PPL EnergyPlus, LLC v. Douglas Nazarian
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 1:12-cv-01286-MJG. [999366884]. [13-2419, 13-2424]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2419
PPL ENERGYPLUS, LLC; PPL BRUNNER ISLAND, LLC; PPL HOLTWOOD,
LLC; PPL MARTINS CREEK, LLC; PPL MONTOUR, LLC; PPL
SUSQUEHANNA, LLC; LOWER MOUNT BETHEL ENERGY, LLC; PPL NEW
JERSEY SOLAR, LLC; PPL NEW JERSEY BIOGAS, LLC; PPL
RENEWABLE ENERGY, LLC; PSEG POWER LLC; ESSENTIAL POWER,
LLC,
Plaintiffs - Appellees,
v.
DOUGLAS R.M. NAZARIAN; HAROLD WILLIAMS; LAWRENCE BRENNER;
KELLY SPEAKES-BACKMAN; KEVIN HUGHES,
Defendants – Appellants,
and
CPV MARYLAND, LLC,
Defendant.
------------------------AMERICAN PUBLIC POWER ASSOCIATION; NATIONAL RURAL ELECTRIC
COOPERATIVE ASSOCIATION; NRG ENERGY INC.; MARYLAND OFFICE OF
PEOPLE'S COUNSEL; CONNECTICUT PUBLIC UTILITIES REGULATORY
AUTHORITY;
CONNECTICUT
DEPARTMENT
OF
ENERGY
AND
ENVIRONMENTAL PROTECTION; GEORGE JEPSEN, Attorney General
for the State of Connecticut; CONNECTICUT OFFICE OF CONSUMER
COUNSEL;
NEW
ENGLAND
CONFERENCE
OF
PUBLIC
UTILITIES
COMMISSIONERS, INC.; MAINE PUBLIC UTILITIES COMMISSION;
RHODE ISLAND PUBLIC UTILITIES COMMISSION; VERMONT PUBLIC
SERVICE BOARD; VERMONT DEPARTMENT OF PUBLIC SERVICE;
CALIFORNIA PUBLIC UTILITIES COMMISSION; PUBLIC SERVICE
COMMISSION OF THE STATE OF NEW YORK (NYPSC); PUBLIC SERVICE
COMMISSION OF THE DISTRICT OF COLUMBIA; DELAWARE PUBLIC
SERVICE COMMISSION; NEW JERSEY BOARD OF PUBLIC UTILITIES;
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NEW JERSEY DIVISION OF RATE COUNSEL; MARYLAND ENERGY
ADMINISTRATION; AMERICAN WIND ENERGY ASSOCIATION; THE MIDATLANTIC RENEWABLE ENERGY COALITION,
Amici Supporting Appellants,
PJM
POWER
PROVIDERS
GROUP;
ELECTRIC
ASSOCIATION; EDISON ELECTRIC INSTITUTE,
POWER
SUPPLY
Amici Supporting Appellees.
No. 13-2424
PPL ENERGYPLUS, LLC; PPL BRUNNER ISLAND, LLC; PPL HOLTWOOD,
LLC; PPL MARTINS CREEK, LLC; PPL MONTOUR, LLC; PPL
SUSQUEHANNA, LLC; LOWER MOUNT BETHEL ENERGY, LLC; PPL NEW
JERSEY SOLAR, LLC; PPL NEW JERSEY BIOGAS, LLC; PPL
RENEWABLE ENERGY, LLC; PSEG POWER LLC; ESSENTIAL POWER,
LLC,
Plaintiffs - Appellees,
v.
CPV MARYLAND, LLC,
Defendant – Appellant,
and
DOUGLAS R.M. NAZARIAN; HAROLD WILLIAMS; LAWRENCE BRENNER;
KELLY SPEAKES-BACKMAN; KEVIN HUGHES,
Defendants.
------------------------AMERICAN PUBLIC POWER ASSOCIATION; NATIONAL RURAL ELECTRIC
COOPERATIVE ASSOCIATION; NRG ENERGY INC.; MARYLAND OFFICE OF
PEOPLE'S COUNSEL; CONNECTICUT PUBLIC UTILITIES REGULATORY
AUTHORITY;
CONNECTICUT
DEPARTMENT
OF
ENERGY
AND
ENVIRONMENTAL PROTECTION; GEORGE JEPSEN, Attorney General
for the State of Connecticut; CONNECTICUT OFFICE OF CONSUMER
COUNSEL;
NEW
ENGLAND
CONFERENCE
OF
PUBLIC
UTILITIES
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COMMISSIONERS, INC.; MAINE PUBLIC UTILITIES COMMISSION;
RHODE ISLAND PUBLIC UTILITIES COMMISSION; VERMONT PUBLIC
SERVICE BOARD; VERMONT DEPARTMENT OF PUBLIC SERVICE;
CALIFORNIA PUBLIC UTILITIES COMMISSION; PUBLIC SERVICE
COMMISSION OF THE STATE OF NEW YORK (NYPSC); PUBLIC SERVICE
COMMISSION OF THE DISTRICT OF COLUMBIA; DELAWARE PUBLIC
SERVICE COMMISSION; NEW JERSEY BOARD OF PUBLIC UTILITIES;
NEW JERSEY DIVISION OF RATE COUNSEL; MARYLAND ENERGY
ADMINISTRATION; AMERICAN WIND ENERGY ASSOCIATION; THE MIDATLANTIC RENEWABLE ENERGY COALITION,
Amici Supporting Appellant,
PJM
POWER
PROVIDERS
GROUP;
ELECTRIC
ASSOCIATION; EDISON ELECTRIC INSTITUTE,
POWER
SUPPLY
Amici Supporting Appellees.
Appeals from the United States District Court for the District
of Maryland, at Baltimore.
Marvin J. Garbis, Senior District
Judge. (1:12-cv-01286-MJG)
Argued:
May 13, 2014
Decided:
June 2, 2014
Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.
Affirmed by published opinion.
Judge Wilkinson
opinion, in which Judge Keenan and Judge Diaz joined.
wrote
the
ARGUED: Scott H. Strauss, SPIEGEL & MCDIARMID, LLP, Washington,
D.C.; Clifton Scott Elgarten, CROWELL & MORING LLP, Washington,
D.C., for Appellants.
Paul D. Clement, BANCROFT, PLLC,
Washington, D.C., for Appellees.
ON BRIEF: H. Robert Erwin,
Ransom E. Davis, Baltimore, Maryland; Peter J. Hopkins, Jeffrey
A. Schwarz, SPIEGEL & MCDIARMID LLP, Washington, D.C., for
Appellants Douglas R.M. Nazarian, Harold Williams, Lawrence
Brenner, Kelly Speakes-Backman, and Kevin Hughes.
Larry F.
Eisenstat, Richard Lehfeldt, Jennifer N. Waters, CROWELL &
MORING LLP, Washington, D.C., for Appellant CPV Maryland, LLC.
Erin E. Murphy, Candice Chiu, BANCROFT PLLC, Washington, D.C.,
for Amici.
Jesse A. Dillon, PPL SERVICES CORP., Allentown,
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Pennsylvania;
David
L.
Meyer,
MORRISON
&
FOERSTER
LLP,
Washington, D.C., for Appellees PPL EnergyPlus, LLC, PPL Brunner
Island, LLC, PPL Holtwood, LLC, PPL Martins Creek, LLC, PPL
Montour, LLC, PPL Susquehanna, LLC, Lower Mount Bethel Energy,
LLC, PPL New Jersey Solar, LLC, PPL New Jersey Biogas, LLC, and
PPL Renewable Energy, LLC.
Tamara Linde, Vice PresidentRegulatory, Vaughn L. McKoy, General State Regulatory Counsel,
PSEG SERVICES CORP., Newark, New Jersey; Shannen W. Coffin,
STEPTOE & JOHNSON LLP, Washington, D.C., for Appellee PSEG
Power, LLC.
David Musselman, ESSENTIAL POWER, LLC, Princeton,
New Jersey, for Appellee Essential Power, LLC. Susan N. Kelly,
Senior Vice President of Policy Analysis and General Counsel,
Delia D. Patterson, Assistant General Counsel, AMERICAN PUBLIC
POWER ASSOCIATION, Washington, D.C.; Jay A. Morrison, Vice
President, Regulatory Issues, Pamela M. Silberstein, Associate
Director,
Power
Supply
Issues,
NATIONAL
RURAL
ELECTRIC
COOPERATIVE ASSOCIATION, Arlington, Virginia, for Amici American
Public Power Association and National Rural Electric Cooperative
Association.
Abraham Silverman, Cortney Madea, NRG ENERGY,
INC., Princeton, New Jersey; Jeffrey A. Lamken, Martin V.
Totaro, Washington, D.C., Kaitlin R. O'Donnell, MOLOLAMKEN LLP,
New York, New York, for Amicus NRG Energy Inc.
Paula M.
Carmody, William F. Fields, MARYLAND OFFICE OF PEOPLE'S COUNSEL,
Baltimore, Maryland, for Amicus Maryland Office of People's
Counsel. Randall L. Speck, Jeffrey A. Fuisz, Kimberly B. Frank,
Susanna Y. Chu, KAYE SCHOLER LLP, Washington, D.C., for Amici.
Clare E. Kindall, Assistant Attorney General, OFFICE OF THE
ATTORNEY
GENERAL,
New
Britain,
Connecticut,
for
Amicus
Connecticut Public Utilities Regulatory Authority.
Robert D.
Snook, Assistant Attorney General, OFFICE OF THE ATTORNEY
GENERAL, New Britain, Connecticut, for Amicus Connecticut
Department of Energy and Environmental Protection.
John S.
Wright, Assistant Attorney General, Michael C. Wertheimer,
Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL, New
Britain, Connecticut, for Amicus George Jepsen, Attorney General
for the State of Connecticut.
Elin Swanson Katz, Joseph A.
Rosenthal, CONNECTICUT OFFICE OF CONSUMER COUNSEL, New Britain,
Connecticut, for Amicus Connecticut Office of Consumer Counsel.
Sarah Hofmann, Executive Director, NEW ENGLAND CONFERENCE OF
PUBLIC UTILITIES COMMISSIONERS, INC., Montpelier, Vermont, for
Amicus New England Conference of Public Utilities Commissioners,
Inc.
Lisa Fink, STATE OF MAINE PUBLIC UTILITIES COMMISSION,
Augusta, Maine, for Amicus Maine Public Utilities Commission.
Amy K. D'Alessandro, RHODE ISLAND PUBLIC UTILITIES COMMISSION,
Warwick, Rhode Island, for Amicus Rhode Island Public Utilities
Commission.
June Tierney, General Counsel, VERMONT PUBLIC
SERVICE BOARD, Montpelier, Vermont, for Amicus Vermont Public
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Service Board.
Edward McNamara, Regional Policy Director,
VERMONT DEPARTMENT OF PUBLIC SERVICE, Montpelier, Vermont, for
Amicus Vermont Department of Public Service.
Frank Lindh,
Candace Morey, CALIFORNIA PUBLIC UTILITIES COMMISSION, San
Francisco, California, for Amicus California Public Utilities
Commission.
Kimberly A. Harriman, Acting General Counsel,
Jonathan D. Feinberg, Solicitor, Alan Michaels, Assistant
Counsel, PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK,
Albany, New York, for Amicus Public Service Commission of the
State of New York.
Richard A. Beverly, Richard S. Herskovitz,
PUBLIC
SERVICE
COMMISSION
OF
THE
DISTRICT
OF
COLUMBIA,
Washington, D.C., for Amicus Public Service Commission of the
District of Columbia.
Kathleen Makowski, Deputy Attorney
General, DELAWARE PUBLIC SERVICE COMMISSION, Dover, Delaware,
for Amicus Delaware Public Service Commission.
John Jay
Hoffman, Acting Attorney General, Richard F. Engel, Deputy
Attorney General, Lisa J. Morelli, Deputy Attorney General, Alex
Moreau, Deputy Attorney General, Jennifer S. Hsia, Deputy
Attorney General, NEW JERSEY DEPARTMENT OF LAW AND PUBLIC
SAFETY, Trenton, New Jersey, for Amicus New Jersey Board of
Public Utilities.
Stefanie A. Brand, Director, NEW JERSEY
DIVISION OF RATE COUNSEL, Trenton, New Jersey, for Amicus New
Jersey Division of Rate Counsel.
Douglas F. Gansler, Attorney
General, Brent A. Bolea, Assistant Attorney General, Steven M.
Talson,
Assistant
Attorney
General,
MARYLAND
ENERGY
ADMINISTRATION, Annapolis, Maryland, for Amicus Maryland Energy
Administration.
Gene Grace, AMERICAN WIND ENERGY ASSOCIATION,
Washington, D.C., for Amici American Wind Energy Association and
The Mid-Atlantic Renewable Energy Coalition.
Glen Thomas, PJM
POWER PROVIDERS GROUP, King of Prussia, Pennsylvania; John Lee
Shepherd, Jr., Karis Anne Gong, SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP, Washington, D.C., for Amicus PJM Power Providers
Group. David G. Tewksbury, Stephanie S. Lim, Ashley C. Parrish,
KING & SPALDING LLP, Washington, D.C., for Amicus The Electric
Power Supply Association.
Edward H. Comer, Vice President,
General Counsel and Corporate Secretary, Henri D. Bartholomot,
Associate General Counsel, Regulatory and Litigation, EDISON
ELECTRIC INSTITUTE, Washington, D.C., for Amicus Edison Electric
Institute.
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WILKINSON, Circuit Judge:
At
issue
participation
is
of
a
a
Maryland
new
power
program
plant
in
to
the
subsidize
federal
the
wholesale
energy market. Appellees are energy firms that compete with this
new plant in interstate commerce. They contend that the Maryland
scheme is preempted under the Federal Power Act’s authorizing
provisions,
which
grant
exclusive
authority
over
interstate
rates to the Federal Energy Regulatory Commission. The district
court agreed. For the reasons that follow, we affirm.
I.
A.
For
much
dominated
by
of
the
20th
vertically
century,
integrated
the
energy
firms
market
that
was
produced,
transmitted, and delivered power to end-use customers. New York
v. FERC, 535 U.S. 1, 5 (2002); PPL EnergyPlus, LLC v. Nazarian,
974 F. Supp. 2d 790, 798 (D. Md. 2013) (opinion below). These
firms were subject to extensive local regulation, though state
power
in
this
respect
was
limited
by
the
strictures
of
the
dormant Commerce Clause. See Pub. Utils. Comm’n v. Attleboro
Steam & Elec. Co., 273 U.S. 83, 89 (1927).
The Federal Power Act (FPA), passed in 1935, was designed
in
part
to
fill
the
regulatory
gap
created
by
the
dormant
Commerce Clause and cover the then-nascent field of interstate
electricity
sales.
It
vests
the
6
Federal
Energy
Regulatory
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Commission
electric
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(FERC)
energy
with
in
Pg: 7 of 27
authority
interstate
over
the
commerce”
“transmission
and
the
“sale
of
of
electric energy at wholesale in interstate commerce.” 16 U.S.C.
§
824(b)(1).
prominent
as
Federal
the
energy
regulation
market
has
has
become
shifted
increasingly
away
from
local
monopolies to a system of interstate competition. See New York,
535 U.S. at 7.
Rather
than
ensuring
the
reasonableness
of
interstate
transactions by directly setting rates, FERC has chosen instead
to achieve its regulatory aims indirectly by protecting “the
integrity of the interstate energy markets.” N.J. Bd. of Pub.
Utils. v. FERC, 744 F.3d 74, 81 (3d Cir. 2014). To this end,
FERC
has
authorized
organizations”
to
the
creation
oversee
certain
of
“regional
multistate
transmission
markets.
PJM
Interconnection, LLC (PJM), superintended by FERC, administers a
large regional market that (as relevant here) includes Maryland
and the District of Columbia.
PJM operates both energy and capacity markets. The energy
market is essentially a real-time market that enables PJM to buy
and sell electricity to distributors for delivery within the
next hour or 24 hours.
The
capacity
market
is
a
forward-looking
market,
which
gives buyers the option to purchase electricity in the future.
In the capacity market, PJM sets a quota based on how much
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capacity it predicts will be needed three years hence and then
relies on a Reliability Pricing Model (RPM) to determine the
appropriate price per unit. Auction participants bid to sell
capacity
for
a
single
year,
three
years
in
the
future.
PJM
stacks the bids from lowest to highest and, starting at the
bottom, accepts bids until it has acquired sufficient capacity
to satisfy its quota.
The highest-priced bid that PJM must accept to meet this
quota establishes the market-clearing price. Every generator who
bids at or below this level “clears” the market and is paid the
clearing price, regardless of the price at which it actually
bid. Existing generators are permitted to bid at zero as “pricetakers,” meaning they agree to sell at whatever the clearing
price turns out to be.
Both
the
capacity
and
energy
markets
are
designed
to
efficiently allocate supply and demand, a function which has the
collateral
benefit
of
incentivizing
the
construction
of
new
power plants when necessary. Clearing prices occasionally differ
based on geographical subdivisions designed by FERC to stimulate
new construction by signaling that certain regions are prone to
supply shortages. Such price signals are not the sole mechanism
for
incentivizing
generation,
however.
PJM’s
new
entry
price
adjustment (NEPA) guarantees certain new producers a fixed price
for
three
years
to
“support .
8
.
.
the
new
entrant
until
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sufficient
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growth
load
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increased
[i.e.,
demand]
would
be
expected to” do so. PJM Interconnection, LLC, 128 FERC ¶ 61,157,
at ¶ 101 (2009).
In 2006, FERC instituted a requirement (the minimum offer
price
rule,
or
MOPR)
that
new
generators
in
certain
circumstances bid at or above a specified price, fixed according
to the agency’s estimation of a generic energy project’s cost.
This rule was designed to prevent the manipulation of clearing
prices
through
the
exercise
of
buyer
market
power.
The
MOPR
originally exempted certain state-supported generators, however,
and permitted them to bid at zero.
Following a complaint lodged by several competitors, FERC
eliminated the exemption for state-sanctioned plants. The new
rule
required
such
plants
to
bid
initially
at
the
agency-
specified minimum price unless they could demonstrate that their
actual costs were lower than this default price. FERC held that
this adjustment was necessary to protect the integrity of its
markets against below-cost bids by subsidized plants that might
artificially suppress clearing prices. See PJM Interconnection,
LLC, 137 FERC ¶ 61,145, at ¶ 96 (2011).
As
these
features
suggest,
the
federal
markets
are
the
product of a finely-wrought scheme that attempts to achieve a
variety of different aims. FERC rules encourage the construction
of new plants and sustain existing ones. They seek to preclude
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state distortion of wholesale prices while preserving general
state authority over generation sources. They satisfy short-term
demand and ensure sufficient long-term supply. In short, the
federal
scheme
is
carefully
calibrated
to
protect
a
host
of
competing interests. It represents a comprehensive program of
regulation that is quite sensitive to external tampering.
B.
In
1999,
integration
Maryland
model
interstate
and
markets.
decided
throw
in
Deregulation
to
its
abandon
lot
was
the
with
vertical
the
federal
accomplished
by
the
Electric Customer Choice and Competition Act, Md. Code Ann.,
Pub. Utils. § 7–501, et seq., which divested utilities of their
generation
resources,
effectively
compelling
Maryland
energy
firms to participate in the federal wholesale markets. See PPL
EnergyPlus, LLC, 974 F. Supp. 2d at 815. The state believed that
these markets would ultimately produce more efficient and costeffective
service
than
traditional
monopolies,
thus
providing
state residents the benefit of lower prices. See In the Matter
of
Baltimore
81423,
at
decision
Gas
36
to
and
(Md.
Electric
Pub.
participate
Serv.
in
Company’s
Comm’n,
the
federal
Proposal,
May
2007).
scheme
and
Order
No.
Maryland’s
enjoy
its
benefits was necessarily accompanied by a relinquishment of the
regulatory autonomy the state had formerly enjoyed with respect
to traditional utility monopolies.
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Maryland soon became concerned, though, that the RPM was
failing
to
adequately
incentivize
new
generation.
PPL
EnergyPlus, LLC, 974 F. Supp. 2d at 795. To solve this perceived
problem, the Maryland Public Service Commission (MPSC) solicited
proposals for the construction of a new power plant. The plant
was to be located in the “SWMAAC zone,” an area comprising part
of Maryland and all of D.C., which the state believed was at
heightened risk for reliability problems. In order to attract
offers, the MPSC offered the successful bidder a fixed, twentyyear revenue stream secured by contracts for differences (CfDs)
that the state would compel one or more of its local electric
distribution
companies
(EDCs)
to
enter.
Maryland’s
plan
was
ultimately formalized in the Generation Order, issued by MPSC in
2012.
Intervenor-appellant
Commercial
Power
Ventures
Maryland,
LLC (CPV) submitted the winning bid and was awarded the promised
CfDs. The CfDs required CPV to build a plant and sell its energy
and capacity on the federal interstate wholesale markets. If CPV
successfully
cleared
the
market,
it
would
be
eligible
for
payments from the EDCs amounting to the difference between CPV’s
revenue requirements per unit of energy and capacity sold (set
forth in its winning bid) and its actual sales receipts. These
costs would in turn be passed on to the EDCs’ retail ratepayers.
If CPV’s receipts exceeded its approved revenue requirements, it
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would be obligated to pay the difference to the EDCs. The CfDs
did not require CPV to actually sell any energy or capacity to
the EDCs.
Plaintiffs-appellees
are
existing
power
plants
in
competition with CPV who allege that the Generation Order is
unconstitutional
and
has
resulted
in
the
suppression
of
PJM
prices, a reduction in their revenue from the PJM market, and a
distortion of the price signals that market participants rely on
in determining whether to construct new capacity. After a sixday bench trial, the district court found the Generation Order
field
preempted.
It
reasoned
that
the
CfD
payments
had
the
effect of setting the ultimate price that CPV receives for its
sales in the PJM auction, thus intruding on FERC’s exclusive
authority to set interstate wholesale rates. It did not reach
appellees’ conflict preemption claim and rejected their dormant
Commerce Clause claim. This appeal followed.
II.
Plaintiffs
argue
that
the
Generation
Order
and
the
resulting CfDs are preempted by federal law under the Supremacy
Clause. U.S. Const. art. VI, cl. 2. They ground this contention
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alternative
theories:
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field
preemption
and
conflict
preemption. We address each in turn. 1
A.
Preemption of all varieties is ultimately a question of
congressional intent. Nw. Cent. Pipeline Corp. v. State Corp.
Comm’n, 489 U.S. 493, 509 (1989). Here, the district court found
the
Generation
preemption,
Order
which
invalid
applies
under
when
the
doctrine
“Congress
has
of
field
legislated
comprehensively to occupy an entire field of regulation, leaving
no room for the States to supplement federal law.” Id. Actual
conflict
between
a
challenged
state
enactment
and
relevant
federal law is unnecessary to a finding of field preemption;
instead,
it
is
the
mere
fact
of
intrusion
that
offends
the
Supremacy Clause. See N. Natural Gas Co. v. State Corp. Comm’n,
372 U.S. 84, 97-98 (1963). “If Congress evidences an intent to
occupy a given field, any state law falling within that field is
pre-empted.” Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248
(1984).
1
As a threshold matter, appellants assert that we lack
jurisdiction under the filed rate doctrine. See Appellants’ Br.
at 9. This claim is meritless, however, given that a judgment in
plaintiffs’
favor
would
require
this
court
neither
“to
invalidate a filed rate nor to assume a rate would be charged
other than the rate adopted by the federal agency in question.”
Pub. Util. Dist. No. 1 v. IDACORP Inc., 379 F.3d 641, 650 (9th
Cir. 2004) (internal quotation marks omitted).
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Statutory
Filed: 06/02/2014
text
and
Pg: 14 of 27
structure
provide
the
most
reliable
guideposts in this inquiry. See Medtronic, Inc. v. Lohr, 518
U.S. 470, 486 (1996) (“Congress’ intent, of course, primarily is
discerned from the language of the pre-emption statute and the
statutory framework surrounding it.”) (internal quotation marks
omitted). The FPA’s “declaration of policy” states:
It is declared that the business of transmitting and
selling electric energy for ultimate distribution to
the public is affected with a public interest, and
that
Federal
regulation
of
matters
relating
to
generation to the extent provided in this subchapter
and subchapter III of this chapter and of that part of
such business which consists of the transmission of
electric energy in interstate commerce and the sale of
such energy at wholesale in interstate commerce is
necessary
in
the public
interest,
such
Federal
regulation, however, to extend only to those matters
which are not subject to regulation by the States.
16 U.S.C. § 824(a); see also id. at § 824(b).
The breadth of this grant of authority is confirmed by the
FPA’s similarly capacious substantive and remedial provisions.
For example, 16 U.S.C. § 824d(a) states that:
All rates and charges made, demanded, or received by
any public utility for or in connection with the
transmission or sale of electric energy subject to the
jurisdiction of the Commission, and all rules and
regulations affecting or pertaining to such rates or
charges shall be just and reasonable, and any such
rate or charge that is not just and reasonable is
hereby declared to be unlawful.
A wealth of case law confirms FERC’s exclusive power to
regulate
wholesale
sales
of
energy
in
interstate
commerce,
including the justness and reasonableness of the rates charged.
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“The [FPA] long has been recognized as a comprehensive scheme of
federal regulation of all wholesales of [energy] in interstate
commerce,” Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300
(1988)
(internal
jurisdiction
over
quotation
interstate
marks
omitted),
wholesale
rates
and
is
“FERC’s
exclusive,”
Appalachian Power Co. v. Pub. Serv. Comm’n, 812 F.2d 898, 902
(4th
Cir.
1987);
see
also
New
England
Power
Co.
v.
New
Hampshire, 455 U.S. 331, 340 (1982). 2 In this area, “if FERC has
jurisdiction over a subject, the States cannot have jurisdiction
over the same subject.” Miss. Power & Light Co. v. Mississippi
ex rel. Moore, 487 U.S. 354, 377 (1988) (Scalia, J., concurring
in the judgment).
Indeed,
the
Supreme
Court
has
expressly
rejected
the
proposition that the “scope of [FERC’s] jurisdiction . . . is to
be determined by a case-by-case analysis of the impact of state
regulation upon the national interest.” Nantahala Power & Light
Co. v. Thornburg, 476 U.S. 953, 966 (1986) (quoting FPC v. S.
Cal. Edison Co., 376 U.S. 205, 215 (1964)) (internal quotation
marks omitted). Instead, “Congress meant to draw a bright line
2
Schneidewind dealt with the Natural Gas Act rather than
the FPA. However, because “the relevant provisions of the two
statutes are in all material respects substantially identical,”
the Supreme Court has adopted an “established practice of citing
interchangeably decisions interpreting the pertinent sections of
the two statutes.” Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578
n.7 (1981) (internal quotation marks omitted).
15
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easily
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ascertained,
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between
state
and
federal
jurisdiction . . . . This was done in the [FPA] by making [FERC]
jurisdiction plenary and extending it to all wholesale sales in
interstate
commerce
except
those
which
Congress
has
made
explicitly subject to regulation by the States.” Id. (quoting S.
Cal. Edison Co., 376 U.S. at 215-16) (internal quotation marks
omitted).
The federal scheme thus “leaves no room either for direct
state
regulation
[energy],
or
of
for
the
state
prices
of
regulations
interstate
which
wholesales
would
of
indirectly
achieve the same result.” N. Natural Gas Co., 372 U.S. at 91
(citation omitted). “Even where state regulation operates within
its
own
field,
it
may
not
intrude
indirectly
on
areas
of
exclusive federal authority.” Pub. Utils. Comm’n v. FERC, 900
F.2d 269, 274 n.2 (D.C. Cir. 1990) (internal quotation marks
omitted). As a result, states are barred from relying on mere
formal
distinctions
“regulate
matters
in
“an
within
attempt”
FERC’s
to
evade
preemption
exclusive
and
jurisdiction.”
Schneidewind, 485 U.S. at 308.
B.
Applying these principles, we conclude that the Generation
Order is field preempted because it functionally sets the rate
that CPV receives for its sales in the PJM auction.
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The CfD payments, which are conditioned on CPV clearing the
federal market, plainly qualify as compensation for interstate
sales
at
wholesale,
not
simply
for
CPV’s
construction
of
a
plant. Furthermore, the Order ensures -- through a system of
rebates and subsidies calculated on the basis of the PJM market
rate -- that CPV receives a fixed sum for every unit of capacity
and energy that it clears (up to a certain ceiling). The scheme
thus effectively supplants the rate generated by the auction
with an alternative rate preferred by the state. See Appalachian
Power Co., 812 F.2d at 904 (holding that the agreement at issue
did
not
“set
a
rate
per
se,”
but
that
it
nevertheless
“sufficiently resemble[d] a filed rate to come within the realm
of exclusive federal jurisdiction”). The Order thus compromises
the
integrity
of
the
federal
scheme
and
intrudes
on
FERC’s
jurisdiction.
Maryland and CPV argue that the Generation Order does not
actually set a rate because it does not directly affect the
terms
of
any
transaction
in
the
federal
market.
Relevantly,
appellants contend, the Order does not fix the rate that PJM
pays to CPV for its sales in the auction; instead, it merely
fixes the rate that CPV receives for such sales. On the basis of
this
asymmetry,
represent
a
appellants
separate
contend
supply-side
outside the federal market.
17
that
subsidy
the
CfD
implemented
payments
entirely
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We cannot accept this argument. The case of Mississippi
Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354
(1988),
is
purchase
a
output.
Id.
approve
an
illustrative.
specified
at
FERC
percentage
363.
increase
There,
The
in
of
utility
a
its
ordered
utility
particular
petitioned
retail
a
rates
to
to
generator’s
Mississippi
cover
the
to
costs
imposed by the order, but the state insisted that it retained
the authority to determine whether the purchases were prudent
before acceding to the request. Id. at 365-67. The Supreme Court
rejected this argument, ruling that the state was required to
treat
the
incurred
utility’s
operating
FERC-mandated
expenses
for
payments
the
purpose
as
of
“reasonably
setting”
the
utility’s retail rates. Id. at 370; see also Nantahala Power &
Light Co., 476 U.S. 953 (rejecting a similar state effort to bar
a utility from passing FERC-mandated wholesale rates through to
consumers). Mississippi’s prudence review was preempted because
it denied full effect to the rates set by FERC, even though it
did not seek to tamper with the actual terms of an interstate
transaction.
As the district court recognized, see PPL EnergyPlus, LLC,
974
F.
Supp.
2d
at
831,
the
principles
articulated
in
Mississippi Power & Light Co. apply with equal force to this
dispute. If states are required to give full effect to FERCmandated wholesale rates on the demand side of the equation, it
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stands to reason that they are also required to do so on the
supply
side.
Generation
otherwise
Here,
Order
earn
the
contract
supersedes
--
rates
the
price
PJM
established
guaranteed
rates
that
through
a
by
CPV
the
would
FERC-approved
market mechanism. The Order ensures that CPV receives a fixed
price for every unit of energy and capacity it sells in the PJM
auction, regardless of the market price. The fact that it does
not formally upset the terms of a federal transaction is no
defense, since the functional results are precisely the same. As
in the above-mentioned cases, Maryland has “eroded the effect of
the
FERC
determination
and
undermined
FERC’s
exclusive
jurisdiction.” Appalachian Power Co., 812 F.2d at 904.
Our conclusion that the Generation Order “seeks to regulate
a field that the [FPA] has occupied also is supported by the
imminent possibility of collision between” the state and federal
regimes. Schneidewind, 485 U.S. at 310. While the potential for
collision between the two schemes is discussed in detail in Part
D, a high probability of conflict tends to suggest that Congress
intended federal authority in a particular field to be uniform
and exclusive. See id. Even if “collision between the state and
federal
regulation”
in
this
case
is
not
“an
inevitable
consequence,” it is sufficiently likely to warrant invalidating
the Maryland program “in order to assure the effectuation of the
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comprehensive
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federal
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regulation
ordained
by
Congress.”
N.
Natural Gas Co., 372 U.S. at 92.
C.
Appellants
version
of
argue
the
that
this
presumption
court
against
should
apply
preemption
a
to
robust
save
the
Maryland scheme. See, e.g., Intervenor-Appellant’s Br. at 14. As
its name suggests, this presumption militates against findings
of federal preemption, especially in areas of traditional state
authority. See Rice v. Santa Fe Elevator Corp., 331 U.S. 218,
230 (1947). However, the presumption “is not triggered when the
State regulates in an area where there has been a history of
significant federal presence.” United States v. Locke, 529 U.S.
89,
108
applicable
(2000).
here
The
presumption
because
the
“is
federal
almost
certainly
government
has
not
long
regulated wholesale electricity rates.” IDACORP Inc., 379 F.3d
at 648 n.7. Nevertheless, even were we to apply the presumption,
we would find it overcome by the text and structure of the FPA,
which unambiguously apportions control over wholesale rates to
FERC.
Appellants emphasize the FPA’s decree that FERC “shall not
have
jurisdiction,
except
as
specifically
provided
in
this
subchapter and subchapter III of this chapter, over facilities
used
for
the
generation
of
electric
energy.”
16
U.S.C.
§ 824(b)(1). They contend that the Generation Order falls on the
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state side of the jurisdictional line, since it is designed to
ensure that Maryland enjoys an adequate supply of generation
capacity.
Although
states
plainly
retain
substantial
latitude
in
directly regulating generation facilities, they may not exercise
this authority in a way that impinges on FERC’s exclusive power
to specify wholesale rates. As the Supreme Court noted in a
similar context:
[T]he problem of this case is not as to the existence
or even the scope of a State’s power to [regulate
generation facilities]; the problem is only whether
the Constitution sanctions the particular means chosen
by [the state] to exercise the conceded power if those
means threaten effectuation of the federal regulatory
scheme.
N. Natural Gas Co., 372 U.S. at 93. Here, Maryland has chosen to
incentivize
This
generation
particular
by
choice
of
setting
interstate
means
is
wholesale
impermissible.
rates.
Wholesale
energy prices “fixed by FERC must be given binding effect by
state
authorities”
even
“in
areas
subject
to
state
jurisdiction.” California ex rel. Lockyer v. Dynegy, Inc., 375
F.3d
831,
851
(9th
Cir.
2004)
(internal
quotation
marks
omitted).
Nonetheless, it is important to note the limited scope of
our
holding,
which
is
addressed
to
the
specific
program
at
issue. We need not express an opinion on other state efforts to
encourage
new
generation,
such
21
as
direct
subsidies
or
tax
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rebates, that may or may not differ in important ways from the
Maryland
initiative.
It
goes
without
saying
that
not
“every
state statute that has some indirect effect” on wholesale rates
is preempted, Schneidewind, 485 U.S. at 308, for “there can be
little if any regulation of production that might not have at
least an incremental effect on the costs of purchasers in some
market,” Nw. Cent. Pipeline Corp., 489 U.S. at 514. In this
case, however, the effect of the Generation Order on matters
within
FERC’s
incidental.
agency’s
exclusive
Rather,
statutory
the
power
jurisdiction
Order
to
is
strikes
establish
neither
at
the
rates
indirect
nor
heart
of
the
the
sale
of
for
electric energy in interstate commerce, see 16 U.S.C. § 824e(a),
by
adopting
terms
and
prices
set
by
Maryland,
not
those
sanctioned by FERC.
D.
Appellants’
position
is
further
complicated
by
the
fact
that the principles of field and conflict preemption in this
case
are
preemption
mutually
applies
reinforcing.
“where
As
under
relevant
the
here,
circumstances
conflict
of
a
particular case, the challenged state law stands as an obstacle
to the accomplishment and execution of the full purposes and
objectives of Congress.” Crosby v. Nat’l Foreign Trade Council,
530
U.S.
363,
373
(2000)
(internal
quotation
marks
and
alterations omitted). “What is a sufficient obstacle is a matter
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of judgment, to be informed by examining the federal statute as
a whole and identifying its purpose and intended effects.” Id.
“A
state
law
interfering
may
with
pose
the
an
obstacle
to
accomplishment
federal
of
purposes
Congress’s
by
actual
objectives, or by interfering with the methods that Congress
selected
for
meeting
those
legislative
goals.”
College
Loan
Corp. v. SLM Corp., 396 F.3d 588, 596 (4th Cir. 2005) (emphasis
omitted).
In a system of “interlocking” jurisdiction, such as that
created
by
the
FPA,
“[i]t
is
inevitable
that
jurisdictional
tensions will arise” -- even if each sovereign formally remains
within the confines of its “assigned sphere.” Nw. Cent. Pipeline
Corp., 489 U.S. at 506, 515 & n.12 (internal quotation marks and
alteration omitted). “Thus, conflict-pre-emption analysis must
be
applied
sensitively
in
this
area,
so
as
to
prevent
the
diminution of the role Congress reserved to the States while at
the same time preserving the federal role.” Id. at 515. Here,
“the impact of state regulation of production on matters within
federal
control
is
so
extensive
and
disruptive
of”
the
PJM
has
the
markets that preemption is appropriate. Id. at 517-18.
As
an
initial
matter,
the
Generation
Order
potential to seriously distort the PJM auction’s price signals,
thus “interfer[ing] with the method by which the federal statute
was designed to reach its goals.” IDACORP Inc., 379 F.3d at 650.
23
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price
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signals
are
Pg: 24 of 27
intended
to
promote
a
variety
of
objectives, including incentivizing new generation sources. See
PJM Interconnection, LLC, 132 FERC ¶ 61,173, at 61,870 (2010);
see also PPL EnergyPlus, LLC, 974 F. Supp. 2d at 813. Market
participants necessarily rely on these signals in determining
whether to construct new capacity or expand existing resources.
The signals appear to be serving their purpose; according to
FERC, the evidence “suggests that RPM has in fact succeeded in
securing
for
sufficient
the
PJM
capacity
region.”
PJM
to
meet
reliability
Interconnection,
requirements
LLC,
137
FERC
¶ 61,145, at ¶ 3 (2011).
Maryland’s initiative disrupts this scheme by substituting
the state’s preferred incentive structure for that approved by
FERC. See PPL EnergyPlus, LLC v. Hanna, No. 11-745, 2013 WL
5603896,
distorting
at
*36
impact
(D.N.J.
of
a
Oct.
similar
11,
2013)
(describing
the
New
Jersey
program
the
on
business decisions of private participants in the PJM auction).
Two features of the Order render its likely effect on federal
markets particularly problematic. First, as noted, the CfDs are
structured to actually set the price received at wholesale. They
therefore directly conflict with the auction rates approved by
FERC. Second, the duration of the subsidy -- twenty years -- is
substantial.
24
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The
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Order
is
conflicts
with
otherwise
preempted
NEPA,
steadfast
which
Pg: 25 of 27
for
the
further
represents
commitment
to
a
an
reason
exception
uniform
that
to
market
it
PJM’s
clearing
price. In order to stimulate plant construction, NEPA carves out
a
three-year
period
during
which
certain
new
generators
are
eligible to receive a fixed price for the capacity they sell in
the
PJM
markets.
See
PJM
Interconnection,
LLC,
128
FERC
¶ 61,157, at ¶ 92 (2009). CPV petitioned FERC to extend the NEPA
period to ten years on the grounds that the three-year period
was insufficient to achieve its objective. Id. at ¶ 93. FERC
rejected
CPV’s
request,
stating
that
“[b]oth
new
entry
and
retention of existing efficient capacity are necessary to ensure
reliability and both should receive the same price so that the
price signals are not skewed in favor of new entry.” Id. at
¶ 102.
The Generation Order represents an effort by the state to
directly override this explicit policy choice. As a functional
matter, the CfDs extend the NEPA period for CPV to twenty years,
a duration vastly exceeding the current NEPA term and double the
term
that
CPV
unsuccessfully
requested
FERC
to
institute.
Maryland has sought to achieve through the backdoor of its own
regulatory process what it could not achieve through the front
door of FERC proceedings. Circumventing and displacing federal
rules in this fashion is not permissible.
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Appellants assert that no conflict is present because FERC
explicitly accommodated -- via the MOPR -- the participation of
subsidized
plants
in
its
auction.
See,
e.g.,
Intervenor-
Appellant’s Reply Br. at 23. The fact that FERC was forced to
mitigate
the
Generation
Order’s
distorting
effects
using
the
MOPR, however, tends to confirm rather than refute the existence
of a conflict. Furthermore, FERC’s own comments on the subject
belie
appellants’
claim
that
the
agency
has
affirmatively
approved the Generation Order. See PJM Interconnection, LLC, 137
FERC at ¶ 3 (“Our intent is not to pass judgment on state and
local policies and objectives with regard to the development of
new capacity resources . . . .”).
As
was
conflict
the
case
preemption
with
our
field
ruling
is
narrow
preemption
and
holding,
focused
upon
our
the
program before us. Obviously, not every state regulation that
incidentally
affects
federal
markets
is
preempted.
Such
an
outcome “would thoroughly undermine precisely the division of
the regulatory field that Congress went to so much trouble to
establish . . . , and would render Congress’ specific grant of
power
to
the
States
to
regulate
production
virtually
meaningless.” Nw. Cent. Pipeline Corp., 489 U.S. at 515. The
Generation
Order,
however,
is
26
simply
a
bridge
too
far.
It
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presents a direct and transparent impediment to the functioning
of the PJM markets, and is therefore preempted. 3
III.
For the foregoing reasons, we hold the Generation Order
preempted
under
federal
law
and
affirm
the
judgment
of
the
district court.
AFFIRMED
3
Our conclusion that the Generation Order is preempted
renders it unnecessary for us to reach plaintiffs’ dormant
Commerce Clause arguments, which were rejected by the district
court. See Schneidewind, 485 U.S. at 311 (“Because we have
concluded that Act 144 is pre-empted by the NGA, we need not
decide whether, absent federal occupation of the field, Act 144
violates the Commerce Clause.”).
27
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