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
Day Pitney will host a FERC 101 event, co-sponsored by Connecticut Power & Energy Society and EBA, on November 13 in its Hartford and Washington, DC offices.
On November 13, Day Pitney LLP and FH+H, PLLC, along with PDB FutureCom International, hosted an invitation-only program, "Industrial Internet of Things (IIoT) & America's Critical Energy & Transportation Infrastructure," held at the new International Spy Museum in Washington, D.C.
Sebastian Lombardi will serve on a panel, "State Policies and the Markets: How the tension is playing out in PJM," at the Northeast Energy and Commerce Association's Power Markets Conference on November 8, at the Marriott Courtyard Hotel in Marlborough, MA.
Day Pitney White Paper
Day Pitney associate Alexander W. Judd has been elected to serve as Chair of the Energy, Public Utility and Communications Law Section of the Connecticut Bar Association (CBA).
Day Pitney Press Release
Paul Belval will be honored at "Celebrating Leaders for Justice," a dinner and ceremony being presented by the Greater Hartford Legal Aid (GHLA) Foundation.
Joseph Fagan was quoted in an article, "Fuel shippers seek U.S. review of 'excessive' Colonial Pipeline rates," published by Reuters.
Day Pitney and the National Governors Association (NGA) hosted an invitation-only forum, held at the Downtown Harvard Club of Boston, that brought together lawyers, policymakers, cybersecurity experts and other participants to identify and discuss legal issues related to the growing Industrial Internet of Things (IIoT).