PPL EnergyPlus, LLC v. Nazarian
753 F.3d 467
4th Cir.
2014

Background

  • Maryland deregulated generation and required utilities to participate in PJM regional wholesale markets; PJM runs energy (real-time) and capacity (forward) auctions using a market-clearing price mechanism and limited transitional fixed-price support (NEPA).
  • Maryland Public Service Commission (MPSC) solicited bids to build a new plant in the SWMAAC zone and awarded CPV a contract for differences (CfD): a 20‑year guaranteed revenue stream paid by Maryland utilities to cover the difference between CPV’s bid-based revenue requirement and actual PJM receipts (passed through to retail ratepayers).
  • CPV was required to sell energy and capacity into the PJM wholesale markets; the CfD payments were conditioned on CPV clearing PJM auctions but did not require sales to the utilities.
  • Competing generators sued, alleging the Generation Order and CfDs are preempted by the Federal Power Act (FPA) because they effectively set wholesale rates and distort PJM price signals; the district court held the Generation Order field-preempted and enjoined it.
  • On appeal, the Fourth Circuit affirmed, concluding the CfDs functionally set CPV’s wholesale rate, intruding on FERC’s exclusive jurisdiction and conflicting with federal market rules (including NEPA).

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether the Generation Order is preempted under the FPA (field preemption) Maryland’s CfDs functionally set CPV’s wholesale rate and thus intrude on FERC’s exclusive authority Maryland/CPV: CfDs are state supply-side subsidies outside the federal auction; they don’t alter PJM’s auction prices or terms Held preempted: CfDs effectively fix the price CPV receives for PJM sales and thus occupy a field exclusively assigned to FERC
Whether the Generation Order is preempted as an obstacle to federal objectives (conflict preemption) CfDs distort PJM price signals and undermine FERC’s chosen market mechanisms, including NEPA Maryland/CPV: FERC’s MOPR and accommodation of subsidized resources mean no conflict exists Held preempted: CfDs conflict with federal objectives and NEPA (Maryland sought to extend NEPA‑style support to 20 years, overruling FERC policy)
Whether the presumption against preemption saves Maryland’s program Plaintiffs: not applicable because FPA shows significant federal presence; federal text/structure displace state regulation of wholesale rates Appellants: generation regulation is traditionally state police power and presumption should apply Court: presumption inapplicable given federal dominance over wholesale rates; even if applied, FPA text overcomes it
Scope of decision — whether other state generation incentives are barred Plaintiffs: challenge focused on this program’s functional effect on wholesale rates Defendants: many state tools remain available (direct subsidies, tax incentives) Court: ruling narrow — only the challenged CfD structure is preempted; other state incentives not decided here

Key Cases Cited

  • New York v. FERC, 535 U.S. 1 (2002) (discusses federal role as markets shifted from local monopolies)
  • Pub. Utils. Comm’n v. Attleboro Steam & Elec. Co., 273 U.S. 83 (1927) (commerce-clause limitations on state regulation noted)
  • N. Natural Gas Co. v. State Corp. Comm’n, 372 U.S. 84 (1963) (field preemption where state regulation intrudes on federal scheme)
  • Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) (text and structure guide preemption analysis)
  • Schneidewind v. ANR Pipeline Co., 485 U.S. 293 (1988) (comprehensive federal regulation of interstate wholesale energy)
  • Appalachian Power Co. v. Pub. Serv. Comm’n, 812 F.2d 898 (4th Cir. 1987) (FERC’s jurisdiction over interstate wholesale rates is exclusive)
  • New England Power Co. v. New Hampshire, 455 U.S. 331 (1982) (FPA creates bright-line allocation of federal wholesale jurisdiction)
  • Miss. Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988) (states cannot refuse to give effect to federally ordered wholesale payments)
  • Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986) (scope of FERC jurisdiction not to be assessed case-by-case; plenary federal control)
  • Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) (congressional intent to occupy a field preempts state law)
  • Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947) (presumption against preemption in traditional state domains)
  • United States v. Locke, 529 U.S. 89 (2000) (presumption not triggered where federal presence is significant)
  • IDACORP Inc. v. Pub. Util. Dist. No. 1, 379 F.3d 641 (9th Cir. 2004) (filed rate doctrine and state regulation affecting federal wholesale markets)
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