Supreme Court rules against state power plant subsidies

Supreme Court rules against state power plant subsidies
© Greg Nash

The Supreme Court on Tuesday ruled that Maryland overstepped its authority when it implemented a program to subsidize construction of natural-gas-fired power plants.

The court unanimously ruled that by requiring companies building such subsidized plants to set rates for certain electricity sales, Maryland improperly interfered in markets that are the sole responsibility of the Federal Energy Regulatory Commission (FERC).

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“We agree with the Fourth Circuit’s judgment that Maryland’s program sets an interstate wholesale rate, contravening the FPA’s division of authority between state and federal regulators,” Justice Ruth Bader Ginsburg wrote for the court.

“By adjusting an interstate wholesale rate, Maryland’s program invades FERC’s regulatory turf.”

The ruling could put a similar program at risk in New Jersey. New Jersey’s program was also overturned by the lower courts, but Ginsburg sought to specify that the Tuesday ruling is only for Maryland.

“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,” she wrote.

It’s the second win this year for FERC defending the jurisdiction of its authority. In January, the Supreme Court upheld a regulation regarding programs that reduce electricity demand during certain times.

The Natural Resources Defense Council (NRDC), which closely watched the case because it wants states to be able to shape their electricity mixes, said the narrow ruling is good.

“The Supreme Court’s decision is good news for clean energy because it rejected Maryland’s program on extremely narrow grounds,” Allison Clements, director of NRDC’s Sustainable FERC Project, said in a statement. “The decision leaves states free to encourage clean energy through a wide variety of means, including by requiring long-term power purchase agreements.”