Van Ness Feldman sees narrow impact from Supreme Court ruling on Maryland program

The Van Ness Feldman Law Firm sees limited implications from the U.S. Supreme Court’s April 19 ruling against a Maryland Public Service Commission in-state generation incentive for a gas-fired power plant.

The high court unanimously affirmed the Fourth Circuit’s decision holding that a Maryland “contract for differences” subsidy program for a new generation facility was preempted by the federal regulation of generation capacity markets under the Federal Power Act.

The high court had ruled that the PSC’s contract incentive for CPV Maryland interfered with the PJM Interconnection (PJM) mandatory forward capacity market.

“The Court’s opinion is narrowly drafted, and explicitly does not address the permissibility of state-level regulatory incentives that are not linked directly to wholesale markets for energy and capacity, such as tax incentives, land grants, direct subsidies, and the construction of state-owned generation facilities,” Van Ness Feldman said in an April 21 analysis.

Thus, state regulators retain flexibility to incent new or clean generation in a variety of ways, and for a variety of purposes, without running afoul of the Court’s opinion. For instance, state policies to encourage in-state generation development to support renewable energy goals are permissible as long as the incentives are “untethered to a generator’s wholesale market participation.”

The opinion is less clear about the continued viability of state regulatory incentives that have a direct link to wholesale markets, according to the law firm analysis.

Maryland PSC reacts to high court ruling

“While the Maryland Commission is, of course, disappointed that the Court found the form of our arrangement was impermissible, we are pleased the decision reaffirms the right of states to procure new generation,” the Maryland PSC said in a statement posted online.

“We think the Court’s opinion provides some clarity for how states can encourage new, clean and renewable generation going forward,” the PSC said.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.