Legal challenges lie ahead for Trump order on independent agencies, FERC

US President Donald Trump's executive order asserting White House control over independent federal agencies could rewrite the traditional role of US energy regulators, industry and legal experts said Feb. 19.

The order is also sure to face legal challenges, they said.

The Feb. 18 order would require independent agencies to consult with the White House on their policy direction and submit major rules in draft and final form for White House review.

Moreover, it seeks to bar any executive branch employee from advancing an interpretation of the law that conflicts with the opinion of the president or attorney general, unless authorized by those two parties. Under the order, the White House would also set performance standards for the regulators.

Multiple longstanding independent agencies would be affected, including the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.

However, action at other independent agencies such as the Federal Trade Commission or the Consumer Financial Protection Bureau could give rise to the first wave of legal challenges to Trump's order, legal experts said.

Industry Impacts

Several industry experts suggested the order could chill rulemaking efforts at agencies like FERC.

The commission was established by Congress in 1977 as a bipartisan five-member panel with staggered terms that dilute the immediate sway of an incoming administration.

"FERC would be limited in the kinds of rules that can be approved by the policy preferences of the president," said Emily Hammond, energy and administrative law professor at George Washington University. "And we're going to see policy preferences, which can easily overlook the nuances of how the electric grid is maintained to be reliable and to minimize costs for consumers."

If upheld, the order will likely result in fewer FERC rulemakings, said Larry Gasteiger, executive director of WIRES, a trade group that represents transmission-owning utilities. Gasteiger was a FERC employee for nearly two decades, including chief of staff for former FERC Chairman Norman Bay.

"The overall thrust of the order is clear in my mind, which is fewer, more targeted rulemakings that are very closely aligned to the goals of the administration," Gasteiger said in an interview.

The order also has raised concerns about an erosion of agency independence and stronger policy swings under future administrations, potentially creating additional uncertainty around long-term infrastructure investments.

"When you're making investments on 40-plus year assets, you can't have the rules change dramatically every four years," said Rob Gramlich, president of the consulting firm Grid Strategies. "There would be great regulatory uncertainty about FERC rules."

Some taking 'wait-and-see' approach

According to Joel Eisen, an energy law professor at the University of Richmond, independent agencies such as FERC were established to "tackle difficult tasks such as making sure there's enough supply to meet demand for electricity for 65 million people in a Mid-Atlantic region, and we want them to do that in a way that is free of partisan interference."

Until now, such agencies were shielded from White House review of their significant rules, he said.

Some industry advocates are adopting a wait-and-see approach, reasoning that much could depend on how the White House Office of Management and Budget carries out the executive order with the individual agencies.

Conservative legal scholars and the president have argued that independent agencies function as a "fourth branch of government" that is exempt from political accountability.

"These agencies do not get to become a fourth branch of government, issuing rules and edicts all by themselves. And that's what they've been doing," Trump said in an April 2023 campaign video.

A White House fact sheet detailing the executive order was critical of specific agencies such as the Federal Trade Commission, Federal Communications Commission, and Securities and Exchange Commission but declined to call out FERC by name. The named agencies "have exercised enormous power over the American people without presidential oversight," the fact sheet said.

Potential challenges

Observers said legal challenges are certain to follow.

It is unlikely independent agency heads would challenge the order directly, especially given the Trump administration's attempt to remove "for cause" termination requirements for independent commissioners, Hammond said.

"A market participant could oppose a FERC order setting market rules on the grounds that it was dictated by the president instead of based on statutory factors," she said. But "that's a very long and intensive way" to challenge the executive order, Hammond added.

The Department of Energy Organization Act, which established FERC as an independent agency, gives the commission exclusive jurisdiction over a broad array of energy sector issues, including the ability to set just and reasonable wholesale electricity rates.

The executive order could infringe on those statutory powers, several energy attorneys told Platts, part of S&P Global Commodity Insights.

The DOE Organization Act also includes specific language stating that FERC personnel are not subject to supervision by any officer of the DOE, said Bill Scherman, partner at Vinson & Elkins. The question becomes whether that restriction would apply to the White House, in the context of the executive order, he added.

Scherman also noted that FERC is still governed by the Natural Gas Act and Federal Power Act. The commission still must comply with the Administrative Procedure Act and make decisions based on the evidence-based record, he said.

Emily Mallen, an energy and regulation partner at Akin, said the DOE Organization Act is "very explicit," that FERC decisions are independent from the secretary of energy and the presidential cabinet.

"The EO wants [FERC's] legal interpretations to be subject to review by the president and the attorney general. How does this work in practice? Does every tariff filing require an opinion from or memorandum of understanding with the Department of Justice before the commission can act?" Mallen said.

"There are multiple layers that would need to be considered and unwound to implement this EO," she said.

'We've seen this movie before'

ClearView Energy Partners in a research note said the "muscular concept of a unitary executive" embodied in the order could theoretically speed policies aligned with Trump's priorities, such as efforts to expedite permitting or revive shuttered power plants and extend the life of existing units.

However, the ClearView analysts said legal challenges could potentially enjoin the order, "elevating the question of agency independence to consideration before the US Supreme Court."

During the first Trump administration, the DOE sent FERC a proposed rulemaking to help coal and nuclear plants struggling to compete in organized power markets. It was ultimately rejected by a unanimous five-commissioner vote.

Environmental groups and Democratic lawmakers criticized the Feb. 18 order as a power grab that would undercut agencies' ability to conduct their statutory obligations.

"We've seen this movie before, but FERC survived and went on to continue to do a remarkable job of staying nonpolitical, and I will certainly do everything I can to maintain their independence," US Senator Martin Heinrich, Democrat-New Mexico, ranking member of the Senate Energy Committee, said at a Feb. 19 press conference. "What we don't need is a political ping-pong match when it comes to a regulator like FERC."