High Court Strikes Down |Md. Energy Plant Subsidy

(CN) - The Supreme Court on Tuesday held Maryland officials overstepped their authority when they offered to subsidize construction of a new power plant in the state.

In a unanimous ruling written by Justice Ruth Bader Ginsburg, the court said Maryland's actions trampled on the Federal Energy Regulatory Commission's authority to regulate the wholesale electricity market.

The ruling stems from a 2012 decision by Maryland regulators to order construction of a new power plant which produced electricity while utilizing natural gas.

The regulators then offered the winning bidder a financial incentive by requiring utilities to buy electricity from the plant for 20 years at a fixed price.

The Fourth Circuit sided with rival power suppliers who said the incentive interfered with pricing in wholesale markets, which are regulated by the federal government.

Justice Ginsberg agreed.

The two cases the court heard on the matter, Nazarian v. PPL EnergyPlus and CPV Maryland v. PPL EnergyPlus, were consolidated for the purpose of oral argument and decision.

"That Maryland was attempting to encourage construction of new in-state generation does not save its program," the justice wrote.

"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 ends, however legitimate, through regulatory means that intrude on FERC's authority over interstate wholesale prices," she said.

While the court affirmed the lower court rulings, Ginsberg reminded the parties that the ruling does not mean that Maryland or any other state is foreclosed from encouraging the construction of new and cleaner power plants.

They are free to do so as long as the measures used "do not condition payment of funds on capacity clearing the auction."

Justices Sonia Sotomayor and Clarence Thomas wrote concurring opinions.

Sotomayor did so to address technical matters related to the Federal Power Act. She concluded by saying while the decision went against Maryland, the "Court ... right recognizes the importance of protecting the States' ability to contribute, within their regulatory domain, to the Federal Power Act's goal of ensuring a sustainable supply of efficient and price-effective energy."

As for Justice Thomas, he said he agreed with his colleague's conclusion that Maryland's subsidies program "invades" the Federal Energy Regulatory Commission's "exclusive jurisdiction over interstate wholesale sales of electric energy."

"I agree that the statutory text and framework compel that conclusion, and that Maryland's program therefore cannot stand."

However, he said, "Because the statute provides a sufficient basis for resolving these cases, I would not also rest today's holding on principles of implied pre-emption."

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