ELR Citation: 46 ELR 20078
No(s). 14-614 (U.S. Apr 19, 2016)

The U.S. Supreme Court held that the Federal Power Act (FPA) preempts a Maryland program intended to encourage in-state power generation. Maryland selected, through a proposal process, a power generation development company to construct a new power plant. The program requires electric utilities to enter into a 20-year pricing contract with the power company at a rate the company specified in its proposal. The contract provides that the company will sell its capacity to a regional transmission organization (RTO) through an auction, but if the company doesn't clear a certain price at auction, the utilities will cover the difference so that the company will receive the full contract price. This "contract for differences," however, disregards the interstate wholesale rate FERC requires. FERC has approved the RTO's capacity auction as the sole rate-setting mechanism for capacity sales to RTOs and has therefore deemed the clearing price just and reasonable. By adjusting an interstate wholesale rate, Maryland’s program contravenes the FPA’s division of authority between state and federal regulators. That Maryland was attempting to encourage construction of new in-state generation does not save its program. States may regulate within their assigned domain even when their laws incidentally affect areas within FERC’s domain. But they may not seek to achieve FERC’s authority over interstate wholesale rates, as Maryland has done here. The Court noted, however, that neither Maryland nor other states are foreclosed from encouraging production of new or clean generation through measures that do not condition payment of funds on capacity clearing the auction. Ginsburg, J., delivered the opinion of the Court, in which Roberts, C.J., and Kennedy, Breyer, Alito, Sotomayor, and Kagan, JJ., joined. Sotomayor, J., filed a concurring opinion. Thomas, J., filed an opinion concurring in part and concurring in the judgment.