On Tuesday, April 19, a unanimous Supreme Court ruled that Maryland's incentive program, which subsidized the participation of a new power plant in the PJM Interconnection (PJM) wholesale energy market, was preempted by the Federal Power Act.
The Maryland incentive program was put in place to encourage new in-state generation proposed by CPV Maryland LLC (CPV) by contractually committing Maryland's regulated load serving entities (LSEs) to guarantee a fixed 20-year revenue stream for CPV. The revenue stream was assured through a "contract for differences," under which the new generator would pay or be paid the difference between the contract price and the price the generator received in the FERC-regulated wholesale power market.
Justice Ginsburg's majority opinion, joined by six Justices, held that "Maryland's program invades FERC's regulatory turf" by impermissibly infringing on the FERC "exclusive jurisdiction over 'rates and charges . . . received . . . for or in connection with' interstate wholesale rates."1 Elaborating, the Court noted that "FERC has approved the PJM capacity auction as the sole ratesetting mechanism for sales of capacity to PJM," and that Maryland's efforts to set a different rate for CPV impermissibly "intrude on FERC's authority over interstate wholesale rates."2
The Court was deliberate in distinguishing the facts and limiting its rationale, observing that it "need not and do[es] not address the permissibility of various other measures States might employ to encourage development of new or clean generation, including tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector."3 Further, the Court clarified that it was not calling into question contracts for differences that are entered into voluntarily by LSEs without the compulsory state action that existed in Maryland. Justice Sotomayor wrote a concurring opinion also stressing the limited nature of the Court's ruling and emphasizing that the Maryland program impermissibly infringed on the existing federal-state relationship envisioned by the Federal Power Act.4 Justice Thomas wrote a concurring opinion, joining in the opinion of the Court" only to the extent that it rests on the text and structure of the Federal Power Act" and not on "principles of implied pre-emption."5
While this ruling involves widely different circumstances and regulatory schemes than the Court's January decision in FERC v. Electric Power Supply Association, the two cases together help clarify the evolving roles of state and federal regulators in the development and management of state public energy policy and their intersection with regulated wholesale power markets.
 Hughes v. Talen Energy Marketing LLC, 578 U.S. ___, 12 (2016) (citing Federal Power Act Section 205, 16 U.S.C. §824(d)).
 Id. at 13.
 Id. at 15.
 Hughes v. Talen Energy Marketing LLC, 578 U.S. ___ (Sotomayor, J., concurring).
 Hughes v. Talen Energy Marketing LLC, 578 U.S. ___ (Thomas, J., concurring in part).
Day Pitney Alert
Jennifer Galiette will be a speaker at a New England Women in Energy and the Environment (NEWIEE) event hosted on campus at UMass Amherst.
Florence Davis co-wrote an article entitled "Taming the Duck--Distributed Energy Resource Solutions to Renewable Energy Integration," for Bloomberg BNA's Daily Environment Report.
On January 30, Jed Davis will speak at The Knowledge Group Webcast, "Best Strategies in Protecting Your Firm Against Hackers: What Hackers Can and Cannot Do?"
On September 22 and 23, Dave Doot, Tom Havens and Florence Davis will participate at Law Seminars International's 13th Annual Comprehensive Conference on Energy in the Northeast in Boston.
Joseph Fagan was quoted in an article, "1st Circ. Bolsters State Powers In Gas Pipeline Reviews," published in Law360.
Day Pitney Press Release
Joe Fagan was quoted in an article, "For rebuffed Jordan Cove LNG, pipeline was the stumbling block at FERC," in S&P Global Market Intelligence.
Jeff Clopeck was quoted in an article, "Cautious optimism seen as equity crowdfunding begins," in Massachusetts Lawyers Weekly.
Harold Blinderman was quoted in an article, "Coal Co.'s Win Won't Diminish EPA's Regulatory Clout," in Law360. In the article, he discusses the significance of the case, Murray Energy Corporation et al v. Administrator of Environmental Protection Agency, in which the federal District Court for the Northern District of West Virginia granted summary judgment to Murray Energy.