ELR Citation: 44 ELR 20207
No(s). 13-4330, -4501 (3d Cir. Sep 11, 2014)

The Third Circuit struck down New Jersey's Long Term Capacity Pilot Program Act, which was enacted in 2011 to encourage the construction of new power plants within the state. The program, known as "LCAPP", would add a cumulative 2,000 megawatts of capacity to the regional power grid from which New Jersey obtains its electrical energy. Pursuant to the LCAPP, the state created a set of contracts, called Standard Offer Capacity Agreements, that assured new electric energy generators 15 years of revenue from local utilities and, ultimately, New Jersey ratepayers. The LCAPP guaranteed revenue to new generators by fixing the rates those generators would receive for supplying electrical capacity. The Federal Power Act, however, vests the federal government with exclusive control over interstate rates for wholesales of electric capacity. When New Jersey arranged for LCAPP generators to receive preferential capacity rates, the state entered into a field of regulation beyond its authority because the LCAPP compels participants in a federally regulated marketplace to transact capacity at prices other than the price fixed by the marketplace. As such, federal law preempts, and thereby invalidates, the LCAPP and the related Standard Offer Capacity Agreements.