Joint Petitioners submit opening brief calling for the Fifth Circuit Court of Appeals to vacate FERC’s Order 904 eliminating reactive power compensation as the final rule is unlawful, as well as arbitrary and capricious.
Date filed: February 19, 2026 | Venue: U.S. Court of Appeals – Fifth Circuit | Proceeding: Vistra Corp., et al. V. FERC, Case No. 25-60055
Summary:
The Electric Power Supply Association (EPSA joined a group of power generators and industry organizations in filing a joint brief in the U.S. Court of Appeals for the Fifth Circuit challenging FERC’s Order No. 904. The brief argues that the order unlawfully eliminates compensation for a critical reliability service that competitive generators provide to the grid.
“In eliminating compensation for reactive power nationwide, Order No. 904 upended the structure of American power markets and disrupted the investment-backed expectations of generators across the country.”
Key Takeaways
- FERC Order No. 904 eliminates compensation for reactive power, a service generators provide to help maintain voltage and ensure grid reliability.
- Generators are still required to provide the service, but the order sets the compensation rate at $0 nationwide, effectively requiring generators to provide the service for free. As the brief states, the order “compelled generators to give away reactive power for free.”
- Petitioners argue that the order exceeds FERC’s authority under the Federal Power Act, violates cost-causation principles, and fails to consider the reliance interests of generators that have long been compensated for this service. The brief explains that the order allows “the entities that need and benefit from reactive power service to free ride on generators’ reactive power production.”
- The brief asks the court to vacate the order.
About the Case
Reactive power helps stabilize voltage levels across the grid and is essential to reliable electricity delivery. For decades, FERC treated reactive power as a distinct reliability service and allowed generators to receive compensation for providing it.
Order No. 904 changes that policy by eliminating payments for reactive power across the country while still requiring generators to provide the service as a condition of interconnection and electricity sales.
Petitioners’ Arguments
In the joint brief, petitioners argue that the order is unlawful for several reasons:
- Lack of statutory authority: Under Section 206 of the Federal Power Act, FERC must show that existing rates are unjust and unreasonable before replacing them. Petitioners argue FERC failed to make that showing before imposing a $0 rate for reactive power.
- Violation of the cost-causation principle: Electricity regulation generally requires that the parties who benefit from a service pay for it. Petitioners argue that transmission customers benefit from reactive power but would no longer pay for it under Order No. 904.
- Failure to consider reliance interests: Generators have made long-term investment and contractual decisions based on decades of compensation for reactive power services. Petitioners argue FERC failed to adequately address those reliance interests when adopting the order.
Requested Outcome
Petitioners ask the court to vacate Order No. 904, arguing that the decision is inconsistent with the Federal Power Act and established regulatory principles.
Why It Matters
EPSA supports policies that ensure competitive power generators are fairly compensated for the essential services they provide to maintain a reliable and resilient electric grid. The petitioners argue that eliminating compensation for reactive power while continuing to require generators to provide the service undermines those principles and conflicts with the Federal Power Act.
EPSA is part of the Vistra Petitioners, which also includes: Vistra Corp./Dynegy Marketing & Trade; Alpha Generation; LS Power Development; National Grid Renewables Development; NEPGA; IPPNY and P3.
