Maryland Office of People ’s Counsel v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 17, 2025 Decided January 13, 2026
No. 24-1353
M ARYLAND OFFICE OF P EOPLE ’S C OUNSEL, ET AL.,
P ETITIONERS
v.
FEDERAL ENERGY R EGULATORY C OMMISSION,
R ESPONDENT
PJM INTERCONNECTION, L.L.C., ET AL.,
INTERVENORS
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Jeffrey A. Schwarz argued the cause for petitioners. With
him on the briefs were David S. Lapp, William F. Fields, Scott
H. Strauss, Peter J. Hopkins, Lauren L. Springett, John
McCaffrey, Timothy G. McCormick, Christian F. Tucker,
Robert A. Weishaar, Jr., Adrienne E. Clair, Gerit F. Hull,
Thomas L. Rudebusch, Bhaveeta K. Mody, Miles H. Mitchell,
and Ransom E. Ted Davis.
Jason T. Perkins, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on

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the brief were David L. Morenoff, Acting General Counsel, and
Robert H. Solomon, Solicitor.
Paul W. Hughes argued the cause for intervenors in
support of respondent. With him on the brief were Steffen N.
Johnson, Nicholas M. Gladd, Kelsey C. Catina, David G.
Tewksbury, Andrew A. Lyons-Berg, Connor J. Suozzo, Ryan J.
Collins, Christopher C. O’Hara, Zachary C. Schauf, Zachary
B. Cohen, and Arjun R. Ramamurti. Vivian W. Chum entered
an appearance.
Before: HENDERSON, P ILLARD and GARCIA, Circuit
Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
KAREN LEC RAFT HENDERSON, Circuit Judge: PJM
Interconnection, LLC (PJM) asked the Federal Energy
Regulatory Commission (FERC) for permission to amend its
tariff under section 205 of the Federal Power Act (FPA) before
it finalized a capacity auction that was set to saddle consumers
with hundreds of millions of dollars in inflated electricity
prices. FERC approved PJM’s request, but the United States
Court of Appeals for the Third Circuit vacated that decision,
reasoning that the tariff amendment violated the filed-rate
doctrine. PJM Power Providers Grp. v. FERC, 96 F.4th 390,
399–402 (3d Cir. 2024). FERC complied with the Third
Circuit’s mandate and directed PJM to complete the auction
using the unamended version of its tariff. PJM obliged and, as
expected, rates soared. State agencies, PJM customers and
private entities representing the customers’ interests filed a
complaint under section 206 of the FPA, asking FERC to
modify the auction result. FERC declined, reasoning that the
Third Circuit’s decision tied its hands. Unsatisfied with

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FERC’s explanation, the complainants have petitioned this
Court for review.
There may have been a sound basis for FERC to deny
relief. But the only reason it articulated—that the Third Circuit
resolved the matter—was anything but sound. The Third
Circuit held that the filed-rate doctrine foreclosed FERC’s
efforts to modify PJM’s rate-setting process under section 205
of the FPA. But it never addressed whether the auction result
is subject to revision under section 206. FERC’s conclusion to
the contrary was erroneous. We therefore grant the petition for
review.
I. Legal and Factual Background
The filed-rate doctrine prohibits regulated entities from
charging rates “other than those properly filed with the
appropriate federal regulatory authority,” Ark. La. Gas Co. v.
Hall, 453 U.S. 571, 577 (1981), and permits those rates to be
changed “only prospectively,” Okla. Gas & Elec. Co. v. FERC,
11 F.4th 821, 829 (D.C. Cir. 2021).1 The doctrine has long
provided “necessary predictability” in our Nation’s electricity
1 Some of our decisions have attributed the prohibition on
retroactive rate modifications to the filed-rate doctrine’s “corollary,”
the rule against retroactive ratemaking. OXY USA, Inc. v. FERC, 64
F.3d 679, 699 (D.C. Cir. 1995); see Associated Gas Distribs. v.
FERC, 898 F.2d 809, 810 (D.C. Cir. 1990) (Williams, J., concurring
in denial of rehearing and rehearing en banc) (“We have not always
clearly distinguished between the filed rate doctrine and the
retroactive ratemaking doctrine, doubtless because they often
overlap.”).

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markets. Elec. Dist. No. 1 v. FERC, 774 F.2d 490, 493 (D.C.
Cir. 1985).
The “contours” of the filed-rate doctrine have historically
been drawn by the judiciary. Ark. La. Gas Co., 453 U.S. at 599
(Stevens, J., dissenting); see generally Gustavus H. Robinson,
The Filed Rate in Public Utility Law: A Study in Mechanical
Jurisprudence, 77 U. Pa. L. Rev. 213 (1928). But the doctrine
has always been “statutorily grounded.” Columbia Gas
Transmission Corp. v. FERC, 895 F.2d 791, 795 (D.C. Cir.
1990). The earliest decisions articulating the filed-rate doctrine
rested on interpretations of the Interstate Commerce Act of
1887. See, e.g., Pa. R.R. Co. v. Int’l Coal Mining Co., 230 U.S.
184, 196–97 (1913). Over time, the doctrine found footing in
other statutes and expanded “across the spectrum of regulated
utilities.” Ark. La. Gas Co., 453 U.S. at 577. In the context of
FERC’s regulation of electricity markets, the filed-rate doctrine
primarily “rests on two provisions” of the FPA: section 205 and
section 206, 16 U.S.C. §§ 824d, 824e. Towns of Concord,
Norwood & Wellesley v. FERC, 955 F.2d 67, 71–72 (D.C. Cir.
1992).
Section 205 and section 206 are “related but distinct.”
FirstEnergy Serv. Co. v. FERC, 758 F.3d 346, 348 (D.C. Cir.
2014). Both require that the rates charged by utilities subject to
FERC’s jurisdiction be just and reasonable. Kan. Gas & Elec.
Co. v. FERC, 758 F.2d 713, 716 (D.C. Cir. 1985). But they
enforce that mandate differently. Section 205 requires
regulated entities to file their rates with FERC and thus
primarily involves “newly filed rates.” Papago Tribal Util.
Auth. v. FERC, 723 F.2d 950, 956 (D.C. Cir. 1983). Section
206, on the other hand, focuses on “existing rates,”
empowering FERC to modify those that it deems unjust or
unreasonable. FirstEnergy Serv. Co., 758 F.3d at 348. All told,
FERC’s role under section 206 is “more active” than the

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“essentially passive and reactive” role contemplated by section
205. City of Winnfield v. FERC, 744 F.2d 871, 876 (D.C. Cir.
1984).
FERC oversees Regional Transmission Organizations
(RTOs), which “are independent organizations that manage the
transmission of electricity over the electric grid and ensure
electricity is reliably available for consumers.” Advanced
Energy Mgmt. All. v. FERC, 860 F.3d 656, 659 (D.C. Cir.
2017) (per curiam). RTOs fulfill their responsibilities by
carrying out “several functions.” Citadel FNGE Ltd. v. FERC,
77 F.4th 842, 848 (D.C. Cir. 2023). One such function is
procuring capacity, which “is not electricity itself but the
ability to produce it when necessary.” Conn. Dep’t of Pub. Util.
Control v. FERC, 569 F.3d 477, 479 (D.C. Cir. 2009).
PJM is an RTO that manages the transmission of
electricity in “all or parts of thirteen Mid-Atlantic and
Midwestern states and the District of Columbia.” Advanced
Energy Mgmt. All., 860 F.3d at 659.2 It procures capacity by
conducting auctions “years in advance of when the capacity
offered at the auction will be needed.” N.J. Bd. of Pub. Utils. v.
FERC, 744 F.3d 74, 84 (3d Cir. 2014). The results of PJM’s
capacity auctions have a direct effect on the prices that
downstream consumers pay for electricity. See Hughes v. Talen
Energy Mktg., LLC, 578 U.S. 150, 159 (2016). In other words,
when PJM pays more for capacity, consumers pay more for
electricity.
PJM’s Open Access Transmission Tariff (Tariff)
“provides a detailed roadmap” of how PJM’s capacity auctions
must be conducted. PJM Power Providers Grp., 96 F.4th at
2 PJM takes its name from Pennsylvania, New Jersey and
Maryland: “the first three states in which it operated.” Long Island
Power Auth. v. FERC, 27 F.4th 705, 709 (D.C. Cir. 2022).

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395. The Tariff requires PJM to calculate and publish various
“parameters, or inputs,” it intends to use in each auction. Id.
One of those parameters is the Locational Delivery Area
Reliability Requirement (LDA Reliability Requirement),
which represents “the amount of capacity that must be
produced to meet peak demand” in a particular PJM zone. Del.
Div. of the Pub. Advoc. v. FERC, 3 F.4th 461, 463–64 (D.C.
Cir. 2021).
After PJM publishes the auction parameters, capacity
suppliers review that information and decide whether to submit
a bid. PJM Power Providers Grp., 96 F.4th at 395. At the
conclusion of the bidding period, PJM runs an algorithm that
determines which bids to accept. Id. PJM begins by accepting
the lowest-priced bid and repeats that process until it secures
sufficient capacity. Id. The price of the final accepted bid
constitutes the clearing price, and all suppliers whose bids are
accepted are paid that price. Hughes, 578 U.S. at 156.3 If PJM
fails to secure sufficient capacity and there is no natural
clearing price, the auction clears at a predetermined price cap.
This case involves PJM’s 2024/2025 capacity auction.
That auction “proceeded smoothly at first.” PJM Power
Providers Grp., 96 F.4th at 396. More recent developments
have been anything but smooth. In August 2022, PJM posted
parameters for the 2024/2025 auction and gave suppliers more
than three months to decide whether to bid. Shortly after
bidding closed, PJM noticed an issue pertaining to the
Delmarva Power & Light Company South Zone (DPL South
Zone), a subsection of the DPL Pricing Zone that consists of
3 See Hughes, 578 U.S. at 156 n.1 (“[I]f four power plants bid
to sell capacity at, respectively, $10/unit, $20/unit, $30/unit, and
$40/unit, and the first three plants provide enough capacity to satisfy
projected demand, PJM will purchase capacity only from those three
plants, each of which will receive $30/unit, the clearing price.”).

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parts of Delaware, Maryland and Virginia. The DPL South
Zone’s LDA Reliability Requirement rested on PJM’s belief
that certain suppliers would participate in the auction, but that
prediction proved to be wrong. As a result, the LDA Reliability
Requirement reflected a need for substantially more capacity
than the DPL South Zone in fact needed.4 If left unaddressed,
this mismatch would inflate the clearing price and likely lead
to more than $100 million in excess capacity charges.
Seeking to avoid an anomalous (and expensive) outcome,
PJM requested relief under section 205 and section 206 of the
FPA. Both filings sought FERC’s approval of a tariff
amendment that would authorize PJM to modify the LDA
Reliability Requirement before finalizing the auction. In
February 2023, FERC approved PJM’s request to amend its
Tariff under section 205 and denied its section 206 filing as
moot. PJM quickly amended its Tariff, revised the LDA
Reliability Requirement and completed the auction. Capacity
suppliers that would have benefitted from a higher clearing
price challenged FERC’s approval of PJM’s tariff amendment.
The Third Circuit granted their petition, reasoning that the tariff
amendment operated retroactively in violation of the filed-rate
doctrine. PJM Power Providers Grp., 96 F.4th at 401.
The Third Circuit started with the premise that the
filed-rate doctrine permits only prospective rate changes. Id. at
394. It then looked to Landgraf v. USI Film Products, 511 U.S.
244 (1994), and subsequent decisions applying it, to establish
4 Specifically, PJM had predicted that certain “large power
plants and solar facilities” would participate in the auction. PJM
Power Providers Grp., 96 F.4th at 396 n.3. PJM considered these to
be “relatively unreliable sources of power,” so it factored in a need
for a “correspondingly large amount” of backup capacity. Id. When
those suppliers declined to participate in the auction, the additional
backup capacity became unnecessary. See id.

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a definition of retroactivity. PJM Power Providers Grp., 96
F.4th at 398. Relying on those cases, it reasoned that an action
is retroactive if it “alter[s] the legal consequence[s] attached to
a past action,” id. at 399, and defined the “relevant inquiry” as
whether PJM’s “Tariff Amendment alter[ed] the legal
consequences attached to past actions,” id. at 400. The Third
Circuit held that it was retroactive to change the LDA
Reliability Requirement mid-auction because the Tariff
required that parameter to be “calculate[d]” and “post[ed]”
“prior to conducting the Auction and then use[d] . . . in the
Auction.” Id. at 399. The “legal consequence” that the Third
Circuit held FERC altered was the Tariff’s requirement “to
use [the LDA Reliability Requirement] in the Auction.” Id. at
400. Thus, in the Third Circuit’s view, the tariff amendment
was “retroactive, and FERC violated the filed rate doctrine by
approving it.” Id. at 401. The Third Circuit therefore vacated
the portion of FERC’s orders permitting the tariff amendment
to apply to PJM’s 2024/2025 auction. Id. at 402.
Shortly after the Third Circuit issued its mandate, PJM
petitioned FERC for confirmation that it should re-run the
auction using the initial LDA Reliability Requirement. A group
consisting of agencies in the Maryland and Delaware state
governments, PJM customers and private entities representing
the customers’ interests (collectively, the DPL Customers)
protested the petition. FERC sided with PJM and instructed it
to re-run the auction as if its Tariff had not been amended. PJM
re-ran the auction and was unable to secure enough capacity for
the auction to clear naturally, causing it to clear at the
predetermined price cap. Compared to the earlier iteration of
the auction, PJM spent an additional $182.8 million to procure
just 1.9 per cent more capacity.
While the DPL Customers were protesting PJM’s petition,
they also filed a complaint under section 206 of the FPA

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(Complaint). The Complaint asked FERC to declare the re-run
“auction results . . . unjust and unreasonable” and “replace
them” with the “efficient market outcome” that prevailed at the
original auction. App. at 3. FERC denied the Complaint,
reasoning that it could not reach an “outcome that would be
inconsistent with the Third Circuit’s ruling.” PJM Load Parties
v. PJM Interconnection, LLC, Order Denying Complaint, 188
FERC ¶ 61,020, P 21 (2024). FERC elaborated on its views in
a subsequent order denying rehearing, contending that it was
powerless to grant relief that would fail “the Third Circuit’s test
for retroactivity” and “lead to an outcome inconsistent with the
Third Circuit’s ruling.” PJM Load Parties v. PJM
Interconnection, LLC, Order Addressing Arguments Raised on
Rehearing, 189 FERC ¶ 61,199, P 12 (2024). Dissatisfied with
FERC’s denial of their Complaint, the DPL Customers
petitioned this Court for review. PJM has since intervened in
support of FERC, as have several capacity suppliers and their
trade association.
II. Analysis
We have jurisdiction under 16 U.S.C. § 825l(b). We
ordinarily review FERC’s orders under the Administrative
Procedure Act’s arbitrary and capricious standard. See Mo.
River Energy Servs. v. FERC, 918 F.3d 954, 957 (D.C. Cir.
2019). But FERC’s denial of the Complaint rested entirely on
its interpretation of the Third Circuit’s decision. And we
“give[] no deference to an agency’s interpretation of judicial
precedent.” SFPP, L.P. v. FERC, 967 F.3d 788, 795 (D.C. Cir.
2020) (per curiam). “We therefore are not limited to, and do
not employ, the deferential arbitrary and capricious standard.”
City of Ukiah v. FERC, 729 F.2d 793, 796 (D.C. Cir. 1984).
Instead, our review is de novo. See Ass’n of Civilian
Technicians v. FLRA, 353 F.3d 46, 50 (D.C. Cir. 2004).

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The Third Circuit was presented with a discrete legal
question: whether FERC acted lawfully when it used its section
205 authority to modify the process PJM uses to procure
capacity. It answered that question in the negative, reasoning
that FERC’s orders approving PJM’s tariff amendment were
retroactive as applied to the 2024/2025 auction and therefore
violated the filed-rate doctrine. PJM Power Providers Grp., 96
F.4th at 402. The Third Circuit was simply not presented with,
nor did it answer, the question of whether a subsequent use of
FERC’s section 206 authority to modify the resulting auction
price would be retroactive, much less impermissible.
We recognize that courts sometimes answer questions
implicitly. But the “important differences” between section 205
and section 206 make it impossible to predict how the Third
Circuit would have resolved a challenge to FERC’s
modification of PJM’s auction-set capacity price under section
206. Ala. Power Co. v. FERC, 993 F.2d 1557, 1571 (D.C. Cir.
1993). Indeed, when the capacity suppliers argued that the
tariff amendment was impermissibly retroactive “because it
allowed PJM to disregard the Auction results,” the Third
Circuit expressly declined to take up that argument. PJM
Power Providers Grp., 96 F.4th at 401 n.8. And even if the
Third Circuit had telegraphed how it would resolve a section
206 challenge to the auction results, FERC would not be bound
by its telegraph. Federal courts are powerless to answer
“hypothetical questions.” FBI v. Fikre, 601 U.S. 234, 241
(2024). And when the Third Circuit issued its decision, the
DPL Customers had not yet filed their Complaint. The current
controversy had simply not yet materialized.
Because the Third Circuit did not answer the different
legal questions raised by the DPL Customers’ Complaint—and
could not have done so even if it had wanted to—we have little
difficulty concluding that the Third Circuit’s decision did not

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mandate the Complaint’s denial. FERC resists this conclusion,
but its arguments lack force.
FERC contends that, under the Third Circuit’s reasoning,
any modification to PJM’s auction-set capacity price would be
retroactive. Even were that true, “agencies rely on . . . dictum
at their own risk.” Alaska Dep’t of Env’t Conservation v. EPA,
540 U.S. 461, 514 (2004) (Kennedy, J., dissenting). And they
are not bound by their hypotheses about how a court might
have ruled on questions that were never presented or answered.
More fundamentally, FERC’s argument wrongly assumes
that the filed-rate doctrine categorically bars all
backward-looking rate modifications. No doubt, the filed-rate
doctrine generally forbids the retroactive modification of rates.
Okla. Gas & Elec. Co., 11 F.4th at 829. But that is only a
default rule because the doctrine does not operate
independently of the “interconnected statutory” provisions that
undergird it. Id.; see E. Tex. Elec. Coop., Inc. v. FERC, 90 F.4th
579, 589 n.7 (D.C. Cir. 2024). If a filed rate is “changed in [a]
manner provided by the [Federal Power] Act,” the earlier rate
is no longer “binding upon the seller and the purchaser.” Nw.
Pub. Serv. Co. v. Montana-Dakota Utils. Co., 181 F.2d 19, 22
(8th Cir. 1950), aff’d, 341 U.S. 246 (1951). That is no less true
of retroactive rate changes.
Consider section 206(b), which directs FERC to establish
a “refund effective date” upon the commencement of a section
206 proceeding. 16 U.S.C. § 824e(b). If FERC eventually finds
that the rate being charged is not just and reasonable, it may
provide refunds for “amounts paid,” during the pendency of the
section 206 proceeding, “in excess of those which would have
been paid under the just and reasonable rate.” Id. When FERC
exercises this authority, it permissibly effectuates what might
be thought of as “retroactive . . . rate decreases.” City of

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Anaheim v. FERC, 558 F.3d 521, 524 (D.C. Cir. 2009); cf.
Verso Corp. v. FERC, 898 F.3d 1, 10 (D.C. Cir. 2018)
(explaining that section 206(b) does not endow FERC with
“concomitant authority . . . to retroactively correct rates that
were too low”). If the filed-rate doctrine operated as a
categorical bar to all “retroactive” rate modifications, section
206(b) would be a dead letter. But, by concluding otherwise,
we have given effect to the Congress’s command, recognizing
section 206(b) for what it is: “a narrow exception” to the
filed-rate doctrine’s general prohibition of retroactive rate
modifications. Exxon Mobil Corp. v. FERC, 571 F.3d 1208,
1211 (D.C. Cir. 2009); see E. Tenn. Nat. Gas Co. v. FERC, 863
F.2d 932, 942 (D.C. Cir. 1988) (explaining that an analogous
refund provision in the Natural Gas Act is a “statutory
exception to the rule prohibiting retroactive rate changes”). We
do not mean to suggest that the DPL Customers are necessarily
entitled to a refund under section 206(b).5 We hold only that
labeling the relief they seek as “retroactive” should not
foreclose the possibility that it is available under section 206.
FERC also contends that it could not “render the Third
Circuit’s judgment economically meaningless,” FERC Br. at
28, because that court “expected” its decision to have certain
“economic effects,” id. at 36. We disagree. To start, we do not
share FERC’s certainty about the effects the Third Circuit
expected its decision to have. That court said only that its
application of the filed-rate doctrine “could potentially produce
a harsh result.” PJM Power Providers Grp., 396 F.4th at 401
(emphasis added). That could be read to suggest that the Third
Circuit was aware that FERC had not yet exhausted all the tools
in its regulatory arsenal. Additionally, and more importantly,
even if the Third Circuit did expect its decision to have certain
5 We leave that matter to FERC for resolution in the first
instance. Cf. City of Anaheim, 558 F.3d at 525.

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economic effects, that expectation would have been irrelevant.
The Third Circuit is a court, “not an economic regulator.”
Reply Br. at 8. And when a court finds that an “agency based
its decision upon an improper legal ground,” the agency “might
later . . . reach the same” or a similar “result for a different
reason.” FEC v. Akins, 524 U.S. 11, 25 (1998). Nothing
required FERC to adopt a use-it-or-lose-it approach when
considering the different ways it might address the problems
caused by PJM’s forecasting error. And we decline to impose
such a requirement without a statutory basis.
The Third Circuit’s decision rejecting FERC’s efforts to
modify PJM’s auction process under section 205 simply did not
resolve whether FERC might later use its section 206 authority
to set aside the auction result. In reaching a different
conclusion, FERC committed legal error.
* * *
For the foregoing reasons, the petition for review is
granted. We vacate FERC’s orders denying the Complaint and
remand the case to FERC for further proceedings.
So ordered.

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