The Supreme Court ruled unanimously in favor of the federal government on Tuesday in deciding that a Maryland program to subsidize construction of natural gas-fired power plants overstepped the fine line between state and federal jurisdiction over electricity markets.
The decision sends a strong message to states that they must defer to the Federal Energy Regulatory Commission, which regulates the interstate wholesale markets, if they want to subsidize power plants that operate in the federally controlled market.
“By adjusting an interstate wholesale rate, Maryland’s program invades FERC’s regulatory turf,” wrote Justice Ruth Bader Ginsburg in the court’s decision. She said the justices agree with a lower court’s finding that the state’s subsidy interferes with federal wholesale rates.
“We agree with the Fourth Circuit’s judgment that Maryland’s program sets an interstate wholesale rate, contravening the [Federal Power Act’s] division of authority between state and federal regulators,” Ginsburg wrote.
The case marks a second big win for the commission in the high court this year. The court had favored the independent agency over power plant owners in a similar jurisdictional fight over the agency’s landmark rules for incentivizing a form of energy efficiency known “demand response.” A lower court had ruled that FERC overstepped its wholesale authority by implementing rules affecting rates in the state-ran retail markets. The Supreme Court overturned the lower court’s ruling in FERC’s favor, which coincidentally Maryland supported.
The high court said Tuesday’s ruling would not affect a similar program that another court struck down in New Jersey. “Nothing in this opinion should be read to foreclose Maryland and other states from encouraging production of new or clean generation through measures untethered to a generator’s wholesale market participation,” Ginsburg wrote, which could mean the high court was attempting to keep its decision as narrow as possible.
Environmentalists, who defended Maryland’s program, remained optimistic that was the case.
“The Supreme Court’s decision is good news for clean energy because it rejected Maryland’s program on extremely narrow grounds,” said Allison Clements, director of the Natural Resources Defense Council’s Sustainable FERC Project. “The decision leaves states free to encourage clean energy through a wide variety of means, including by requiring long-term power purchase agreements.”
