Maryland and New Jersey

Commerce Clause and Supremacy Clause Challenges to States’ Incentives for New Gas-Fired Generation
PPL EnergyPlus, LLC v. Douglas Nazarian, et al, Civil Action No. MJG-12-1286 (Maryland)
PPL EnergyPlus, LLC v. Robert M. Hanna, et al, Civil Action No. 11-745 (New Jersey)
Recent Developments: The Third and Fourth Circuits affirmed the District Courts’ holdings that the State programs are preempted by the Federal Power Act.
Case Documents

Maryland and New Jersey are both part of PJM, which operates wholesale markets for energy and capacity. Both states determined that insufficient generation was causing high power prices and had the potential to lead to reliability issues. Concluding that PJM’s markets were providing an insufficient incentive for building new plants in their States, the Maryland Public Service Commission and the New Jersey Legislature created their own incentives to encourage new gas-fired generation.

Under the States’ incentive programs, the two States conducted competitive solicitations to construct new capacity. After selecting a developer or developers, each State then required its regulated distribution companies to sign contracts with the developer(s) that guaranteed certain revenues. In Maryland, the distribution companies paid the developer the difference between PJM clearing prices for energy and capacity and energy and capacity prices set by the developer and approved by the State’s Public Service Commission. In New Jersey, the distribution companies paid the developers the difference between PJM’s clearing prices for capacity and a price authorized by the Board of Public Utilities that is based on the developers’ fixed costs.

Following two separate trials, Federal District Courts in Maryland and New Jersey determined that these state incentive schemes are unconstitutional. The Courts found that the schemes violated the Supremacy Clause because the States effectively set rates of wholesale power transactions, thus invading FERC’s exclusive jurisdiction over wholesale power transactions. The Courts also agreed that the States’ schemes did not offend the Commerce Clause because the in-state benefit of enhanced reliability was reasonable in light of the minimal burden on interstate commerce.

Maryland and New Jersey appealed the decisions to the Fourth and Third Circuits, respectively.

Answering an invitation from the Third Circuit, the United States Attorney General and FERC filed a brief arguing that New Jersey’s law is preempted by the Federal Power Act. According to FERC, “the Commission’s jurisdiction extends beyond the [wholesale] rates themselves, to any practice directly affecting wholesale rates.” FERC concluded that New Jersey’s subsidy allows for uneconomic bidding into PJM’s capacity auction. These bids suppress the resulting auction price. New Jersey’s law therefore “affects” wholesale prices and intrudes on FERC’s exclusive jurisdiction over wholesale rates.

FERC’s brief noted, however, that states “have the right to promote particular generation sources,” and “may direct[] the planning and resource decisions of electric utilities under its jurisdiction.”

On June 2, 2014, the Fourth Circuit affirmed the district court’s ruling. New Jersey’s appeal is still pending before the Third Circuit.


Circuit Court Opinions
Third Circuit Decision (Sep. 11, 2014)
Fourth Circuit Opinion (June 2, 2014)

District Court Opinions
PPL EnergyPlus, LLC v. Douglas Nazarian, et al, Civil Action No. MJG-12-1286 (Maryland) (Sep. 30, 2013)
PPL EnergyPlus, LLC v. Robert M. Hanna, et al, Civil Action No. 11-745 (New Jersey) (Oct. 11, 2013)

FERC Order
FERC Order Rejecting Filings (Aug. 5, 2014)


Filed Briefs at the Third Circuit (New Jersey)
Brief of Appellant New Jersey Board of Public Utilities (Jan. 17, 2014)
Brief of Appellant-Intervenor CPV (Jan. 17, 2014)
Amicus Briefs for Appellants (Jan. 24, 2014):
American Public Power Association and National Rural Electric Cooperative Association
American Wind Energy Association
New Jersey Division of Rate Counsel
Northeastern States and California
NRG Energy

Brief of Appellees PPL (Feb. 18, 2014)
Amicus Briefs for Appellees (Feb. 25, 2014):
Edison Electric Institute and Electric Power Supply Association
Pennsylvania Public Utility Commission
PJM Providers

Reply Brief of the New Jersey Board of Public Utilities
Reply Brief of Appellant-Intervenor CPV
Reply Brief of Appellant-Intervenor Hess

Court Order Inviting United States to File Amicus Brief
Brief of United States and Federal Energy Regulatory Commission (supporting appellees) (Mar. 20, 2014)
Supplemental Brief of Appellant-Intervenor CPV (responding to FERC’s Brief, not accepted by the Court) (Mar. 24, 2014)

Transcripts
Oral Argument before the Court of Appeals for the Third Circuit (Mar. 27, 2014)


Filed Briefs at the Fourth Circuit (Maryland)
Brief of Appellant Maryland Public Service Commission (Feb. 4, 2014)
Brief of Intervenor- Appellant CPV (Feb. 4, 2014)
Amicus Briefs for Appellants (Feb. 11, 2014):
American Public Power Association and National Rural Electric Cooperative Association
American Wind Energy Association
Maryland Energy Administration
Maryland Office of People’s Counsel
Northeastern States and California
NRG Energy

Brief of Appellees PPL (Mar. 10, 2014)
Amicus Briefs for Appellees (Mar. 17, 2014):
Edison Electric Institute and Electric Power Supply Association
PJM Providers

Reply Brief of Appellant Maryland Public Service Commission (Apr. 3, 2014)
Reply Brief of Intervenor- Appellant CPV (Apr. 3, 2014)

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