Update: The U.S. Supreme Court ruled that the Maryland Public Service Commission’s (Maryland PSC) plan to boost in-state generating capacity impermissibly interfered with the exclusive power of the Federal Energy Regulatory Commission to regulate the wholesale energy markets.  The Court observed that “FERC has approved the PJM capacity auction as the sole ratesetting mechanism for sales of capacity to PJM, and has deemed the clearing price per se just and reasonable.” The fatal flaw with the Maryland PSC’s plan was that it guaranteed a rate to a generator that was distinct from the clearing price set in PJM’s auction.  By authorizing a rate that departed from FERC’s approved ratesetting mechanism, the Maryland PSC impermissibly veered into “FERC’s regulatory turf.”  Defenders of the Maryland PSC’s plan claimed that it was simply a legitimate attempt to spur new in-state generation.  But the Court rejected that defense, explaining that “States may not seek to achieve ends, however, legitimate, through regulatory means that intrude on FERC’s authority over interstate wholesale rates.”

The Court’s decision strengthens arguments made by OMAEG and others that the PUCO-approved PPA mechanisms in the AEP and FirstEnergy cases are invalid. In each of those cases the generators will receive a contractual rate, rather than the rate set by PJM, for the sale of their output.