U.S. Supreme Court Invalidates Maryland Program that Supplements FERC-Approved Capacity Payments

04.28.16

In a unanimous opinion issued on April 19, the U.S. Supreme Court invalidated a Maryland program designed to incentivize construction of a new natural gas plant.  The Court concluded that the program infringed upon the Federal Energy Regulatory Commission's exclusive jurisdiction under the Federal Power Act over rates for wholesale sales of capacity.  The decision affirmed that states may continue to use traditional incentives to encourage power plant construction, including "clean" power plants but ruled that the infirmity in the Maryland program was its requirement that two Maryland utilities enter into 20-year "contracts for differences" with the developer of a new 725 MW natural gas fired combined-cycle plant selected by the Maryland Public Service Commission, and the requirement that the new plant sell its capacity into the PJM capacity market.  The opinion extends the Court's prior holdings invalidating state or state commission policies that directly or indirectly interfere with the FERC-regulated interstate wholesale power markets.