Supreme Court smacks down Md. power incentives

The Supreme Court today rejected a contentious state program to spur new power generation, finding that it intruded on federal regulators' authority.

The justices' 8-0 decision, penned by Justice Ruth Bader Ginsburg, upholds a lower-court ruling that knocked down a Maryland effort to encourage new natural gas generation. The justices' narrow opinion also attempts to leave the door open for other state programs to incentivize energy generation.

Challengers of the program -- including some power producers and the Obama administration -- asserted that the state incentives would distort costs and trample on the Federal Energy Regulatory Commission's turf.

The Obama administration told the justices the lower courts correctly found that the Maryland program infringed on FERC's jurisdiction over "wholesale" rates for electricity and transmission that crosses state lines.

Maryland officials and a broad coalition of states and industry groups had asked the justices to reverse the lower court's decision, arguing that their ability to ensure appropriate power generation was in jeopardy without the incentives.

"Our holding is limited," Ginsburg wrote for the unanimous court. "We reject Maryland's program only because it disregards an interstate wholesale rate required by FERC. We therefore need not and do not address the permissibility of various other measures states might employ to encourage development of new or clean generation, including tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector."

The ruling adds, "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.' ... So long as a state does not condition payment of funds on capacity clearing the auction, the state's program would not suffer from the fatal defect that renders Maryland's program unacceptable."

In urging the high court to hear the case, Maryland officials said that the issues are "exceptionally important" and that the lower court's decision "imperils dozens of state laws under which private parties are investing billions in needed generation plants, from clean-coal facilities in Illinois to offshore wind in Massachusetts" (Greenwire, Feb. 22).

Several justices appeared highly skeptical of the Maryland program when the court heard oral arguments in February (Greenwire, Feb. 24).

Justice Sonia Sotomayor filed a concurring opinion; Justice Clarence Thomas filed an opinion concurring in part and concurring in the judgment.

Click here to read the ruling.

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