Energy Policy in Motion: What DOE Section 403 Instruction to FERC Means for Data Center Power Supply

DOE Secretary Wright’s Federal Power Act Section 403 direction to FERC calls for a sea-change in the way large energy users — especially data centers — interconnect to the power grid. 

In the ninth episode of Accelerating Energy, host and Sidley partner Ken Irvin is joined by colleagues Terence Healey, a partner in Sidley’s Energy practice, and Peter Bruland, a senior managing associate in the firm’s Supreme Court, Appellate, and Litigation Strategies practice. Together, they examine how this rulemaking may affect the cooperative federalism balance and change the large load interconnection process, transmission planning, capacity markets, and the pace of new infrastructure deployment. Hear what to expect and how to stay positioned for what’s next in the power-hungry data economy.

 Executive Producer: John Metaxas, WallStreetNorth Communications, Inc.

Transcript

Energy Policy in Motion: What DOE Section 403 Instruction to FERC Means for Data Center Power Supply

Ken Irvin, Terence Healey, Peter Bruland 

October 2025

Ken Irvin:

Good morning, everybody. This is Ken Irvin from the Washington, D.C. office at Sidley Austin, and welcome to a special edition of our accelerating energy podcast. We’re here, this morning, to talk about the recent Federal Power Act, Section 403 directive that Secretary Wright, Department of Energy Secretary Wright, sent to the Federal Energy Regulatory Commission. I’m going to say FERC and stop defining terms that I know all of you already understand. 

 We’re going to talk about what this Section 403 directive means, and FERC’s announced a schedule for getting comments on the advance NOPR. To help me through all this, I’m joined by a couple colleagues that I’d like to introduce, but before we do anything more, I’ve got to give a legal disclaimer, just so everyone understands that this is only for informational purposes. This is not legal advice. The information is intended to allow us to kind of flag some issues for you and points to consider, but nothing here is intended to create or constitute some kind of lawyer/client relationship. 

 All views, opinions, comments expressed in this presentation are our own, and nobody should act on anything we say here without seeking advice from a lawyer licensed to practice in your own jurisdiction. So, with that disclaimer, please allow me to introduce my colleagues, Terence Healey, from our Boston office, and fellow partner in our energy practice group, and Peter Bruland, here in our D.C. office, a member of our appellate litigation group, and an accomplished Supreme Court litigator, as Peter has appeared before the court and made arguments. 

 So, gentlemen, thank you, so much, for being here and talking with me about all this. For the folks in the audience, we’re going to drive through this and first kind of set the table about what’s at stake, what’s going on here, explain the DOE directive, talk through what is an advance notice of proposed rulemaking, NOPR, what will FERC consider? Importantly, we’ll remind everybody of the deadlines, because they’re very quick. 

 Then we’re going to touch on what can come next. What does this mean? Underlying all of this is talking about interconnecting large loads, datacenters, to the transmission grid, and whether FERC should assert jurisdiction over that and create some kind of process like FERC uses for interconnecting generation so that large load can come into the grid and hopefully on a more streamlined and efficient basis. 

 The table setting point, here, the challenges before us, are about the total contango market for demand. Wood Mackenzie, for example, has got a report saying expect 116 gigawatts of growth in the coming years. Demand, as everybody knows, for energy is growing in a way that we’ve not seen before. 

 Over the last several decades, we have saw 0 to maybe 2 percent growth, and all of a sudden, now, growth and demand is off the charts. EIA forecasts power sales for 2025 will rise up to 1,527 billion kilowatt hours for just residential customers, 1,467 kilowatt hours for commercial, and over 1 thousand billion kilowatts for industrial. 

 So, lots of opportunities for development, a lot of stress on a grid that’s already dealing with a resource adequacy problem, and at the same time, a lot of complaints about the variations and the discrepancies and the different challenges from state to state, region to region, about getting large load interconnected. 

 There’s clearly, essentially, an arms race, a national security race, to develop AI. The United States owns a commanding lead in that, right now, but other nations are fighting hard to catch up, and anybody who’s used AI, anybody who’s done even funny things with it, like trying to write songs, or do animations, or make movies, knows it’s a very, very powerful tool, and so, the national security issue is you need AI to defend against AI and to defeat AI. 

 So, we got to solve a problem that we’re currently dealing with about protracted interconnection for load, and you know, another form of like permitting reform, another way of kind of speeding up the process, so, when we, here in the U.S., are competing against countries that are more command and control, we can still keep ourselves at the number-one spot in the race. 

 The unclear, uncertain, inconsistent regulations, policy changes, very, very bad for investment, very hard to make investment because the dollar levels and the tenor of the investments we’re talking about are very large and take a long time to earn back. So, policy changes measured in years, 2 years, 4 years, difficult for investors to stomach. FERC has seen this and tried to address it across several different orders. 

 Order 2023, and its order on rehearing, 2023 A, is one such example, trying to deal with interconnection issues, trying to establish a timely approach, trying to find a way to speed up how quickly we get generation interconnected, long-term planning, resource needs, considering extreme weather, considering other issues, FERC order 1920 and 1920 A get at that, and these orders represent improvements in the normal scope or the traditional scope of FERC’s jurisdiction, about how to better plan for the future and get us taking a more long-term perspective. 

 A key factor in the tension and the challenges we have is FERC and the utility industry and the development of these things are years, multiple years in planning, whereas datacenters are sprouting as quickly as mushrooms after rain, and that timing disconnect, we need to manage through. 

Those orders, and FERC’s initiatives otherwise, kind of set the stage for the Department of Energy directive, and Terence, I want to turn to you, first, to kind of walk us, a little bit, through what’s in this DoE directive, what is Section 403 of the Federal Power Act, why does Secretary Wright get to tell FERC what to do?

 Terence Healey:
Yeah, certainly. So, as Ken mentioned Secretary Wright utilized his authority under Section 403, which does authorize the secretary to propose new rules, regulations, policy statements within FERC’s jurisdictional ambit for FERC to consider. It’s not a mandate that FERC has to act in accordance with the proposal made, but FERC certainly needs to consider what is proposed by Secretary Wright, and that’s what FERC has done. 

 So, on 10/23, Secretary Wright issued his letter directing this ANOPR, or recommending this ANOPR. FERC has since docketed the NOPR and the ANOPR and set kind of deadlines for mid and late November, and set an action date, so a final rule, if you will, by April 30, 2026. You know, I think one of the main thrusts of the ANOPR, what Secretary Wright spent some time on, is shoring up his perspective that these issues fall within FERC’s jurisdiction. 

 He relies on four, I think, components to illustrate that, one being that these large loads do represent a critical component of open access transmission service, a core tenet of FERC’s policy and statutory authority. Interconnection of large load certainly has an impact on wholesale electricity rates, which is squarely within the commission’s jurisdiction from the perspective of Secretary Wright. 

 He’s careful, I think, or the letter that was issued, the ANOPR proposed, is set to try not to interfere with what is clearly within the states’ jurisdiction over retail sales and siting of generation facilities, transmission facilities, and that, you know, taking a contrary position to what Secretary Wright describes as within FERC’s jurisdiction would really conflict with the Federal Power Act’s core purpose, which includes oversight for transmission facilities and interstate commerce. I think we can advance on that.

 Okay. So, the proposal itself, and again, this is a nod towards keeping the jurisdictional lines clean, would attach with respect to loads over 20 megawatts. That’s not inconsistent with generation interconnection. It does, you know, address what would be large generation interconnection to facilities 20 megawatts or larger. You see a lot of parallels.

 Ken mentioned the earlier setting the stage on the reforms to the interconnection process that FERC has issued relatively recently and put into place. A lot of the proposed 14 principles in the ANOPR are parallel or fit within kind of the thrust of those recommended improvements to the interconnection process, writ large. You know, among those, hybrid facilities, so that’s co-located load and generation. Those should be studied together.

 Protection should be put into place to address any problematic injections or withdrawals by those sorts of facilities, so, sort of a net analysis of hybrid facilities when being studied, load, so, load being connected, should shoulder the cost of any network upgrades that are required, something that is similar to generation facilities looking to interconnect, and cost allocation for those sorts of assets would now read on load.

 And the emphasis is on nondiscrimination and timeliness and orderly process towards interconnection, again, a major theme of what FERC followed when it addressed reforms to the interconnection process, that it be done on a nondiscriminatory basis, that it is orderly in application, and you know, focuses on things like readiness, you know, folks that are in line and ready to connect and doing that in an orderly way, including this study process that would attach to that.

 Ken Irvin:
Terence, thank you for that. Peter, I know we’re going to get into it in more depth later on in our discussion, this morning, but I just want to touch with you, here, to bring you into the conversation. You know, Chris Wright’s letter, its directive, anticipates some issues with the states, and states’ rights, and there’s a little bit of irony because I always used to think of the GOP as a states’ rights kind of mindset. I know certain senators, Cramer from North Dakota, former commissioners, former chairs, Mark Christie, have kind of echoed those. Just give us a brief sort of teaser about the state versus federal issues and how that’s going to be viewed by the courts.

 Peter Bruland:
Yeah. So, one of the things I think I’ll be focusing on is what we’ve come to call the major questions doctrine. So, that’s a rule that says if you’ve got an agency action, and it looks like a really big deal, you want to check twice to make sure that congress authorized it to do that thing that looks pretty big.

 And one of the triggers, or tells, or signs that you’re dealing with a major question is when it looks like the agency is starting to get into territory that belongs to the states, or has historically or traditionally belonged to the states, and I got to think that that’s going to be top of mind for the court when they start looking at whatever comes out of this rule-making process.

 Another thing that we’ll talk about later is just this seems like a new thing. So, there will be a lot of fighting about is this a new thing? Is this applying authority that FERC has always had to a new situation, in which case, maybe it’s not that big a deal, but yeah, I think you’re right, Ken. The states are going to be front and center. They were front and center in the New York against FERC case that Secretary Wright quotes in his letter, and I think everybody’s going to be paying a lot of attention to that.

Ken Irvin:
Yeah. There’s already a lot of folks clamoring that this is like the biggest action by FERC in decades, and you know, Order 888 was a big deal, unbundling purchase and sale of energy from transmission and distribution services. So, this is a big deal. Let’s tear into the ANOPR and what this process is, here. Let’s talk about timeline and key milestones. So, as Terence said, the secretary’s power under Section 403 of the Power Act to direct FERC to do something, FERC then has discretion about what it does with that directive.

 We’ve been through this before. 403 was used to get the commission, recently, here to back off on changing its pipeline siting policies and clean up, maybe, some linger doubt about what FERC was going to apply there. This also came up in the first Trump Administration about resiliency, and you know, having some kind of requirement that power plants have at least 90 days of fuel on-hand, and that was seen as calling for coal-fire generation and maybe nuclear.

 What’s interesting there is that didn’t really come of anything, and ultimately, the commissioners decided that what was proposed by then-Secretary Perry was not going to be something FERC could do. Here, now, seems like a very thoughtful and kind of learn from the past instruction. So, last week, the directive comes in from Secretary Wright. Then Tuesday, this week, FERC publishes notice of it and is calling for comments, in two rounds, to discuss, at a high level, this is an advanced notice of proposed rulemaking.

 So, this is precedent to an actual rulemaking. It’s sort of like gathering information to decide if and what a proposed rulemaking should be about. So, there’s going to be this comment period. We wrote in the slide that sometimes it’s 60-to-90 days. Everyone should absolutely note, it is not 60-to-90 days. Reply comments are due Friday after Thanksgiving. So, when you’ve got the family gathered around, and after the lull of post-turkey dinner, you should debate what you want to reply to FERC on the NOPR here.

 All these comments come in. The next step is FERC staff and the commissioners review it, decide, you know, can they find some principles about which they want to carry forward. This is another important factor in the current administration. The new chair has already said she’s in alignment. The most immediate chair said he’s in alignment. So, you know, signals are good that we will see this advance NOPR lead to an actual NOPR, but that’ll take some time.

 How much? How many comments? Expect a lot, you know? The states’ rights versus federal is going to be an issue. You know, so, expect investor-owned utilities, NARUC, states’ rights folks on one side, maybe others, power producers and developers, generators, maybe large load customers, clean energy folks on the other side. Then, through all that, staff then publishes a formal notice of proposed rulemaking.

 There can also be the use of technical conferences because FERC is a commission, right? It operates in the government in the Sunshine Act. So, when 2 or more commissioners want to get together, there needs to be notice. It needs to be a public meeting. Technical conferences are a way where they can engage directly with the regulated bodies, the regulated constituents, and hear from them.

 The proposed rulemaking lays out what would be proposed and sets the table for what’s going to be reviewed in a court, right? So, all the comments on the proposed rulemaking come in. Then FERC can digest all those and further revise its proposed rulemaking, or it can say, okay, good comments, here’s our rulemaking, and we put it in final, and then we get notice of a final rulemaking.

 At that point, that’s a FERC order. If people ultimately want to have some kind of judicial review, you got to ask for rehearing of that. What’s interesting about all of this, right now, we’re in a government shutdown, so although FERC issued a notice of the advanced rulemaking, we’re not getting federal register publication. Hopefully, by the time we get to the actual federal register publication of an actual NOPR, the government will be back and fully functional, but that would be an interesting thing to come up to, that like there’s no formal federal register publication, is everything still valid?

 That’s an esoteric question we can’t delve into here, but it’s an interesting one. You got to ask for a rehearing in order to punch your ticket to get to judicial review. FERC has 30 days to act. If it doesn’t act or if it denies your rehearing, then you can go on to ask for review and petition a circuit court.

 And I think most FERC orders probably go to the D.C. circuit, but here, lately, we see orders going up to different circuits, and so, you know, one of the things we’ll get into with Peter, in a bit, is the competition amongst the circuit courts and how things would get decided if people aggrieved by FERC’s order and denied rehearing file in different circuits, how does that get picked? 

 Another factor here is circuit courts don’t just rubber stamp FERC. FERC’s batting average in the D.C. circuit might be, actually, much lower than, you know, the average baseball player. So, the court can just outright reject. The court can say these are problematic and remand. So, at that point, we could go back to FERC or we could go further up in the judicial chain through rehearing en banc or petition to the Supreme Court.

 And you know, the New York v FERC and the challenges around Order 888 kind of illustrate the path here. The point of walking through all this is that that’s going to take a long time, and that time period, as good as this administration is about moving quickly, probably goes beyond this administration. 

 Certainly, to get final judicial review and get back to FERC with something that actually gets implemented, it’s hard for us to imagine that happens in this current administration. Let’s dive into the core rulemaking contents, and Terence, maybe I could come back to you and have you kind of walk us through this one.

 Terence Healey:
Sure, and just to your baseball reference and timing, I think this is going to look more like Game 3 of the World Series, earlier this week, in terms of …

 Ken Irvin:
… 18 innings?

 Terence Healey:

… 18 innings versus 9. So, I think you’re right on that. You know, on the way into the office, this morning, I was listening to a podcast with former Commissioner Chatterjee, and you know, he kind of expressed regret on the way he handled Secretary Perry’s resilience directive during Trump 1 and looked to this as somewhat of an opportunity to have an apolitical, or somewhat apolitical, approach.

 And you know, when we look at what Secretary Wright included in his ANOPR as kind of the core principles for consideration, you know, a lot of this seemed to me to be somewhat by the by, to a certain degree, you know? He was careful to have it apply to large loads of 20 megawatts or more, limit it to interstation transmission facilities, and apply what FERC refers to as the 7-factor test, which is the test to distinguish between what is transmission versus what is distribution, the latter being generally in scope for state jurisdiction versus FERC.

 It implements some of the interconnection standardized … or reforms that were recently implemented in respective generation interconnection. You know, that would focus on study deposits, readiness, milestones, penalties for withdrawal. So, it puts skin in the game, right, for generators, presently, and I think the same is what would be intended for interconnection of load, a focus on hybrid facilities. So, how will those be treated?

 Ken Irvin:
Let me get you to clarify for everyone what we mean when we say a hybrid facility.

 Terence Healey:
So, that’s when you have co-located generation, and this, well, as an example, a datacenter where that co-located generation would serve the load at the datacenter and be looked at kind of on a net basis in terms of injection into the grid of surplus power or withdrawals from the grid, when perhaps the co-located generation is not able to serve the on-site load, and how best to optimize that process and to minimize network upgrades that might be needed to facilitate those sorts of facilities.

 You know, in relation to that, cost allocation. That’s a longtime tenet of FERC. Those that create the costs should bear the costs. So, load would be looked to like generators are, to, you know, take costs associated with the network upgrades that might be required to interconnect.

 Ken Irvin:

Yeah, that cost causation principle is definitely central tenet, right? That’s a central tenet of all utility ratemaking, right, federal and state.

 Terence Healey:
That’s right.

 Ken Irvin:

And you know, I think another factor here is everyone is clamoring about the rising price of electricity, right? Like, it’s just more expensive for electricity, all around, and I think another focus here with this part of the rulemaking and the 7-part test is which agency, the states or the federal regulators, are best at protecting consumers, making sure that energy prices, as delivered, are as affordable as they should be, to be, to use the federal terms, just and reasonable.

 Terence Healey:
I agree with that. I agree with that, and you know, that’s been part of what’s been the discussion, you know, in recent months and perhaps longer. You know, these large load facilities trying to become interconnected, states are very concerned about those costs being put on the rate base, and these are long-range kind of plans. I mean, a lot of these facilities are hoping to get interconnected as soon as possible, but it’s looking more like ‘28, ‘29 for a lot of the loads that are trying to interconnect, and a lot can change in between now and then.

 So, not shouldering costs on rate-payers that come five years from now, there could be a different set of circumstances, and you know, work done, costs incurred, for load that perhaps might not show up, or be modified in some way or form, you know, system protection and reliability, a focus on making sure that as we talked about the hybrid-type facilities, and injection and withdrawals, to have that happen in a way that doesn’t disrupt the bulk transmission system and to make sure that those are installed protective equipment to help address those sorts of concerns.

 NERC, of course, is going to play a large role. Their mandate is system reliability. So the creation of new standards by NERC and enforced by NERC will certainly be a large part of this proposed rulemaking, and option to build. This is for customers to have the option to construct the facilities that would be necessary to interconnect the load to the transmission system. 

 I think that, in large part, is to provide some efficiency if the customer can construct these facilities and do so in a more efficient manner, albeit within the engineering requirements and specifications of the transmission owner, that that ability be there in order to speed up the process in a way that’s responsible and have that ability for folks looking to connect.

 Transition planning, you know, there already are many projects in the queue today, so how to manage those that exist in a queue under the current regime and set of rules, how will those be addressed? And then just back to, again, the cost allocation and transmission planning, which 1920 A certainly gave a nod to state participation in that process and a voice on how costs will be allocated.

 Ken Irvin:

I mean, there’s a lot to be said for what Secretary Wright envisions because there’s nice standardization, clearly an abiding principle for FERC is no undue discrimination, just and reasonable. So, and what Secretary Wright put forward is making sure that there’s not even an arguable ground that there’s an intrusion or a trespass of states’ regulatory authority here.

 It’s interesting that we’ve seen, recently, FERC addressed a large load tariff. In a very recent decision involving a generation and transmission company that filed a heavy load interconnection, FERC denied that or rejected that approval. So, that decision, which came out just a day or two ago, is maybe the other end of the bookshelf, kind of bounding where FERC will go here.

 Peter, I want to come back to your major question doctrine, because one of the commissioners has actually argued that to the Supreme Court, right? Commissioner See has famously argued that about EPA. Is this where you have FERC and other orders saying, no, no, no, that’s retail? 

 We can’t address heavy load interconnection if you’re dealing with transmission level, sure, but when you’re smuggling in retail rate and retail regulatory issues, like minimum take, take or pay, is that going to say this is a major question, like this is for congress, or do you think … how are the courts going to react to that? How do the courts react when an agency is maybe seen as reversing itself, or talking out of both sides of its mouth.

 Peter Bruland:

Yeah. So, I think that’s less a major questions issue and more a Chevron issue. Back in the old days, when we had Chevron, we used to say if a statute is ambiguous, the agency gets to make up its mind, and then it gets to flip-flop. So, that used to be a virtue of Chevron and the way we used to do things. There was a case called Brand X that said if an agency does that, a court doesn’t get to second-guess the agency, agency is allowed to flip-flop back and forth, and you see that with all sorts of different regulations.

 I mean look at net neutrality, for example. That’s flip-flopped back and forth a bunch of times. So, that’s how we used to do things. Now, we’ve got Loper Bright, which says there’s one best reading of a statute. Maybe the best reading is that the agency gets some discretion, and they get to pick and choose within that area, but you’ve got one best reading, and now, it’s actually a black mark against the agency to say that it’s gone back and forth, like you were describing.

 I can talk more about this later, but there’s a doctrine called Skidmore that says when we’re trying to figure out what a statute means, we’re going to pay respectful attention to the agency because they are smart people, and they’ve thought about it a bunch, and maybe they know what the words mean or how they play out in the real world, but one thing we’re going to look for is has the agency been consistent?

 And if the agency hasn’t been consistent, if they’ve said, for a long time, like you just said, that this is one way, and then they change their minds, well, maybe that’s fine as a policy matter, but don’t come back, the courts would say, don’t come back and tell us that the statute means what you say it means, because, like, last week, you said it meant something different. So, that’s a reason for special skepticism, not special deference, like it was in the old days.

 Ken Irvin:

Yes. It all ties in together. It’s all unified field theory, Loper Bright, Skidmore, all of that. I will say, also, in the backdrop, here, is permit reform. I’m going to offer my plea for can’t Congress please help us with permit reform? Recently, a bunch of governors, a large number of governors, sent a letter, bipartisan group of governors, trying to get congress to address all the permitting reform, among other things, because of demand from datacenters, manufacturing, reshoring, electrification.

 And so, I guess, it would seem to me that this would be another thing that maybe a court would consider is like there’s a whole bunch of people who are in government, who have a stake in the ground saying this is for congress, and won’t congress please do something. So, we’ll see what comes of that. Man, it would be nice to have another energy policy act.

 We go back to 2005, and the Energy Policy Act in 2005, before we had real, meaningful changes, like creating and making reliability such an important thing, 20 years? That would be a nice anniversary, wouldn’t it? Sorry, all right. I’ll come back down to ground, keep my head out of the sky.

 Peter Bruland:
You raise a good point. I mean, I feel a certain degree of sympathy for FERC and FERC staff, right, to tackle. This sort of issue is a significant issue, and to place it on this agency and this staff, there is a reason to think that congress should play a role or certainly take some of the pressure of here.

 Ken Irvin:
Well, Peter, let’s jump in the wayback machine and go back to the early 2000s, when FERC boldly announced Order 888, and Secretary Wright does cite the decision, New York v. FERC, which was Supreme Court review of that. Secretary Wright quotes Justice Thomas, who conveniently is still sitting on the court. Walk us through New York v. FERC and what that ruling means for the present situation?

 Peter Bruland:
Yeah. It’s fascinating, Ken. It’s always interesting when somebody quotes a dissent instead of the majority, and here, you can totally see why the secretary is doing that, because, I mean, back in 2002, we had an entirely different set of justices than we do today. The only one who’s still there today that was there in 2002 is Justice Thomas. 

 So, we’ve had a tremendous amount of turnover, and you got to think that the secretary’s seeing it as a signal that a Justice Thomas dissent is going to carry more weight today than maybe a Justice Stevens majority from 23 years ago, and looking at the current court, I mean, he’s not wrong, but he’s not entirely quoting the entire context of what Justice Thomas was saying. 

 So, he’s pulling some dictum out of the dissent. So, I’ll just take a step back and walk through exactly what was going on, and then that’ll inform some context of the procedures and substance for the challenge here. So, I assume that almost everybody who’s listening is old hand at New York v. FERC and Order 888.

 Ken Irvin:
I think that’s a safe assumption. We’re all energy nerds here, so.

 Peter Bruland:

The interesting thing, though, is the court is not, right? So, the court gets this, and they don’t start by talking about the policy, or how it works on the ground, or any of these things. They start with the words of the statute, and you listen to the oral argument, and they don’t have a lot of time for the concerns about like how practically it works on the ground. I mean, they’re laser-focused on the statute. 

 And so, they said, Congress told FERC to do two things, as two jobs. One is sale of wholesale electricity, and the other is transmission, and that’s all transmission, and as to transmission, congress told FERC to regulate unjust, unreasonable, unduly discriminatory, preferential treatment in transmission, and so, Order 888 tries to do just that, right? It says FERC is seeing discrimination in transmission. 

 There’s utilities that own the grid, and they’re not being nice to other people want to use them, and so, FERC is like, no, we’re not going to do that anymore, we’re not going to have discrimination, you have to treat everybody on your grid evenly. And so, there’s two challenges, challenges from two sides, and one is a state, right? 

 The State of New York comes in and says, well, what about these transactions where they used to be bundled together, so it used to be transmission and retail sale, which is our job, because FERC gets to do wholesale, not resale. So, New York says, well, this used to be bundled together. Now, we’ve got it unbundled, but FERC shouldn’t be able to keep its hands on our unbundled transmission. And the Supreme Court unanimously rejects that, because New York is worried about …

 They say at oral argument, well, what if we have to triage a situation when we want to be able to direct more power to one of our hospitals, and the Supreme Court says, no, transmission is transmission, FERC gets to regulate transmission, so if you’ve unbundled those things and now it’s energy service and transmission, FERC can make you do what FERC wants with the transmission side of things. Then there was also a private challenger. It was Enron was leading the challengers, and they said that FERC didn’t go far enough.

 Ken Irvin:
Of course it was, you know?

 Peter Bruland:

It’s 2002.

 Ken Irvin:

Who doesn’t need a scoundrel setting, again, another regulatory policy?

 Peter Bruland:
I mean, it’s fascinating. It’s like a time capsule back in 2002. But so, the state’s in there saying, look, FERC went too far, FERC is stepping on our toes, and the Supreme Court says, sorry, statute says what it says, and then Enron comes in and says, well, actually, FERC didn’t go far enough because some states still have these services bundled together. So, you’ve got transmission, and you’ve got the energy itself, and that looks like transmission, so why isn’t FERC regulating that?

 And this is where the divide between the majority and the dissent comes in. So, FERC says, well, we … FERC is inconsistent about whether it even could do that, could regulate bundled transmission. By the time they got to the Supreme Court, they said, yeah, we have the authority to do that, but relevant here, they said it’s not necessary, maybe we’ll take that on down the road, but we’re not worried about it right now.

And I mentioned Chevron earlier. The DC Circuit said, well, Federal Power Act says what it says, and it’s ambiguous, and not regulating bundled transmission is permissible. So, Chevron applies, agency, you did a good enough job, and thumbs up. And then it gets to the Supreme Court, and it’s interesting. They don’t actually rely on Chevron in the same way that the D.C. Circuit did.

 But they said, look, FERC has discretion to tackle one problem at a time, and here, I mean, maybe there’s discrimination in bundled transmission, maybe there’s not, but FERC said we’re going to focus on this policy thing, right now, not necessary to go further, and the majority said that’s okay by us. 

 Then there’s a dissent by Justice Thomas, joined by Justice Scalia and Justice Kennedy, and this is where it’s important to clarify what the secretary is quoting here, Justice Thomas says, look, I’m not going to prejudge the statutory question, that’s not what’s before me, right here, so I’m not going to tell you what I think the Federal Power Act means, but I don’t think the agency acted reasonably when it said, oh, we don’t have to worry about it. 

 So, Justice Thomas says, look, the statute says transmission, and statute doesn’t say bundled or unbundled. It just says the word transmission, and energy, like electricity, doesn’t care if it’s bundled or unbundled. It’s just like racing all over the place, right? So, what is this bundled, unbundled thing? FERC has the authority and the duty, congress said go out and if there’s discrimination, regulate it. 

 So, Justice Thomas says, like, what are you doing here, my friends? It looks in the record like there’s discrimination in bundled transmission, but you’re just going to kind of sit on your hands and not do anything about it. Justice Thomas said that’s not reasoned decision making. He would’ve sent it back for FERC to either do something different or explain itself better.

 Ken Irvin:

And I want to pick up on that, and then, you know, this is where I think Chevron, Skidmore, West Virginia come in, because, you know, we had scary movies back in 2000, 2002 about, you know, the advent of computers, and I was just counseling a friend to watch War Games from the ‘80s, but I don’t know how much AI and AI demand they were thinking about. 

 So, you know, we’ve talked a bit about it as FERC kind of reversing itself or going in a whole new area, but maybe from another perspective, it’s FERC evolving because of the advent of technology and the new circumstances that are 2025. So, if we look at it from that perspective, you know, does that give the commission sort of a sounder footing under a Loper Bright, Chevron, under a major question doctrine perspective?

 Peter Bruland:

Yeah. I mean, it’s a good point. It’s a good question. So, I’ll take those in turn. Let me start with Loper and then talk about major question. So, Loper just says courts are going to use independent judgment. Courts are good at reading words in statutes. They don’t need agencies’ help to figure out what statutes mean. So, we’re going to pay respectful attention to the agency. We’re not going to feel bound to do what the agency says. 

 So, here, I think Loper Bright is going to make it easier to challenge what FERC ends up doing, whatever they end up doing, from whichever side the challenge is coming. So, if this is New York against FERC redux, then the state is going to have an easier time challenging the statute, because they don’t have to first show that it’s not ambiguous, and then the challengers on like the Enron side of things will have an easier time. 

 It’s just Loper Bright makes it easier to get to the heart of the question, because we don’t have to deal with is it ambiguous, or does the agency get deference? It was just cut to the heart of the question. And then, major questions are a tool that the courts use to figure out what the statute means, and I think it’s actually better to talk about there’s different major questions doctrines because the court hasn’t been entirely clear. 

 There’s the like more robust form that Justice Gorsuch wrote about in his West Virginia concurrence, which basically says if it passes the test, if we think it’s a major question, maybe it’s a big political hot-button issue, or a major economic thing, or intrudes on states’ rights, like you were saying, Ken, then we’re going to make sure that Congress has spoken clearly, and if Congress hasn’t spoken clearly, then, no, agency doesn’t get to do it. 

 Then there’s a softer form, which Justice Barrett talked about in the student loans case, and she says, look, I don’t know about this whole, like, 1 step, 2 step thing, it’s more contextual, right? So, if you say to your babysitter I’m going away for the weekend, here’s a credit card, make sure the kids have fun, the context is like take them to the movies, buy them pizza. The context is not like fly them to Disney World.

 Ken Irvin:
I thought it meant go clubbing with them, you know? 

 Peter Bruland:
Ken’s kids must have a fun childhood.

 Ken Irvin:

A lot of ‘80s movies.

 Peter Bruland:
It’s like a contextual thing.

 Ken Irvin:
Yeah.

Peter Bruland:

And here, I mean, that might affect which way the court looks at it. So, if it’s just a contextual thing, maybe it’s Congress told the agency to regulate electricity, and here, they’re just like regulating a different aspect of electricity, no big surprise that they’re tackling something like that, or maybe if you look at it from a different perspective, the more robust form, maybe it’s like, actually, this is a big deal, because this is something new, and FERC has been around for a long time, the statute has been around for a long time, but nobody’s ever thought that the agency can do this thing. 

 So, you know, extraordinary claims require extraordinary evidence. Did Congress speak clearly enough? And I think those are the arguments you’re going to see. I don’t know what the right answer is. But I mean, let me kick it back to you, Ken. Do you think this is more of a new phenomenon that FERC is applying authority it’s always had, or is this FERC inventing powers that it didn’t have before to tackle something it could’ve tackled ages ago? I mean, how do you think courts will look at that?

 Ken Irvin:

So, I can’t just say 42 and answer the universal question? I’m making all bad movie jokes. You know, I think it’s not black or white like that. I see the value in FERC acting. Having a smooth, consistent, delineated process for interconnected large loads that definitely affect transmission and transmission reliability, if anybody’s paying attention to what NERC is doing with its large load taskforce, you can see this is a concern, and when these large loads drop out of taking grid service, and they do it precipitously, the operator has like…it’s easier to deal with loss of generation, by a magnitude, than it is to deal with loss of load, and we don’t want blackouts. 

 So, like, there’s a reliability, there’s a transmission system issue here, and I think it bears having some federal jurisdiction to engage there, finding the balance, you know? It was supposed to be a bright line between federal and state jurisdiction, and it’s definitely fuzzy. It’s been fuzzy for a while, but like these are the things to put in your comments to the advance NOPR. 

 These are the things to put into what I think will be a forthcoming NOPR, and you know, articulate your policy reasons, your statutory interpretation reasons, for one way or the other. We got a question. Forgive me for not giving you the full citation to the tri-state order, where FERC rejected the tariff was the matter for tri-state generation and transmission. It’s docket ER25-3316. It’s at 193 FERC 61070. So, everyone can go pull that order.

 Another question, and Terence, you know, maybe you can help me on this, another question we got is what is the authority of RTOs or balancing areas to deal with interconnecting large load? Does this mean we’re going to have to write all-new chapters of tariffs for interconnecting large loads in that process?

 Terence Healey:
Yeah. I think, you know, what the authority of the RTOs and ISOs is really derived from FERC’s authority, I think. FERC will presumably advance this through a NOPR. We’ll have a final rule of some sort, presumably by the deadline that Secretary Wright has requested, and you know, that will put forward what the RTOs, ISOs are required to react to or to do. 

 There’s generally regional variability in terms of how these things are implemented, for good reason, and that’s not an unusual circumstance. So, I think they don’t, on their own, have a specific authority. It is something that is imbued to them through FERC’s authority. 

 So, it really, to me, goes back to the question of whether FERC is within its statutory authority to address these issues and set forward, you know, a path forward, and the RTO’s role and kind of authority is to take that and implement it and to argue, one way or another, how they should do something slightly different but within the major confines of whatever the final rule is. So, I equate their authority to really be what FERC’s authority ultimately is, in respect to the issues.

 Ken Irvin:
Yeah, but this is like a whole new chapter added to the FERC pro forma transmission tariff, right? Like, this is just going to add to the timeline of the process before we get the actual being able to use whatever comes of this, in fact.

 Terence Healey:
Yeah.

 Ken Irvin:
You know, I think it can be reasonably expected that if this goes forward, a lot of the attributes of the generation interconnect will be replicated here. So, there are requirements about being bona fide in your application for interconnecting generation. There’s definitely a lot of deposits and a lot of financial conditions applied, parameters applied, to make sure that generation interconnection request is real and going to show up. 

 So, I think that kind of thing can be expected on the load side and might be pretty substantially different than what large load sees when it’s talking in different electric distribution territories and different state-by-state. I think it will be interesting to see how these things all pair together and the balance of those different issues. 

 I know that PJM has got a process underway, and they’re coming forward with their proposals about load of a certain size being flexible. We have what ERCOT, what Texas has done with Senate Bill 6. Maybe this is a way to kind of federalize those points and nationalize those points, spread it around the country. Does that sound plausible to you guys, or maybe not? I don’t know. Maybe I’m the only one kind of seeing everything as all related.

 Terence, for all things PURPA, I count on you to help me, here, not jump off a cliff, but one of the questions that we got is doesn’t this large load interconnection issue relate back to PURPA?

 And you know, legislation going all the way back to 1978 with incumbent utilities motivated to protect their state franchise, their monopoly, and having to break that open, you know, allowing qualified facilities to be a source of generation, having the mandatory purchase obligation that avoided cost, you know, do we need a large load version of PURPA from congress to carry this forward, you think?

 Terence Healey:

Yeah. I mean, I think there probably are parallels, and that’s not a bad spot to look in terms of, you now, what we might see with respect to comments coming in, and you know, I think come November 13, I think that’s the deadline for the initial comments. I wouldn’t be surprised to see parallels drawn to that and that as a source of guidance and an indicator of some of the positions that the states and utilities might take. So, I think that that presents a viable context that will likely guide some of the comments that we see here.

 Ken Irvin:
Let’s turn, now, and talk in the final segment about mitigating risks to rate payers because, as everyone knows, the price of electricity’s gone up, and a central focus here is making sure that we abide with the cost causation principles, and we don’t have undue subsidization. I hail from Virginia, and this issue is a pretty hot-button issue in our gubernatorial election, right now, across all the elections, because we are electing all the members to our assembly. 

 So, you know, and I know that the Secretary Wright directive contemplated how to manage all this. Terence, talk to us about front of the meter, behind the meter, and the different kind of risks that providing service to a large load may or may not impose costs on the transmission or distribution system and how you make sure that the right people are paying for those costs?

 Terence Healey:
Yeah. That’s back to cost allocation. You know, if you’re talking about something that’s strictly behind the meter, you know, a question immediately comes, what, if any, transmission costs or charges should be attributed to a facility that is truly behind the meter, for example, a hybrid-type facility? 

 I think there’s a lot of concern about transmission costs and perhaps whether or not behind the meter versus front of the meter are going to be required to shoulder those costs, and if so, how much, and what will be the process to determine how those costs will be allocated? 

 I think the concern about this load perhaps being anticipated five years out, a change or you know that load not showing up, down the road, could leave costs on rate payers, and that’s been a significant concern for state utility commissions, and you know, back to your kind of take or pay type arrangements, studying these loads in a way that, although they may not use the transmission system in quite the same way that front of the meter type facilities would, should they, and must they, participate or shoulder some of those costs, and if so, how will that be determined?

 Ken Irvin:
Peter, in 30 seconds, I mean, like, imagine you’re at the podium, and the light has turned red here, and this is the last question. So what do you want to see FERC … what would you recommend FERC do to help itself best to achieve some progress here, survive judicial review, notch a victory at the Supreme Court, because I know we’re going to end up there.

 Peter Bruland:

I’d say two things. First, it’s got to be laser-focused on the statutory authority and make sure it stays within that or make sure it stays within what it expects Justice Thomas and the other textualists on the court to view as FERC’s statutory authority, and then the other thing is it’s got to respond to comments.

 And it’s got to do a good enough job explaining itself and explaining its decisions because that’s what Justice Thomas was worried about, the last time. So, it’s got to respond to all the comments that our viewers send in, and it’s got to make sure that it’s considering alternatives and doing a good enough job with explaining itself. That’s the way to stay out of trouble.

 Ken Irvin:

That’s awesome actionable advice. We’re going to wrap up, here. Obviously, there’s a lot going on, and there’s, you know, affordability, the cost allocation is an issue, but we got to win the AI war. You know, in Virginia, we’re very proud of our lead, with having most datacenters and having the economic activity, the economic wind in the sails that provides, but there’s also a lot of concerns, overall, about that. 

 It’s been our privilege talking with everybody out there. Peter, Terence, thank you, so much, for your time and your insights. It was wonderful, and I look forward to continuing the dialogue, and thank you, guys, and thank you all for attending. Much appreciated.

 Terence Healey:
Thank you.

 Peter Bruland:

Thanks, Ken.

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