PJM Interconnection, a regional transmission organization, sought to amend its tariff to adjust a capacity requirement before a major electricity auction, fearing that a miscalculation would lead to inflated prices. FERC approved this amendment under Section 205 of the Federal Power Act, but the Third Circuit later vacated that approval, ruling that changing the tariff mid-auction violated the filed-rate doctrine by altering legal consequences attached to past actions. Consequently, PJM was forced to run the auction using the original, flawed parameters, which resulted in a clearing price cap and an additional $182.8 million in costs for consumers. State agencies and customer groups then filed a complaint under Section 206, asking FERC to modify the auction results to reflect the efficient market outcome. FERC denied the complaint, asserting that the Third Circuit's mandate left it powerless to grant relief that would be inconsistent with that ruling.
The D.C. Circuit reviewed FERC's decision de novo, as it rested entirely on the agency's interpretation of judicial precedent rather than factual findings. The court explained that while the filed-rate doctrine generally prohibits retroactive rate changes, it is not an absolute bar when the Federal Power Act provides specific mechanisms for modification. The court distinguished between Section 205, which governs new filings and tariff amendments, and Section 206, which empowers FERC to modify existing rates that are unjust or unreasonable. The Third Circuit's decision in PJM Power Providers Group v. FERC addressed only the propriety of amending the tariff process under Section 205; it did not address, nor did it implicitly resolve, whether FERC could use its Section 206 authority to correct the resulting auction prices. The court noted that Section 206(b) explicitly allows for refund proceedings that effectively operate as retroactive rate decreases, demonstrating that the filed-rate doctrine does not categorically forbid all backward-looking adjustments. Because the Third Circuit never ruled on the specific legal question of modifying the auction result under Section 206, FERC's conclusion that it was bound to deny relief was erroneous.
The decision vacates FERC's previous orders denying the complaint and remands the case for further proceedings. FERC must now reconsider the complaint under Section 206 to determine if the inflated auction rates are unjust and unreasonable, potentially ordering refunds or rate adjustments. The ruling clarifies that FERC retains independent authority under Section 206 to address market outcomes even when a prior court decision restricts its ability to modify the underlying tariff process under Section 205.
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