State Jurisdiction Over Distributed Generators

Abstract

The Federal Energy Regulatory Commission (FERC) has defined in an expansive manner its jurisdiction over electricity sales-for-resale, in effect preempting the states from any role, even when such sales occur on distribution circuits for consumption locally. Under the FERC’s approach, all such sales are swept under federal law no matter how small the generator or how local the consuming market. This article challenges the FERC’s approach by providing a review of first principles, illustrating inconsistencies in the FERC’s interpretation, and arguing that the Federal Power Act by its own terms leaves to the individual states their own independent jurisdiction over generators that sell their output on distribution circuits to colocated off-takers. This means the states have complete authority, emanating from their organic police powers, to regulate not only the rates and terms of such sales, but also the terms by which the generators interconnect to the distribution grid. Put another way, the individual states have full inherent authority to adopt mechanisms such as “feed-in tariffs” for distributed generators.