The state of Maryland is asking the U.S. Supreme Court to overturn a federal appeals court decision last June that labeled as unconstitutional a state order requiring utilities to support construction of a 725-MW power plant in Waldorf.
In a Nov. 26 petition to the high court, state regulators contend that the ruling impedes Maryland's ability to manage its power supply.
The Maryland Public Service Commission in 2012 required state-based utilities to sign 20-year contracts with Competitive Power Ventures, the plant’s developer, to support construction of the project.
Two utilities, PPL and Public Service Enterprise Group, challenged the commission order in federal court.
The commission had issued a request for proposals for a 650-MW project out of concern that the capacity auction held each May by the regional transmission organization was not encouraging construction of new generation in the transmission-constrained area of eastern Maryland.
Under the 20-year contracts, utilities would pay Competitive Power Ventures the difference between the power price that the developer bid into the request for proposals and the payment that the new plant will receive for its output from the capacity auction held by PJM Interconnection, the regional transmission organization.
The federal appellate court in Richmond, Va., said the Maryland order intrudes on the Federal Energy Regulatory Commission’s jurisdiction by effectively setting the rate that the developer receives for its sales in the capacity auction.
Although states plainly retain substantial latitude in directly regulating generation, they cannot use their authority in a way that impinges on FERC’s exclusive power to specify interstate wholesale rates, the appeals court said.
“Here, Maryland has chosen to incentivize generation by setting interstate wholesale rates. This particular choice of means is impermissible," the appeals court said. "Wholesale energy prices fixed by FERC must be given binding effect by state authorities even in areas subject to state jurisdiction."
Maryland, in its petition before the Supreme Court, says the appellate court ruling cripples states’ ability under the Federal Power Act to manage their own power supplies.
“The decision imperils dozens of state laws under which private parties are investing billions in needed generation plants, from clean-coal facilities in Illinois to offshore wind in Massachusetts,” the petition says.
The state wants the high court to grant certiorari because the lower court decision distorts the Federal Power Act’s rate-setting machinery and conflicts irreconcilably with multiple decisions of the Supreme Court and the District of Columbia Circuit, the state petition contends.
One key question before the high court is: When a seller offer to build generation and sell wholesale power on a fixed-rate contract basis, does the Federal Power Act preempt a state order directing retail utilities to enter into the contract?
Another is: Does FERC’s acceptance of an annual regional capacity auction preempt states from requiring retail utilities to contract at fixed rates with sellers that are willing to commit to sell into the auction on a long-term basis?
Commonwealth Power Ventures said Dec. 2 that it has begun construction on the $775-million project and has received financing for the project without the support of the contracts with utilities.