ruling by the U.S. Court of Appeals for the District of Columbia
Circuit that threw out the rule.
The case pits the government's energy regulator against power
companies that are fighting a regulation that promises to cut into
their profits.
The regulation concerns what FERC calls "demand response," which is
when, in an attempt to manage demand for electricity, regional
electrical grid operators agree to pay electricity users to cut
consumption at peak times. It is aimed at improving grid
reliability, lowering costs and encouraging clean energy.
The rule remains in effect while the case continues.
The nine-member court could be divided 4-4, with conservative
Justice Samuel Alito recusing himself from the case. An even split
would uphold the lower-court ruling.
Conservative Chief Justice John Roberts said he was concerned about
the federal government exercising too much authority over retail
electricity markets, traditionally overseen by states.
"You have to have some sort of limiting principle, otherwise FERC
can do whatever it wants," Roberts said.
Justice Anthony Kennedy, who often casts the deciding vote in close
decisions, asked questions indicating he could favor a narrower
ruling against the government that would allow FERC to rewrite the
regulation rather than ruling that FERC has no authority to issue
one.
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The court's liberal justices were more supportive of FERC.
Justice Elena Kagan said it would be an "odd result" if the court
does not allow the agency to regulate on the issue because Congress
made clear in the 2005 Energy Policy Act that "it wanted FERC to
lower barriers to demand response."
The Electric Power Supply Association, PPL Corp and other trade
groups that challenged the regulation would lose out if the
regulation is upheld because it is likely to reduce demand for
electricity generation.
The Electric Power Supply Association's members include Exelon Corp
and Dynegy Inc. Utility group Edison Electric Institute, which
represents such companies as Entergy Corp and Southern Company, also
challenged the rule.
Some utilities and companies that support the regulation backed the
government's appeal.
A ruling is due by the end of June.
(Reporting by Lawrence Hurley; Editing by Will Dunham)
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