Scotus Case: Finding Bidders for Giant Power Plants

By Lisa Soronen

If you were going to build a nearly three-quarters of a billion dollar power plant, you would want to know for sure that you weren’t going to lose money on the deal, right?

Beyond the legalese, the practical dilemma in Hughes v. PPL EnergyPlus and CPV Maryland v. PPL EnergyPlus is how else will states find bidders for projects this ambitious?

In a U.S. Supreme Court amicus brief, the State and Local Legal Center (SLLC) argues that Maryland directing its local utilities to enter into a long-term contract providing stable revenue to the successful power plant bidder isn’t field- or conflict-pre-empted. 

In Hughes v. PPL EnergyPlus and CPV Maryland v. PPL EnergyPlus, the Maryland Public Service Commission offered the successful bidder a 20-year “contract for differences.” The power plant would sell its capacity at Federal Energy Regulatory Commission (FERC)-regulated auction price. If the auction price was lower than its bid price, local utilities would make up the difference. If it was higher, the developer would rebate the utilities, which would pass the cost recovery onto retail customers.

Under the Federal Power Act (FPA), FERC has the authority to regulate interstate wholesale rates. FERC claims that Maryland’s program amounts to rate-setting and is field- and conflict-pre-empted by the U.S. Constitution’s Supremacy Clause.

Field pre-emption applies when “Congress has legislated comprehensively to occupy an entire field of regulation, leaving no room for the states to supplement federal law.” Conflict pre-emption applies “where under the circumstances 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.”

The 4th U.S. Circuit Court of Appeals concluded that Maryland’s program is barred based on “field pre-emption” because it “effectively supplants the rate generated by the auction with an alternative rate preferred by the state.” It is conflict pre-empted because it disrupts FERC-controlled federal markets by setting the price the bidder receives for a substantial time period. 

The SLLC amicus brief argues that the founding principle of cooperative federalism requires a different result in this case and that the lower court misapplied pre-emption doctrine. The 4th Circuit found field pre-emption “without identifying any affirmative statements or actions by Congress or FERC indicating an intent to occupy the field.” Regarding conflict pre-emption, the 4th Circuit took an open-ended approach, which always favors pre-emption, to finding tension between FERC’s policies and Maryland’s plan.

Bill Stein, Scott Christensen, Eric Parnes, and Elizabeth Solander, Hughes Hubbard & Reed wrote the SLLC amicus brief, which the National Governors Association, National Conference of State Legislatures, and Council of State Governments joined.

Lisa Soronen is the executive director of the State and Local Legal Center and writes frequently for the NCSL blog about the U.S. Supreme Court.