U.S. Supreme Court

Maryland program to encourage new generation of electricity is pre-empted, Supreme Court says

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A Maryland program that provides incentives for electricity generation is pre-empted by federal law, the U.S. Supreme Court has unanimously ruled.

Justice Ruth Bader Ginsburg’s opinion (PDF) for the court said the Maryland program is pre-empted by the federal law giving the Federal Energy Regulatory Commission exclusive jurisdiction over wholesale sales of electricity in the interstate market. Her opinion was joined in full by six justices, while Justice Clarence Thomas partially concurred.

Ginsburg stressed that her decision should not be read to foreclose Maryland or other states from encouraging generation of new or clean power through other measures. The court was taking no stance on measures such as tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector, Ginsburg said.

Maryland’s program involved a regional auction market that determines wholesale prices that are paid to ensure available energy supplies, SCOTUSblog reported in its coverage of oral arguments. Challengers to Maryland’s program had argued it suppressed prices.

Concerned about insufficient energy production, Maryland regulators solicited proposals for a new gas-fired power plant and selected one. The state guaranteed a rate for power generated by the plant on the auction market, Utility Dive reported in a preview of the case. The market operated on a three-year cycle, but Maryland required electricity purchasers to enter into 20-year contracts at a rate specified in the proposal by the new power plant. If the auction price fell beneath the required price, the extra costs were passed on to consumers.

Ginsburg said in her opinion that Maryland’s program intruded on federal authority by setting an interstate wholesale rate. “That Maryland was attempting to encourage construc­tion of new in-state generation does not save its program,” Ginsburg wrote.

Thomas said in his partial concurrence that he would have based the ruling on the Federal Power Act rather than principles of implied pre-emption.

The case is Hughes v. Talen Energy Marketing.

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