On February 10, 2026, the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit) upheld FERC’s order accepting revisions to the PJM Interconnection, L.L.C. (PJM) Open Access Transmission Tariff (Tariff) to prohibit Energy Efficiency Resources (EERs) from participating in PJM’s capacity market auctions starting with the 2026/2027 Delivery Year auction. The court held that FERC’s acceptance of PJM’s proposal to sunset EERs’ participation in capacity auctions did not run afoul of the filed-rate doctrine, nor was it arbitrary and capricious.
EERs are resources in PJM that achieve a reduction in electricity demand at an end-use customer’s retail site. Since 2009, PJM had allowed EERs to participate in its annual capacity auctions for up to four consecutive auctions. PJM limited EERs’ participation to four consecutive auctions because, after the fourth auction, PJM’s load forecasting models would capture the EER’s participation and thus allow PJM to reduce the amount of demand purchased in the following capacity auction. However, in 2016, PJM updated its load forecasting models to reduce the four-year lag between when EERs became operational and when PJM’s load forecasts capture the EERs’ effects on energy consumption.
Following the 2016 change to the rules governing EERs’ participation in its capacity markets, PJM proposed in September 2024 to sunset EERs’ eligibility to participate in PJM’s capacity auctions altogether starting with the July 2025 capacity auction. In a 2024 order, FERC accepted PJM’s proposal, finding it would reduce capacity costs without compromising grid reliability and was therefore just and reasonable. After rehearing was denied, Affirmed Energy LLC (Affirmed Energy) petitioned for judicial review in the DC Circuit, arguing FERC (i) violated the filed rate doctrine by retroactively revoking Affirmed Energy’s right to participate in certain auctions and (ii) acted arbitrarily and capriciously by failing to critically review PJM’s forecasting models, ignoring the benefits of EERs’ participation in the PJM capacity markets, and overlooking Affirmed Energy’s reliance interests based upon the existing Tariff.
The DC Circuit denied Affirmed Energy’s petition for review. First, the court held that FERC’s approval of PJM’s proposal was not impermissibly retroactive because it only altered Affirmed Energy’s eligibility to participate in future capacity auctions. Second, the court rejected Affirmed Energy’s argument that FERC arbitrarily and capriciously “rubberstamped” PJM’s analysis. Instead, the court concluded that FERC carefully reviewed PJM’s proposal and explained why it found the proposal persuasive. Third, the court held that FERC adequately considered the benefits of EERs’ participation in PJM’s capacity markets. Finally, the court found that FERC adequately appraised the reliance interests at stake in the proceeding and explained that they were outweighed by other considerations.
Judge Pan dissented in part, arguing PJM’s proposal retroactively modified Affirmed Energy’s ability to participate in future capacity auctions, but joined the majority opinion that FERC’s orders were not arbitrary and capricious.
The DC Circuit’s opinion is available here.