D.C. Circuit Finds FERC Erred in Declining to Consider Section 206 Relief in 2024/25 PJM Capacity Auction Re-Run Case

On January 13, 2026, the United States Court of Appeals for the District of Columbia Circuit issued its decision in Maryland Office of People’s Counsel, et al. v. FERC, No. 24-1353, holding that the Federal Energy Regulatory Commission erred in concluding that an earlier federal appellate court decision precluded it from granting relief under Section 206 of the Federal Power Act (FPA) to customers who faced unusually high electricity capacity prices following a PJM Interconnection, L.L.C. (PJM) capacity auction re-run. In so deciding, the court reasoned that providing such Section 206 relief was an exception to the general rule under the “filed-rate doctrine” that prohibits retroactive modification of filed rates. The court vacated FERC’s orders on appeal and remanded the case for further proceedings. In doing so, the decision clarifies the distinct roles of Sections 205 and 206 of the FPA and underscores the limits of the filed-rate doctrine in constraining FERC’s remedial authority.

No party requested rehearing of the decision, so the court issued its mandate on March 10, 2026. Unless one of the parties seeks and receives Supreme Court review,[1] the case now returns to FERC, which must consider on the merits whether the re-run auction results are unjust and unreasonable under Section 206 and, if so, what relief is appropriate. 

Background

PJM is the Regional Transmission Organization that manages electricity transmission and markets across all or parts of thirteen Mid-Atlantic and Midwestern states and the District of Columbia, covering more than 67 million customers. It is the nation’s largest organized wholesale electricity market. PJM procures power generation capacity—the ability to produce electricity when necessary—by conducting auctions years in advance of when the capacity is expected to be needed. The results of these capacity auctions directly affect the prices consumers pay for electricity. 

The underlying dispute arose from PJM’s 2024/25 capacity auction, which occurred in 2022. After bidding closed, PJM discovered an error in its calculation of the Locational Delivery Area Reliability Requirement (LDA Reliability Requirement) for the Delmarva Power & Light Company South Zone (DPL South Zone), a subsection of the DPL Pricing Zone covering parts of Delaware, Maryland, and Virginia. PJM had predicted that certain large power plants and solar facilities would participate in the auction, and because PJM considered both to be relatively unreliable sources of power, it had factored in a need for a correspondingly large amount of backup capacity. When those suppliers declined to participate in the auction at all, the additional backup capacity became unnecessary, but the inflated LDA Reliability Requirement remained. 

Seeking to avoid more than $100 million in excess capacity charges, PJM filed requests for relief with FERC under both Section 205 and Section 206 of the FPA,[2] asking FERC to approve a tariff amendment that would authorize PJM to modify the LDA Reliability Requirement before finalizing the results of the auction. In February 2023, FERC approved PJM’s request under Section 205 and denied its Section 206 filing as moot. PJM then amended its tariff, revised the LDA Reliability Requirement, and completed the auction using the adjusted LDA Reliability Requirement.

The Third Circuit’s Filed-Rate Doctrine Ruling

Capacity suppliers that would have benefited from the higher clearing price in the original auction results challenged FERC’s approval of PJM’s tariff amendment. In PJM Power Providers Group v. FERC, 96 F.4th 390 (3d Cir. 2024), the Third Circuit vacated FERC’s orders under the “filed-rate doctrine,” which binds regulated entities to charge only the rates that have been filed with FERC and to change their rates only prospectively. As the Third Circuit explained, the doctrine is “unbending regardless of where the equities lie” and “does not yield, no matter how compelling the equities.” Importantly, it extends not only to rates per se but also to “matters directly affecting rates,” including any “rule, regulation, or contract relating thereto.” This stems directly from the text of Section 205, which prohibits changes not just to rates but also to any classification, service, or rule, regulation, or contract relating to such rates without proper prior notice and FERC approval.

The Third Circuit reasoned that PJM’s tariff amendment violated the filed-rate doctrine because it operated retroactively. Specifically, the court held that it was retroactive to change the LDA Reliability Requirement mid-auction because PJM’s tariff required that parameter to be calculated and posted before conducting the auction and then used in the auction.

Following the Third Circuit’s mandate, FERC instructed PJM to completely re-run the auction using the original, inflated LDA Reliability Requirement. When PJM re-ran the auction, it was unable to secure enough capacity for the auction to clear naturally, causing it to clear at a predetermined price cap. Compared to the earlier iteration of the auction, without the inflated LDA Reliability Requirement, PJM spent an additional $182.8 million to procure just under two percent more capacity. 

The Section 206 Complaint

A group consisting of state agencies in the Maryland and Delaware governments, PJM customers, and private entities representing customers’ interests (together, the “DPL Customers”) filed a complaint with FERC under Section 206, asking FERC to declare the re-run auction results unjust and unreasonable and replace them with the efficient market outcome from the original auction. FERC denied the complaint, reasoning that it could not reach an outcome inconsistent with the Third Circuit’s ruling. In a subsequent order denying rehearing, FERC contended 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. 

The D.C. Circuit’s Analysis

The D.C. Circuit granted the petition for review of the relevant FERC orders, applying de novo review because FERC’s denial rested entirely on its interpretation of the Third Circuit’s decision, and courts give no deference to an agency’s interpretation of judicial precedent.

The court emphasized the “important differences” between Sections 205 and 206, noting that while both require that rates charged by utilities subject to FERC’s jurisdiction be just and reasonable, they enforce that mandate differently. Section 205 requires regulated entities to file their rates with FERC and primarily involves newly filed rates, whereas Section 206 focuses on existing rates, empowering FERC to modify those it deems unjust or unreasonable. The court characterized FERC’s role under Section 206 as “more active” than the “essentially passive and reactive” role contemplated by Section 205. 

The court determined that the Third Circuit was presented only with and answered in the negative one “discrete legal question: whether FERC acted lawfully when it used its Section 205 authority to modify the process PJM uses to procure capacity.” (Emphasis added.) Critically, 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[.]” Indeed, when capacity suppliers had argued that the tariff amendment was impermissibly retroactive because it allowed PJM to disregard the auction results, the Third Circuit declined to take up that argument.

The Upshot: The Filed-Rate Doctrine Does Not Categorically Bar All Retroactive Rate Modifications; Section 206 May Provide an Exception

The D.C. Circuit rejected FERC’s contention that, under the Third Circuit’s reasoning, any modification to PJM’s auction-set capacity price would be retroactive. The court explained that the filed-rate doctrine does not operate independently of the statutory provisions that undergird it. While the filed-rate doctrine generally forbids retroactive modification of rates, this is “only a default rule” and Section 206 provided an exception.

Under Section 206(b), if FERC finds that a rate is not just and reasonable, it may provide refunds for “amounts paid” during a Section 206 proceeding, the refund effective date of which is set based on the commencement date of the proceeding. Courts have viewed this refund as a “retroactive . . . rate decrease[.]” As such, if the filed-rate doctrine were a complete bar to “all ‘retroactive’ rate modifications,” then Section 206(b) would be ineffective. Instead, the court held, reading Section 206(b) as “a narrow exception” to the filed-rate doctrine’s general prohibition of retroactive rate modifications fulfills Congress’s intent.

The court also rejected FERC’s argument that granting relief would “render the Third Circuit’s judgment economically meaningless[.]” The court observed that the Third Circuit is “a court, not an economic regulator,” 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. Further, FERC did not need to adopt a “use-it-or-lose-it approach” when considering different ways it might address the problems caused by PJM’s forecasting error and the court refused to impose a new requirement without a statutory basis.

Implications

The D.C. Circuit decision provides important guidance in several respects: 

First, the case reaffirms the structural distinction between Sections 205 and 206 of the FPA. A determination that relief is unavailable under Section 205 does not automatically foreclose relief under Section 206. Parties should evaluate which statutory pathway may be available for addressing concerns. 

Second, the case clarifies that the filed-rate doctrine, while foundational to FERC’s regulatory framework, is not an absolute bar to all backward-looking rate modifications. The refund mechanism under Section 206(b) represents an exception that may provide relief in appropriate circumstances.

The Foley energy regulatory team will continue to track the remand proceedings and welcomes questions on these issues.