# Petition for Writ of Certiorari — Nazarian v. PPL Energyplus, LLC, 135 S. Ct. 1582 (2015) (No. 14-614) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0312%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2015 ## Text “ OL4 NOV 25 20% No. OFFICE OF THE CLERK In the Supreme Court of the United States DOUGLAS R.M. NAZARIAN, ET AL., Petitioners, Vv. PPL ENERGYPLUS, L.L.C., ET AL., Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Fourth Circuit PETITION FOR A WRIT OF CERTIORARI Scott H. STRAUSS* *Counsel of Record PETER J. HOPKINS JEFFREY A. SCHWARZ Spiegel & McDiarmid LLP 1875 Eye Street, NW, Suite 700 Washington, DC 20006 (202) 879-4000 scott.strauss@spiegelmcd.com Counsel for Petitioners November 2014 PRE I ge Ai A an ie tr IE Bie I WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D C. 20002 QUESTIONS PRESENTED The Federal Power Act (FPA) splits authority among states, utilities, and the Federal Energy Regu- latory Commission (FERC). States regulate generation facilities and retail utility power purchases, but may not set wholesale rates. Wholesale energy sellers set their own rates. FERC has exclusive jurisdiction to re- view them and determine their legality. In much of the country, independent system opera- tors run multi-state transmission systems and whole- sale energy markets. PJM Interconnection LLC (PJM), an operator whose region includes Maryland, procures by auction the generation capacity it expects the region to need for a one-year period beginning three years lat- er. Looking beyond that horizon and concerned that facility retirements could degrade reliability, Maryland decided it needed new generation. It solicited offers, and required retail utilities to accept the winning bid. The resulting contracts obligate the bidder to build a plant and make it available to PJM for twenty years, while the retail utilities pay (or receive) the difference between the contract and PJM auction prices. The Fourth Circuit held Maryland’s actions field and con- flict preempted—contrary to the FPA’s structure and decisions of this Court, the D.C. Circuit, and FERC. The questions presented are: 1. When a seller offers to build generation and sell wholesale power on a fixed-rate contract basis, does the FPA field-preempt a state order direct- ing retail utilities to enter into the contract? 2. Does FERC’s acceptance of an annual regional capacity auction preempt states from requiring retail utilities to contract at fixed rates with sellers who are willing to commit to sell into the auction on a long-term basis? ss PARTIES TO THE PROCEEDING Petitioners (defendants in the district court and appellants in the court of appeals) are Douglas R.M. Nazarian, Harold Williams, Lawrence Brenner, Kelly Speakes-Backman, and W. Kevin Hughes, who were sued in their official capacities as the Chairman and Commissioners of the Maryland Public Service Commission. Rule 29.6 does not apply. Petitioner Nazarian was Chairman when the relevant orders were issued, but is no longer a member of the Commission. Petitioner Hughes is now Chairman. CPV Maryland, LLC is filing a separate petition for a writ of certiorari. CPV was a defendant in the district court and an appellant before the court of appeals. Respondents (plaintiffs in the district court and ap- pellees in the court of appeals) are: PPL EnergyP lus, LLC; PPL Brunner Island, LLC; PPL Holtwood, LLC; PPL Martins Creek, LLC; PPL Montour, LLC; PPL Susquehanna, LLC; Lower Mount Bethel Energy, LLC; PPL New Jersey Solar, LLC; PPL New Jersey Biogas, LLC; PPL Renewable Energy, LLC; PSEG Power LLC; and Essential Power, LLC. TABLE OF CONTENTS Page QUESTIONS PRESENTED ................cccccccccocecccceeeeeees i PARTIES TO THE PROCEEDING.....0000000000.en. ii ia 1 I aa ltl 4 ERR ae ee Nm rem ea wee! 4 CONSTITUTIONAL AND STATUTORY REESE EALERTS 4 IIT citeiesniiinssasinsieibincinianialtiapciinicleiidlaciataaliet lacs laa 4 REASONS FOR GRANTING THE PETITION ......... 9 I. The decision contorts the FPA’s rate machinery, contrary to precedent, and thereby harms the states, public utilities, and FERC. ..................... 10 A. The decision conflicts with decades of FPA Ee 11 B. The decision conflicts with D.C. Circuit precedent and FERC’s orders......................... 14 1. The decision elevates PJM’s tariff above CPV’s rate-setting authority, contrary to Se cescteasceansinninnicmienintiniatinnttunigesi 15 2. The decision conflicts with precedent on the coexistence of contracts and markets. ....... 16 Il. The decision jeopardizes dozens of state laws and billions in private investment. ........................... 18 iV III. The decision creates a generation-planning vacuum, and will reduce investment in needed EE Se aR ae Sete na Ce eee 26 A. The decision erects barriers to long-term contracting needed to support investment. ...26 B. Neither wholesale markets nor FERC can substitute for state-supervised generation planning and contracting. .......................0.--++- 28 C.The decision guts the states’ authority at the EEE SES See OO eee 30 OT ctrrnenncnctetnnsmiennessnnincsenstonipesenseemenegnane 31 v TABLE OF CONTENTS TO APPENDIX Page Appendix A: Opinion, PPL EnergyPlus LLC v. Nazarian, 753 F.3d 467 (4th Cir. 2014).......... la Appendix B: Order No. 84815, In re Whether New Generating Facilities Are Needed to Meet Long-Term Demand for Standard Offer Service, 297 P.U.R.4th 336 (Md. I a 29a Appendix C: Memorandum of Decision, PPL EnergyPlus LLC v. Nazarian, 974 F Supp. 2d 790 (D. Md. 2013)............................-+- 62a Appendix D: Order Denying Rehearing, PPL EnergyPlus LLC v. Nazarian, Nos. 13-2419, 13-2424 (4th Cir. June 30, 2014) ... 197a Appendix E: Judgment, PPL EnergyPlus LLC v. Nazarian, Nos. 13-2419, 13-2424 (4th SEL ae eee 202a Appendix F: U.S. Const., art. VI, cl. 2.............. 207a Appendix G: Federal Power Act § 201, a csienlicila 208a Appendix H: Federal Power Act § 205, EERE. de 21lla Appendix I: Order Granting Extension of Time to File Petition for a Writ of Certiorari, Nazarian v. PPL Energy Plus, LLC, No. 14A282 (U.S. Sept. 15, 2014). .................. 214a vl TABLE OF AUTHORITIES Page(s) Federal Court Cases Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm'n, 461 U.S. 375 (1983)..............................-. 1 Atl. City Elec. Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002) (Atlantic City), mandate enforced, 329 F.3d 856 (D.C. Cir. 2003).. 2, 12, 15, 16, 21, 29 Barnstable v. Berwick, No. 14-10148-RGS, 2014 U.S. Dist. LEXIS 61892 (D. Mass. May 2, 2014), appeal pending, No. 14-1597 (1st Cir. filed June 2, 2014)............................0006. 21 City of Tacoma v. Taxpayers of Tacoma, EE a 3 City of Winnfield, La. v. FERC, 744 F.2d ETE eee 12 Conn. Dep't of Pub. Util. Control v. FERC, 569 F.3d 477 (D.C. Cir. 2009).......................c0000000. 5 Fed. Mar. Comm'n v. S.C. State Ports Auth., I i i cee 11 Fla. Mun. Power Agency v. Fla. Power & Light Co., 64 F.3d 614, 616 (11th Cir. 1996) ................ 18 Grand Council of the Crees (of Quebec) v. FERC, 198 F.3d 950, 957 (D.C. Cir. 2000).......... 29 Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988)....................... 18 Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist. No. 1, 554 U.S. 527 (2008) (Morgan Stanley) ........... 2, 5, 10, 11—12, 16, 26, 27 vii New England Power Co. v. New Hampshire, EE EEE AR nee eS ll New England Power Generators Ass'n v. FERC, 757 F.3d 283 (D.C. Cir. 2014).................. 19 N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74 (Sd Cir. 2014) ...............000..........ecceeee 19 New York v. FERC, 535 U.S. 1 (2002) ................... 11 NRG Power Mkig., LLC v. Me. Pub. Utils. Comm’n, 558 U.S. 165 (2010) (NRG) ........ 2, 12, 16 Permian Basin Area Rate Cases, 390 U.S. EIRENE eee eee 12 PPL EnergyPlus, LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014) (Solomon)..................... 3, 20, 30 United Gas Pipe Line Co. v. Memphis Light, Gas & Water Div., 358 U.S. 103 (1958)............... 15 United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U.S. 332 (1956) (Mobile) .......... 2,11, 12 Federal Agency Cases Cal. Pub. Utils. Comm’n, 132 FERC 4 61,047, clarified, 133 FERC 4 61,059 (2010), reh’g denied, 134 FERC ¥ 61,044 (2011)... 13 Cal. Pub. Utils. Comm’n, 134 FERC § 61,044 RCAC EEE ea ee, OE RT RS AY Fe 13 CPV Shore, L.L.C., 148 FERC § 61,096 (2014)....... 9 Midcontinent Indep. Sys. Operator, Inc., 148 clit 16 New England States Comm. on Elec. v. ISO New England Inc., 142 FERC § 61,108 RECS SER ESE RR Eevee a 8 ore RO ere 17 PJM Interconnection, L.L.C., 115 FERC SITE ESE Maactss 50S aA Le Oe 17 PJM Interconnection, L.L.C., 1385 FERC 61,022, on reh’g, 137 FERC § 61,145 (2011), petition for review denied sub nom. N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74 (3d Cir. PJM Interconnection, L.L.C., 137 FERC { 61,145 (2011), petition for review denied sub nom. N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74 (3d Cir. 2014)...............0..0...... 8, 18, 29 United Illuminating Co., 123 FERC SEER a 9 Se 25 State Court Cases Commonwealth Edison Co. v. Ill. Commerce Comm'n, 16 N.E.3d 228, 233 (Ill. App. 2014) ..... 23 In re Calpine Corp., No. 24-C-12-002853 alt. Cty. ws A. Oct. 4, 2018), quertatte at pdfs/mdbt2013-9.pdf, appeal pending but stayed sub nom. Md. Office of People’s Counsel v. Md. Pub. Serv. Comm'n, No. 1738, Sept. Term 2013 (Md. Ct. Spec. App. docketed a 7, 8,19 In re Review of Proposed Town of New Shoreham Project, 25 A.3d 482 (R.1. 2011).......... ccc eee 23 State Agency Cases DPUC Review of Peaking Generation Projects, No. 08-01-01 (Conn. Dep’t. Pub. Util. Control 1x June 25, 2008), available at ST eo ae ae a 23 In re Ga. Power Co.’s 2013 Integrated Resource Plan, No. 36498 (Ga. Pub. Serv. Comm’n July 11, 2013), available at http://goo.gl/trbZKA ..................00..0.. 24 In re Whether New Generating Facilities Are Needed to Meet Long-Term Demand for Standard Offer Service, Order No. 84815, 297 P.U.R.4th 336 (Md. Pub. Serv. Comm’n naa i iniintatintiahseeeaiiiiiiiidsid 1, 5,6 Petition for Initiation of Proceeding to Examine Proposal for Continued Operation of R.E. Ginna Nuclear Power Plant, Order Directing Negotiation of a Reliability Support Service Agreement and Making Related Findings, No. 14-E-0270 (N.Y. Pub. Serv. Comm'n Nov. 14, 2014), available at http://goo.gl/TNg213............. 22 Proceeding on Motion of the Comm’n to Examine Repowering Alts. to Util. Transmission Reinforcements, Order Addressing Repowering Issues and Cost Allocation and Recovery, No. 12-E-0577 (N.Y. Pub. Serv. Comm’n June 13, 2014) (Dunkirk Repowering Order), available CO I I cevccccessccccessecscssesscesccsceceess 22 Re: Procurement Targets for Viable & Cost- Effective Energy Storage Sys., Decision No. 13-10-040, 308 P.U.R.4th 213 (Cal. Pub. Utils. I ae hibennetetienl 24 Federal Statutes Le Cod | | | ace 4 OE, III orccececrenecssrensnensersionsnreevcevccnnsontsnonsnsten 9 EER Sn ae ere ae ne ey aa 9 Federal Power Act (FPA), 16 U.S.C. S§ 791a—S25r ..............ccc00 1, 10, 11, 12, 13, 14, 30 § 3(17)(A)(ii), 16 U.S.C. § 796(17)(A)(ii) 25 ES I inh nicatneencilanescceniiadied 4 § 201(f), 16 U.S.C. § 824(f)....................... 14 § 202(b), 16 U.S.C. § 824a(b) ssninaieinaianne 29 § 205, 16 U.S.C. § 824d..................000. 4, 15-16 § 207, 16 U.S.C. § 824f.........ececcccceseceseseeseeees 29 Public Utility Regulatory Policies Act of 1978 (PURPA), Pub. L. No. 95-617, AREER Ls a an eee en 25 State Statutes 2013 Conn. Pub. Act No. 303, § 6 ..................... 21 2008 Mass. Legis. Serv. ch. 169......................... 20 2012 Mass. Legis. Serv. ch. 209......................42. 20 Me. Rev. Stat. tit. 35-A, §§ 3210-C(3)................ 24 Me. Rev. Stat. tit. 35-A, §§ 3210-C(6)................ 24 3 Rg Eee 23 i i SIN ios cccnensnectctantionauinaenions 23 Federal Administrative Regulations a asieualienineteiel 13 enn 17 Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; xl Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,539 (May 10, 1996), FERC Stats. & Regs. § 31,036 (1996), clarified, 76 FERC 4 61,009 (1996), modified, Order No. 888-A, 62 Fed. Reg. 12,274 (Mar. 14, 1997), FERC Stats. & Regs. 4 31,048 (1997), order on reh’g, Order No. 888-B, 62 Fed. Reg. 64,688 (Dec. 9, 1997), 81 FERC 4 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC ¥ 61,046 (1998), affd in part and remanded in part sub nom. Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002)......................... U.S. Envtl. Protection Agency, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, Proposed Rule, No. EPA-HQ-OAR- 2013-0602 (June 2, 2014), 79 Fed. Reg. 34,829 (June 18, 2014).....cccccccccccesecessesecseeeseeeeevees State Administrative Regulations Resolution E-4471 (Cal. Pub. Utils. Comm’n Mar. 22, 2012), available at TTT One e ETE Other Authorities An Act Relative to Clean Energy Resources, H. 4187, 188th Gen. Court, Current Sess. (Mass. 2014), available at https://malegislature. gov/Bills/188/House/H4187 ...................02....000ee0e xl] Am. Elec. Power, Volatile Capacity Markets, available at http://www.aepsustainability. com/business/risk/volatile.aspx (last visited I ae 27 Am. Pub. Power Ass’n, Power Plants Are Not Built on Spec: 2014 Update, available at http://appanet.files.cms-plus.com/PDFs/ 94 2014 Power Plant Study.pdf.......................... 28 The Brattle Group, Second Performance Assessment of P-JM’s Reliability Pricing Model 11-15 (Aug. 26, 2011), available at RTE SSRI eae ae 5, 27 The Brattle Grp., The Importance of Long- Term Contracting for Facilitating Renewable Energy Project Development (May 7, 2013) (Brattle Report), available at http://goo.gl/ ESERIES REA AEES reece rel een nrneoe terete aaa 27, 28 Calpine Executes Contracts for Sutter Energy Center With California Utilities, Bus. Wire, May 7, 2012, available at http:// ET ee 24 Corina Rivera Linares, P-JM’s Boston: “World’s Largest and Fastest Fuel Change” Taking Place Now, TransmissionHub (Oct. 22, 2014), available at http://goo.g/BWBxxM .......... 29 Dominion Va. Power, Request for Proposal 5-6 (Nov. 3, 2014), available at http://goo. Elise Caplan, What Drives New Generation Construction? An Analysis of the Financial Arrangements behind New Electric Generation Projects in 2011, Elec. J., I cons cracnsnepinieintenabinnesinoniamnien 28 xi Gwen Bredehoeft & Michelle Bowman, State Renewable Energy Requirements and Goals: Update through 2013, U.S. Energy Information Admin., Annual Energy Outlook 2014, Report No. DOE/EIA- 0383(2014), available at http://www.eia.gov/ forecasts/aeo/state_renewable.cfm (last | EE eee 25 ISO New Eng!and, Finalized Auction Results Confirm Slight Power System Resource Shortfall in 2017-2018 (Feb. 28, 2014), available at http://www.iso-ne.com/nwsiss/pr/ 2014/fca8 final results final 02282014.pdf...... 27 Lance Duroni, JI. Court OKs Rate Hike to Fund $2B FutureGen Coal Plant, Law360 (July 23, 2014), available at http://www.law360. com/articles/560068/ill-court-oks-rate-hike-to- -2b- - - EE Ae Ae ee SO Oe 23 Mathew J. Morey et al., Ensuring Adequate Power Supplies for Tomorrow’s Electricity Needs (June 16, 2014), available at http://goo.gl/ ESRI Eero a FoI Meee NnD 6 See SOMES 28 N.Y. Energy Highway Task Force, New York Energy Highway Blueprint (2012), available at http://www.nyenergyhighway.com/Blueprint. ERR TERE OU AA SA aE Re ae 21, 22 Nat'l Ass’n of Regulatory Util. Comm’rs, Competitive Procurement of Retail Electricity Supply: Recent Trends in State Policies and Utility Practices (July 2008), available at I il eaieinpmimenemnancnniiie 19 Paul J. Hibbard, Analysis Grp., Inc., The Impacts of the Green Communities Act on the Massachusetts Economy: A Review of the X1V First Six Years of the Act’s Implementation (Mar. 4, 2014), available at http://goo.gl/ aan lle 20 U.S. Chamber of Commerce, Assessing the Impact of Potential New Carbon Regulations in the United States (Inst. for 21st Century Energy 2014), available at http://www. ener TTT 27-28 U.S. Energy Information Admin., Most States Have Renewable Portfolio Standards, Today in Energy (Feb. 3, 2012), available at http://www.eia.gov/todayinenergy/detail.cfm ?id=4850 (last visited Nov. 21, 2014)............000... 25 U.S. Envtl. Protection Agency, Clean Power Plan Toolbox for States, http://www2.epa.gov/ cleanpowerplantoolbox (last visited Nov. 21, U.S. P’ship for Renewable Energy Fin., Ramping up Renewables: Leveraging State RPS Programs amid Uncertain Federal Support 18, 24-26 (June 2012), available at a caasaseaneniniiinils 25 INTRODUCTION Electricity is the “life blood of modern society,” App. 29a, so regulating utilities to ensure that citizens have electricity when and where they need it is among a state’s most important police powers. See Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm'n, 461 U.S. 375, 377 (1983). States must monitor and, if needed, modify the generation-resource mix serving their citizens. An adequate and diverse resource portfolio supplies power across a wide range of conditions and reduces the risk that an event that affects only some resources could imperil reliability. States that fail to meet these re- sponsibilities run unacceptable risks that the lights will go out—along with medical equipment, traffic lights, water purification plants, and virtually every- thing necessary to a modern economy and the well- being of a state’s citizens. The Federal Power Act (FPA), 16 U.S.C. §§ 791a—825r, preserved the states’ ability to manage their power supplies, but the Fourth Circuit’s opinion cripples that ability. Maryland needed new natural-gas-fired generation, solicited proposals, and ordered its retail utilities to contract with the winner. CPV Maryland, LLC agreed to build a power plant and make its capacity and out- put available to the wholesale electricity market for twenty years. In exchange, CPV would receive fixed contract rates and stable revenues that it could not obtain without a contract. The Fourth Circuit struck down Maryland’s action and invalidated the contracts on grounds that (1) the state “set” rates for CPV’s sales and (2) the rates differed from those set through an annual auction that procures year-by-year capacity to fulfill needs forecast by PJM Interconnection LLC (PJM). 2 Those holdings are contrary to a half century of this Court’s teaching on FPA ratemaking, as well as D.C. Circuit precedent and Federal Energy Regulatory Commission (FERC) orders. The field-preemption hold- ing—that states impermissibly “set[]” wholesale rates by directing retail utilities to contract with the winners of competitive power-supply solicitations, App. 19a— fails to recognize that sellers like CPV set their own rates and can do so by contract, subject to FERC re- view. United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U.S. 332, 341 (1956) (Mobile); Morgan Stan- ley Capital Grp. Inc. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 531 (2008) (Morgan Stanley); NRG Power Mkig., LLC v. Me. Pub. Utils. Comm'n, 558 U.S. 165, 171 (2010) (NRG). The advent of independent system oper- ators did not deprive sellers of rate-setting power. Atl. City Elec. Co. v. FERC, 295 F.3d 1 (D.C. Cir. 2002) (At- lantic City), mandate enforced, 329 F.3d 856 (D.C. Cir. 2003). CPV responded to Maryland’s procurement by offering the rate at which it would contract to build a new plant and sell its output to PJM on a long-term basis. Maryland’s directive to accept the offer neither set CPV’s rate nor intruded on FERC’s review authori- ty. The conflict-preemption holding likewise flouts this Court’s precedent on the relationship between short- term markets and long-term contracts, Morgan Stan- ley, as well as FERC’s orders. When FERC accepted PJM’s capacity-auction tariff, it held expressly that states could support new generation through long-term bilateral agreements. And later, with full knowledge of Maryland’s procurement, FERC specifically disclaimed any conflict between the state’s actions and the whole- sale market. FERC held instead that resources like CPV’s are needed and economic if—as the CPV re- source was—they are selected in the auction after bid- 3 ding based on their costs excluding contract revenues. Indeed, no state-federal conflict was possible here, as FERC was gatekeeper of PJM’s auction and CPV could bid only as FERC allowed. Thus, the decision’s finding that Maryland’s actions could “distort” PJM auction price signals is an improper collateral attack on FERC’s orders. City of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320, 336 (1958). These matters are exceptionally important. The de- cision below imperils dozens of state laws under which private parties are investing billions in needed genera- tion plants, from clean-coal facilities in Illinois to off- shore wind in Massachusetts. The Third Circuit already followed its sister Circuit’s lead in striking down a law to support new gas-fired generation in New Jersey, PPL EnergyPlus, LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014) (Solomon),' and several other challenges based on the Fourth Circuit’s decision are pending elsewhere. Going forward, the attacks leveled by this decision and its progeny will sow uncertainty, stifle investment in needed facilities, and open a dangerous generation- planning vacuum. Volatile short-run electricity prices rarely suffice to induce investment in expensive, long- lived assets, and, even if they could do so, they would not direct it to the right facilities. By design, the wholesale markets focus only on preserving short-run reliability at least cost, and are blind to long-run relia- bility, fuel diversity, environmental concerns, and simi- lar matters. Meanwhile, FERC lacks authority to require utilities to build or buy what the market fails | We understand that separate petitions for certiorari will seek review of Solomon, which raises the same field-preemption ques- tion as this case but did not reach the conflict-preemption ques- tion. 4 to elicit. States must provide that backstop. But the decision undercuts their ability to do so. OPINIONS BELOW The Fourth Circuit's opinion (App. la—28a) is re- ported at 753 F.3d 467. The district court’s decision (App. 62a—196a) is reported at 974 F.Supp. 2d 790. JURISDICTION The court of appeals entered judgment on June 2, 2014. Petitioners Nazarian et al. (acting collectively as the Maryland Public Service Commission) filed a time- ly petition for rehearing and rehearing en banc on June 16, 2014. The court of appeals denied rehearing on June 30, 2014. App. 197a—201la. On September 15, 2014, the Chief Justice extended until November 27, 2014 the time for filing petitions for a writ of certiorari to review the Fourth Circuit’s judgment. App. 214a— 216a. This Petition is therefore timely. This Court has jurisdiction under 28 U.S.C. § 1254(1). CONSTITUTIONAL AND STATUTORY PROVISIONS Article VI, Clause 2, of the United States Constitu- tion is reproduced at App. 207a. FPA section 201, 16 U.S.C. § 824, is reproduced in pertinent part at App. 208a—210a. FPA section 205, 16 U.S.C. § 824d, is re- produced in pertinent part at App. 21la—213a. STATEMENT PJM is a “regional transmission organization” that operates the electricity transmission system and ad- ministers wholesale energy markets in a region that spans the District of Columbia and parts of 13 states, 5 including Maryland.? PJM’s responsibilities include ensuring short-term electric-system reliability, and to that end it holds an annual auction to secure the quan- tity of electric generation capacity that it expects the region to need during a one-year period beginning three years later. PJM’s auction procedures, estab- lished in a FERC-filed tariff, see App. 8la, set the amount of the capacity to be procured in each subre- gion of PJM, select the least-cost resources, and pay a uniform “clearing” price within each subregion for each megawatt of selected capacity. App. 1la, 98a-102a. The price is set by the most costly (or “marginal”) resource needed to meet the subregional requirement. Jd. Annual clearing prices fluctuate greatly. App. 98a.‘ And while new resources can lock in for three years the price set by the first PJM auction in which they are selected, App. 1la-12a, this system has not induced the development of major new generation facilities in Mar- yland or other eastern PJM states. App. 37a, 53a. The absence of new generation concerned Mary- land, and became critical as the fate of its existing power supplies became less certain. PJM itself identi- fied 2,320 megawatts of Maryland’s generation facili- ties as being at “high risk” of retirement. App. 34a-35a. 2 App. 10a, 82a-83a; cf. Morgan Stanley, 554 U.S. at 536 (describ- ing regional transmission organizations). 3 “Capacity” is “not electricity itself but the ability to produce it when necessary.” Conn. Dep't of Pub. Util. Control v. FERC, 569 F.3d 477, 479 (D.C. Cir. 2009). “It amounts to a kind of call option that electricity transmitters purchase from parties—generally, generators—who can ... produce ... when required.” Jd. 4 See also The Brattle Group, Second Performance Assessment of PJM’s Reliability Pricing Model 11-15 (Aug. 26, 2011), available at http://goo. gl/OldwX. 6 The Maryland Public Service Commission investi- gated the state’s need for new generation and, in paral- lel, directed retail utilities to solicit offers from developers willing to build facilities. App. 30a-34a. The commission ultimately concluded that Maryland need- ed 650-700 megawatts of new natural-gas-fired genera- tion capacity by 2015,5 and selected CPV’s offer as providing the best price for Maryland ratepayers. App. 56a-57a. The commission directed the state’s retail utilities to enter into contracts based on CPV’s offer. App. 60a. The contracts required CPV to build the plant and bid its output into the PJM capacity auction and energy markets for twenty years.® In turn they obligated the retail utilities (and, ultimately, their ratepayers) to pay CPV a fixed price, offset by whatever CPV earned from PJM. If the contract’s capacity price exceeded a given year’s auction clearing price, ratepayers would pay CPV the difference; alternatively, if the PJM auction price rose above the contract price, ratepayers would receive the excess. But Maryland was unwilling to pay CPV for capacity if its resource failed to clear the auc- 5 Maryland’s conclusion reflected “major” concerns with the “al- ways uncertain and now even more uncertain future of [the] exist- ing coal-fired generation” in Maryland and neighboring states, App. 49a-51a, and a finding that additions of wind and solar gen- eration would require “other dispatchable generation with flexibil- ity to start quickly, a characteristic that our existing coal and nuclear fleet does not have.” App. 52a (footnote omitted). Neither the district court nor the Fourth Circuit questioned Maryland’s conclusions. 6 Although the contracts require CPV to offer both capacity and energy, the ensuing litigation focused on CPV's capacity sales and their relationship to PJM’s auction. This petition focuses on those matters. Where a resource clears PJM’s capacity auction as CPV did here, it must then offer energy into PJM’s energy markets. 7 tion. The reason is straightforward: if ratepayers had to pay CPV for capacity that did not clear, then, under the PJM tariff, ratepayers would pay twice for capacity to meet the same reliability need—once to CPV under the contract and again for replacement resources pro- cured by PJM’s auction. To avoid potential double charges, the contracts obligated the retail utilities to pay the contract price only for CPV capacity that cleared PJM’s auction. The contracts, known in the industry as “contracts for differences,” were otherwise identical in purpose and effect to bilateral power purchases. If the retail utilities had purchased the power from CPV bilateral- ly, then they (instead of CPV) would have bid the ca- pacity into the PJM auction—to get “credit” for the ca- capacity and avoid paying twice—and would have passed through to ratepayers the contract cost and any auction revenues earned by the resource. Under that arrangement, CPV still would have received the con- tract price, and ratepayers still would have covered the difference between the resource’s contract cost and auction revenues. The contracts for differences accom- plished in one step what otherwise would have taken two, while allocating to CPV the risk of its resource not clearing the auction. The retail utilities appealed the commission’s di- rective that they enter into the contract.? But a Mary- land state court upheld the commission’s order, finding that it was “directly related to ensuring reliable service and protecting the public safety” and fit well within the 7 In re Calpine Corp., No. 24-C-12-002853 (Balt. Cty. Cir. Ct. Oct. 4, 2013), available at http://www.courts.state.md.us/businesstech/ pdfs/mdbt2013-9.pdf, appeal pending but stayed sub nom. Md. Office of People’s Counsel v. Md. Pub. Serv. Comm'n, No. 1738, Sept. Term 2013 (Md. Ct. Spec. App. docketed Nov. 6, 2013). 8 commission’s “broad supervisory and regulatory pow- ers” to ensure that retail electric service is “safe, ade- quate, just, reasonable, economical, and efficient.” Jn re Calpine, slip op. at 16-17 (quotation omitted). Reacting to both the Maryland contract and a larger state-sponsored generation procurement in New Jer- sey, some existing generators complained to FERC that sellers with such contracts would bid their resources into PJM’s capacity auction at artificially low (state- subsidized) prices, thereby distorting the auction. FERC responded by ensuring that could not happen. It modified the PJM auction rules to require offers for contract-backed resources to be set by PJM (subject to FERC review) based on the projects’ actual costs— excluding contract revenues.® CPV’s resource was bid into and cleared the PJM auction in accordance with these modified rules. PJM reviewed CPV’s bid and replaced it with PJM’s own assessment of the resource’s “competitive, cost-based” net cost of entry, based “solely on revenues from PJM- administered markets as required by [the] PJM Tariff.” App. 125a (quotations omitted). The PJM-calculated bid for CPV’s resource was more than forty percent less than the auction clearing price. App. 125a-126a. FERC held that such resources are “economic,” “competitive,” and “[do] not artificially suppress market prices,”? and concluded that its bidding rules “reconcile[d]” any “ten- sion” between state generation-development programs and the wholesale market’s needs. '° 8 PJM Interconnection, L.L.C., 1385 FERC % 61,022, P 122, on reh’g, 137 FERC ¥ 61,145 (2011), petition for review denied sub nom. N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74 (3d Cir. 2014). 9135 FERC 4 61,022, PP 175, 177. 10137 FERC § 61,145, P 4. 9 Dissatisfied with FERC’s rulings, PPL EnergyPlus and other incumbent generators (Respondents here) sued in federal district court under 28 U.S.C. § 1331, alleging that Maryland had violated the Supremacy Clause and Commerce Clause. App. 65a. The district court held Maryland’s orders field preempted, did not rule on conflict preemption, and rejected the Commerce Clause challenge. App. 14a-15a, 194a. Maryland ap- pealed the preemption rulings, and the court of appeals had jurisdiction under 28 U.S.C. § 1291. The court of appeals affirmed the field-preemption holding, reasoning that, by ordering the retail utilities to accept CPV’s offer and sign the contracts, Maryland impermissibly “set[{]” a wholesale rate. App. 19a. Un- like the district court, the appellate court also held Maryland’s actions conflict preempted, on grounds that they “distort[ed]” the capacity auction (App. 25a) and gave CPV a longer period of price stability than it could otherwise obtain through the PJM auction (App. 25a- 26a). Requests for rehearing and rehearing en banc were denied. App. 201a. FERC did not participate in either the district court or appellate litigation. FERC subsequently ruled that the decisions rendered the contracts void ab initio, and precluded FERC from passing on their justness and reasonableness. CPV Shore, LLC, 148 FERC 4 61,096, PP 30, 32 (2014). REASONS FOR GRANTING THE PETITION The matters at issue here are exceptionally im- portant. Electricity is central to daily life. Providing it reliably—and choosing the facilities that produce it— are essential to protecting health and welfare. The Court should grant certiorari because the deci- sion below distorts the FPA’s rate-setting machinery, 10 and conflicts irreconcilably with multiple decisions of this Court and the D.C. Circuit. The field-preemption ruling conflates FERC’s ability to review wholesale rates with a seller's ability to set them, constricting both roles while simultaneously impeding the states’ ability to oversee power-supply planning and procure- ment. And the decision’s reasoning—that states im- permissibly set rates by directing retail utilities to contract with willing power sellers—threatens dozens of state laws and orders promoting needed electric gen- eration facilities. The conflict-preemption ruling simi- larly strikes at one of the FPA’s central premises—the role of long-term contracts in supporting investment in new facilities—and ignores this Court’s teaching that “diminishment of [that] role” was “one of the seeds” of the energy crisis that roiled the western states. Mor- gan Stanley, 554 U.S. at 539. The result is a decision that bulldozes state police powers, imperils existing state laws promoting genera- tion development, and chills further efforts to support new resources. And by impeding the states, the deci- sion creates a dangerous generation-planning vacuum that neither FERC nor the wholesale markets can fill. I. The decision contorts the FPA’s rate machinery, contrary to precedent, and thereby harms the states, public utilities, and FERC. The decision turns the FPA’s rate-setting frame- work on its head, in conflict with precedent of this Court and the D.C. Circuit. And it thereby harms not only the states but, also, wholesale energy sellers and FERC. 11 A. The decision conflicts with decades of FPA rate-setting precedent. “Dual sovereignty” is a “defining feature” not only of our Nation’s “constitutional blueprint,” Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 751 (2002), but also the FPA. The statute gives FERC ex- clusive authority to review and potentially to modify rates for wholesale sales of electric energy in interstate commerce. New England Power Co. v. New Hampshire, 455 U.S. 331, 340 (1982). But the statute simultane- ously preserves state authority over local matters like retail electric rates, generation facilities, “integrated resource planning and utility buy-side” decisions and “utility generation and resource portfolios,” New York uv. FERC, 535 U.S. 1, 24 (2002) (quoting FERC Order No. 888).!! State and federal FPA responsibilities interact with each other and with the rate-setting role of electric en- ergy sellers. Under the FPA, neither states nor FERC set wholesale rates in the first instance. Utilities that sell electric energy at wholesale set their own rates subject to FERC review, Mobile, 350 U.S. at 341, and may do so by entering into contracts. Morgan Stanley, 1! Promoting Wholesale Competition Through Open Access Non- Discriminatory Transmission Services by Public Utilities; Recov- ery of Stranded Costs by Public Utilities and Transmitting Utili- ties, Order No. 888, 61 Fed. Reg. 21,539 (May 10, 1996), FERC Stats. & Regs. J 31,036 (1996), clarified, 76 FERC § 61,009 (1996), modified, Order No. 888-A, 62 Fed. Reg. 12,274 (Mar. 14, 1997), FERC Stats. & Regs. § 31,048 (1997), order on reh’g, Order No. 888-B, 62 Fed. Reg. 64,688 (Dec. 9, 1997), 81 FERC 4 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC 4 61,046 (1998), aff'd in part and remanded in part sub nom. Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), affd sub nom. New York v. FERC, 535 U.S. 1 (2002). 12 554 U.S. at 531 (“[T]he FPA ... permits utilities to set rates ... through bilateral contracts”). As this Court explained, the FPA left electric energy sellers’ rate- setting powers “unaffected,” Mobile, 350 U.S. at 343, but required them to notify FERC so that the agency could “examine]]” the rates and modify them if needed, NRG, 558 U.S. at 171. The agency’s authority to pro- tect the public interest is “paramount,” Mobile, 350 U.S. at 344, but its role remains “essentially passive and reactive.” Atlantic City, 295 F.3d at 10 (quoting City of Winnfield, La. v. FERC, 744 F.2d 871, 876 (D.C. Cir. 1984) (Scalia, J.)). And the FPA does not merely tolerate contracts. It is “premised” on them. Permian Basin Area Rate Cases, 390 U.S. 747, 822 (1968). The “stability of supply ar- rangements’ is a “dominant concern” under the Act, NRG, 558 U.S. at 175 (quotation omitted), and con- tracts play an “essential role” as a “key factor fostering stability in the electricity market, to the long-run bene- fit of consumers,” id. at 174 (citation omitted). That remains true even if “rates for a subset of the public might be high by historical standards” under a particu- lar contract at a given point in time. Morgan Stanley, 554 U.S. at 551. The decision below, like the Ninth Cir- cuit decision reversed in Morgan Stanley, “give[s] short shrift to the important role of contracts in the FPA... , and ... threaten[s] to inject more volatility into the electricity market by undermining a key source of sta- bility.” Id. The FPA establishes a system of interlocking au- thority under which sellers decide the rates and terms on which they are willing to sell, states may require retail utilities to contract with willing sellers to devel- op needed supplies, and FERC may review the result- ing transactions. As FERC itself has held, states may 13 “dictate” the specific “generation resources from which utilities may procure electric energy.” Cal. Pub. Utils. Comm'n, 134 FERC 4 61,044, P 30 & n.62 (2011). And though states may not impose prices on unwilling sellers, they may choose among offers made by willing sellers and require retail utilities to enter contracts, subject to FERC review. Cal. Pub. Utils. Comm'n, 132 FERC 4 61,047, P 69, clarified, 133 FERC 4 61,059 (2010), reh’g denied, 134 FERC 4 61,044 (2011). FERC’s rate-filing regulations expressly disclaim any limitation on state authority to establish “[c]lompetitive procedures for the acquisition of electric energy, including demand-side management, pur- chased at wholesale” and “(njon-discriminatory fees for the distribution of such electric energy to retail con- sumers for purposes established in accordance with State law.” 18 C.F.R. § 35.27 That state-supervised solicitations may result in wholesale sales contracts raises no preemption concerns because a willing seller must choose to sell and FERC may review and modify the agreements. State decisions producing contracts subject to FERC’s authority cannot be preempted by that authority. The decision below conflicts with all of this prece- dent. It holds that Maryland usurped FERC’s whole- sale rate-setting role—which the FPA assigns to wholesale energy sellers, and not FERC. Maryland set no rate: CPV set the rate here by bidding on Mary- land’s solicitation and entering into the contracts based on that bid. The decision likewise holds that Maryland interfered with FERC’s regulation of wholesale mar- kets—but FERC held otherwise. This Court and FERC have both held that long-term contracts and short-term markets can coexist. And, but for the decision below, 14 FERC could have reviewed the CPV contracts and if necessary modified them to prevent any conflict. The decision below, not Maryland’s procurement, upsets the FPA’s orderly interlocking of authority. Knowingly or not, the decision strips states of the pow- er to control their generation portfolios. If directing retail utilities to accept CPVs offer was field- preempted because that action “set” a rate, then almost any state order requiring retail utilities to contract with the winner of a state-run power-supply solicita- tion would be preempted. FERC’s field is not limited to sales in PJM’s auction, but encompasses all wholesale energy sales except narrow excluded categories. See, e.g., FPA § 201(f), 16 U.S.C. § 824(f). And so, under the decision, developers willing to build new facilities on the basis of long-term contracts no longer can do so if their counterparties act on state orders. This con- strains wholesale power supplies and jeopardizes reli- ability. And FERC loses the ability even to consider contracts for needed supplies that the decision deters or invalidates. B. The decision conflicts with D.C. Circuit precedent and FERC’s orders. The decision treated PJM’s transmission tariff, providing for annual capacity purchases and prices, as a filed rate that CPV and Maryland could not vary and that precluded them from entering into other ar- rangements. This ignored (1) CPV’s rate-setting role as a capacity seller, (2) the complementary roles of long- term contracts and short-term power markets, and (3) that annual sales pursuant to PJM’s tariff and CPV’s contract commitment to offer capacity to PJM each year for twenty years are different products. 15 1. The decision elevates PJM’s tariff above CPV’s rate-setting authority, contrary to Atlantic City. PJM buys capacity annually under auction proce- dures set forth in its tariff, but CPV—as the seller of its plant’s capacity—has a statutory right to set rates for those sales, subject to FERC review. CPV was will- ing to commit to offer its plant’s capacity for twenty years only on the basis of fixed contract rates. The Fourth Circuit’s treatment of PJM’s tariff as supersed- ing CPV’s right to set its own rates (subject to FERC review) conflicts with D.C. Circuit precedent. In Atlantic City, the D.C. Circuit held that utilities cannot be forced to cede to PJM “the right to file rates and terms for services rendered with [their] assets.” 295 F.3d at 9. There, transmission owners had given PJM the right to operate their facilities, and signed a contract under which they and PJM would share the right to change the region’s transmission rate design, subject to FERC review. FERC rejected the contract and directed the transmission owners to cede their re- maining rate-change authority to PJM, but the D.C. Circuit reversed FERC’s decision. Jd. at 15. The court emphasized that a public utility, “like the seller of an unregulated commodity, has the right ... to change its rates ... [at] will, unless it has undertaken by contract not to do so.” Jd. at 10 (quoting United Gas Pipe Line Co. v. Memphis Light, Gas & Water Div., 358 U.S. 103, 113-14 (1958)). Thus, FERC can neither “force public utilities to file particular rates” under FPA section 205 nor “prohibit public utilities from fil- ing changes in the first instance,” because denying the “ability to initiate rate design changes with respect to services provided with their own assets ... eliminate[s] 16 the very thing that the statute was designed to pro- tect.” Id. So too here. Atlantic City’s reasoning compels the conclusion that PJM’s tariff could not displace CPV’s right to set its own rate for wholesale sales, subject to FERC review. See Midcontinent Indep. Sys. Operator, Inc., 148 FERC 4 61,057, P92 (2014) (modifying transmission organization tariff that purported to give the organization unilateral rights to set rates paid to generators through that tariff). The D.C. Circuit and Fourth Circuit decisions thus conflict on the question whether regional transmission organization tariffs trump the rate-setting rights of utilities that own the facilities used to provide FERC-jurisdictional service. The decision below—that PJM’s short-term capacity- purchase tariff precludes CPV from establishing rates for longer-term sales to PJM, subject to FERC review— harms both sellers and states that want to develop needed new generation facilities on the basis of long- term contracts. 2. The decision conflicts with precedent on the coexistence of contracts and 1 .arkets. The Fourth Circuit held Maryland’s actions conflict preempted because the contracts contained different rates and provided more stability than the PJM auc- tion offered. As this Court has explained, however, long-term contracts play an “essential role ... fostering stability” in those markets, NRG, 558 U.S. at 174, and it would be a “perverse rule” that enforces such con- tracts only if they mirror volatile year-to-year ar- rangements. Morgan Stanley, 554 U.S. at 547. That the contract and auction prices are different is no surprise, as the obligations assumed by short- and long-term sellers are different. Sellers in PJM’s auction under- 17 take single-year obligations and thereafter can seek to retire or sell their capacity outside PJM; the Maryland contracts, however, obligate CPV to offer its capacity to PJM continually for twenty years. FERC understands the complementary nature of long-term contracts and short-term markets, and has sought to facilitate contracting by requiring regional transmission organizations to provide a platform on their websites “for market participants to post offers to buy or sell power on a long-term basis.” 18 C.F.R. § 35.28(g)(2). As the district court found, one of the ways that retail utilities can satisfy their share of the region’s capacity needs, in lieu of “[b]eing assigned ca- pacity in the [auction],” is by “[e]ntering into a bilateral contract with a capacity resource” at a price deter- mined by the parties. App. 90a. FERC specifically addressed the use of long-term bi- lateral contracts to support new facilities when it ac- cepted the settlement creating PJM’s capacity auction. West Virginia challenged the auction as intruding on state jurisdiction over generation, but FERC responded that it would not curtail states’ options, which included the ability to “create an incentive for the construction of new capacity by entering into long-term bilateral agreements.” PJM Interconnection, L.L.C., 115 FERC § 61,079, P 172 (2006).'2 In other words, FERC said states could do exactly what Maryland did: support new generation with a long-term bilateral agreement. FERC then established terms on which resources supported by state contracts could participate in PJM’s 12 See also New England States Comm. on Elec. v. ISO New Eng- land Inc., 142 FERC § 61,108, at 61,490 (2013) (LaFleur, Comm’r, concurring in part) (“[S]tates have the unquestioned right to make policy choices through the subsidization of capacity”). 18 auction without distorting prices, and CPV’s resource cleared the auction on that basis. App. 125a-126a. FERC held that its bidding rules “reconcile[d]” any “tension” between state generation-development pro- grams and the wholesale market's needs, PJM Inter- connection, LLC, 137 FERC 4 61,145, P 4, and that re- resources clearing in accordance with them, like CPV’s, are “economic,” “competitive,” and “[do] not artificially suppress market prices.” PJM Interconnection, L.L.C., 135 FERC 4 61,022, PP 175, 177. The premises of the decision below—that FERC re- lies exclusively on short-term auction prices to support new generation and that long-term contracts at differ- ent prices end-run a filed rate—are couirary to FERC’s rulings, the reality of how PJM’s auction functions, and decisions of this Court. The decision’s reliance on Mis- sissippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988), App. 20a, is thus misplaced and the resulting conflict-preemption conclusion unfound- ed. Bilateral contracts and centralized auctions coexist, and naturally produce different prices for short-term and long-term sales. As the two products are not the same, there can be no conflict as a matter of law. See Fla. Mun. Power Agency v. Fla. Power & Light Co., 64 F.3d 614, 616 (11th Cir. 1996) (no filed-rate bar for sale of a different service). Il. The decision jeopardizes dozens of state laws and billions in private investment. Maryland is not the only state acting to secure its energy future. States throughout the Nation require retail utilities to procure supply from specific resources or resource types or to support them with financial con- tracts for differences. The reasoning of the decision below threatens all of these arrangements. It does not matter whether the 19 resource sells power to retail utilities directly or to a regional transmission organization or whether a state has provided for retail competition.!3 Even states with vertically-integrated utilities sometimes require those utilities to solicit offers to buy power instead of build- ing facilities themselves.'* If mandating solicitations and purchases “sets” a wholesale rate, then every state order requiring the purchase of a FERC-jurisdictional product or service from a competitively-selected seller would be field preempted. And, under the decision be- low, every state order directing retail utilities to con- tract for long-term capacity in PJM (or any other '3 The decision asserts (App. 13a) that, by “abandon|ing] the verti- cal integration model,” Maryland “relinquish{ed] ... the regulatory autonomy [it] had formerly enjoyed with respect to traditional utility monopolies.” Other courts of appeals, however, have found no such relinquishment. N..J. Bd. of Pub. Utils. v. FERC, 744 F.3d at 98 (FERC “permit[s] states to develop whatever capacity re- sources they wish, ... while ... prevent/ing] the state’s choices from adversely affecting wholesale capacity rates.”); New England Pow- er Generators Ass'n v. FERC, 757 F.3d 283, 291 (D.C. Cir. 2014) (“[S]tates remain free to subsidize the construction of new genera- tors[;]” FERC simply regulates how they are offered into whole- sale capacity auctions). Similarly, in dismissing the appeal of Maryland’s order, the state court recognized that giving retail customers “choice as to their electricity supplier” did not divest state regulators of authority to “supervise and regulate” retail utilities to “promote adequate, economical, and efficient delivery of utility services.” In re Calpine, supra note 6, slip op. at 18 (quota- tion omitted). 14 See Nat'l Ase’n of Regulatory Util. Comm'rs, Competitive Pro- curement of Retail Electricity Supply: Recent Trends in State Poli- cies and Utility Practices 1, 4 (July 2008), available at http://goo.gV/zPpshw; see also Dominion Va. Power, Request for Proposal 5-6 (Nov. 3, 2014) (seeking bids for up to 1600 megawatts of power under a 10-20 year purchase agreement), available at http://goo.g/TW1A Ve. 20 region with a short-term auction) would also be conflict preempted. Several important state initiatives already have been struck down or challenged based on the decision below. New Jersey—responding to reliability risks sim- ilar to Maryland’s—enacted a law requiring its retail utilities to solicit offers to build 2,000 megawatts of new natural-gas-fired generation. The state commis- sion then conducted a competitive solicitation and in- structed its regulated retail utilities to enter into contracts (similar to those at issue here) with sellers offering three new power plants, two of which later cleared the PJM auction under FERC’s modified rules. Solomon, 766 F.3d at 248-49. Citing the Fourth Cir- cuit, the Third Circuit held New Jersey’s statute field preempted as impermissible wholesale rate-setting. Id. at 253.15 Massachusetts requires retail utilities to enter long- term contracts with renewable energy developers, sub- ject to state approval.'6 The law has spurred develop- ment of more than 1,000 megawatts of wind-powered generation across New England, including one of the Nation’s first and largest offshore wind projects: the 468-megawatt Cape Wind Project.!7 Cape Wind’s oppo- nents have relied on the decision below in their at- tempt to invalidate a Massachusetts utility's contract to purchase Cape Wind power. Joint Opening Brief of ‘8 Unlike the Fourth Circuit, the Third Circuit expressed no opin- ion on conflict preemption. Solomon, 766 F.3d at 246. 16 2008 Mass. Legis. Serv. ch. 169, § 83 (S.B. 2768); 2012 Mass. Legis. Serv. ch. 209 (S.B. 2395). 17 See Paul J. Hibbard, Analysis Grp., Inc., The Impacts of the Green Communities Act on the Massachusetts Economy: A Review of the First Six Years of the Act’s Implementation 11 (Mar. 4, 2014), available at http://goo.gi/mMEsii. 21 Appellants, Town of Barnstable v. Berwick, No. 14- 1597, at 4, 25, 46 (1st Cir. Aug. 25, 2014) (“[A]s the Fourth Circuit recently held, a state may not use its regulatory authority over utilities to compel the utility to enter into a wholesale contract”). Although the dis- trict court dismissed the plaintiffs’ suit on sovereign- immunity grounds, it also explained that there could be no Supremacy Clause violation because Cape Wind had set its rate and FERC could review it.'* Connecticut allows state regulators to solicit pro- posals for renewable resources, select winners, and compe! retail utilities to enter long-term agreements.!9 Under this authority, Connecticut required retail utili- ties to enter long-term fixed-price contracts with a 250- megawatt wind project in Maine and a twenty- megawatt solar project in Connecticut.”° A disappoint- ed bidder challenged Connecticut’s actions, citing the decision below. Allco Fin. Ltd., Notice of Additional Authority 3-5, June 16, 2014, Allco Fin. Ltd. New York has adopted a comprehensive plan to modernize the state’s energy infrastructure.?! The plan contemplates state-directed contracting for thousands of megawatts of new resources or the temporarily con- tinued operation of facilities that have proposed to re- 18 Barnstable v. Berwick, No. 14-10148-RGS, 2014 U.S. Dist. LEX- IS 61892, at *29 n.26 (D. Mass. May 2, 2014) (citing Atlantic City), appeal pending, No. 14-1597 (1st Cir. filed June 2, 2014). 19 2013 Conn. Pub. Act No. 303, § 6. % See First Amended Complaint for Declaratory and Injunctive Relief for Violations of the Supremacy Clause of the United States Constitution and the Federal Power Act J 53 & Ex. C, Alico Fin. Ltd. v. Esty, No. 3:13-cv-01874-JBA (D. Conn. Feb. 26, 2014). 21 See N.Y. Energy Highway Task Force, New York Energy High- way Blueprint (2012), available at http://www.nyenergyhighway. com/Blueprint.html. 22 tire but remain needed for reliability.22 Some of the contracts include power purchases, while others pro- vide compensation solely to build new facilities or alter existing ones. Yet competitors have challenged even the latter kinds of contracts as field and conflict preempted, citing the decision below.”3 Numerous other mandated purchases either pre- ceded the decision below or have not yet been chal- lenged on preemption grounds (to our knowledge), but exemplify the kinds of important state actions that the decision below puts in jeopardy: 1. Illinois mandates that twenty-five percent of the state’s electricity be generated by “clean coal fa- cilities,” so it required utilities to enter twenty- year purchase agreements with a consortium 22 See New York Energy Highway Blueprint 16-17; Order Address- ing Repowering Issues and Cost Allocation and Recovery at 2-6, Proceeding on Motion of the Comm'n to Examine Repowering Alts. to Util. Transmission Reinforcements, No. 12-E-0577 (N.Y. Pub. Serv. Comm'n June 13, 2014) (Dunkirk Repowering Order), avail- able at http://goo.g/HETtK3. 23 See Dunkirk Repowering Order 13, 37-40; Order Directing Ne- gotiation of a Reliability Support Service Agreement and Making Related Findings 25-27, Petition for Initiation of Proceeding to Examine Proposal for Continued Operation of R.E. Ginna Nuclear Power Plant, No. 14-E-0270 (N.Y. Pub. Serv. Comm'n Nov. 14, 2014), available at http;://goo.gl/TNg213; Letter from Doreen U. Saia, Attorney for Entergy Entities, to Hon. Kathleen H. Burgess, Secretary, N.Y. Pub. Serv. Comm'n at 6-7, Proceeding on Motion of the Comm'n to Examine Repowering Alts. to Util. Transmission Requirements, No. 12-E-0577 (May 27, 2014), available at http://goo.gl/5gF Qu5; Letter from David B. Johnson, Attorney for Indep. Power Producers of N.Y., Inc., to Hon. Kathleen H. Bur- gess, Secretary, N.Y. Pub. Serv. Comm'n at 4 & n.11, Dynegy Dan- skammer LLC, Petition For Waiver of the Generation Facility Retirement Notice Period & Requesting Other Related Relief, No. 13-E-0012 (Jan. 15, 2014), available at http://goo.g//G3etMi. 23 building the “world’s first coal-fueled, near-zero emissions electric power plant,” a multi-billion- dollar project.”4 2. Nevada has required electric utilities serving densely-populated counties to retire at least 800 megawatts of coal-fired generation and to con- struct, acquire, or contract for replacement ca- pacity, including at least 350 megawatts of renewable-energy facilities.25 3. Connecticut required its retail utilities to enter long-term contracts for differences with develop- ers of 678 megawatts of new “peaking” genera- tion.76 4. Rhode Island required a retail utility to solicit proposals for long-term contracts from renewa- ble generators,?? and then approved the result- ing power purchase agreements.”8 5. California required investor-owned retail utili- ties to contract with the owner of a roughly 570- 24 See Commonwealth Edison Co. v. Ill. Commerce Comm'n, 16 N.E.3d 228, 233 (Ill. App. 2014) (quotation omitted); Lance Du- roni, [1l. Court OKs Rate Hike to Fund $2B FutureGen Coal Plant, cane (uly 23, 2014), re at oe nein een 25 Nev. Rev. Stat. § 704.7316. 26 Decision, DPUC Review of Peaking Generation Projects, No. 08- 01-01, slip op. at 51 (Conn. Dep’t. Pub. Util. Control June 25, 2008), available at http://goo.g/UOf8vv. 27 RI. Gen. Laws § 39-26.1-1 et seq. % In re Review of Proposed Town of New Shoreham Project, 25 A.3d 482, 485-86 (R.I. 2011). 24 megawatt gas-fired generator to keep the plant operating when it otherwise would retire.?9 6. In a groundbreaking step, California also re- quired those utilities to procure 1,325 mega- watts of electric energy “storage” facilities—such as grid-scale batteries—with the procurements to be overseen by the state commission.*® 7 Regulators required Georgia Power to procure 525 megawatts of new solar generation by com- petitive solicitation, using an independent bid evaluator per Commission rules.*! 8. Maine allows its state commission to direct re- tail utilities to enter into long-term contracts for electric capacity and energy selected through competitive procurements.®*? 9. Massachusetts is considering a bill to require re- tail utilities to solicit up to 18,900 gigawatt- hours of clean energy per year, in addition to the state’s renewable portfolio standard require- ments, via fifteen- to twenty-five-year con- tracts.*4 29 Resolution E-4471 (Cal. Pub. Utils. Comm’n Mar. 22, 2012), available at http://goo.g/u8M7q7; Calpine Executes Contracts for Sutter Energy Center With California Utilities, Bus. Wire, May 7, 2012, available at http://goo.gl/ssgJrp. 30 See Re: Procurement Targets for Viable & Cost-Effective Energy Storage Sys., Decision No. 13-10-040, 308 P.U.R.4th 213 (Cal. Pub. Utils. Comm'n 2013). 31 Final Order, In re Ga. Power Co.’s 2013 Integrated Resource Plan, No. 36498, slip op. at 18 (Ga. Pub. Serv. Comm'n July 11, 2013), available at http://goo.gi/trbZkA. 32 Me. Rev. Stat. tit. 35-A, §§ 3210-C(3), (6). 33 An Act Relative to Clean Energy Resources, H. 4187, 188th Gen. Court, Current Sess. (Mass. 2014), available at https:// malegi . Oo 7. 25 10. More generally, twenty-nine states and the Dis- trict of Columbia have enacted enforceable re- newable portfolio standards (RPS) or similar laws,*4 which “set[] a minimum requirement for the share of electricity to be supplied from des- ignated renewable energy resources,” often tai- loring the requirement “to best fit the State’s particular resource base or local preferences.”*5 Some can be satisfied by purchasing non-FERC- jurisdictional “Renewable Energy Credits,” but others require the purchase of capacity or ener- gy from those resources.*€ The decision below casts a deep shadow over these and other mandated-purchase programs. The sheer number of state laws and procurements endangered by the decision underscores the need for immediate re- view. Deferring review now on the supposition that the % See Gwen Bredehoeft & Michelle Bowman, State Renewable Energy Requirements and Goals: Update through 2013, U.S. En- ergy Information Admin., Annual Energy Outlook 2014, a No. DOE/EIA-0383(2014), available at http://www.eia.gov/ forecasts/aeo/state_renewable.cfm (last visited Nov. 21, 2014). 35 See U.S. Energy Information Admin., Most States Have Renew- able Furtte Standards, ae in ws a 3, =m, availa- visited Nov. 21, 2014). % See U.S. P’ship for Renewable Energy Fin., Ramping up Renew- ables: Leveraging State RPS Programs amid Uncertain Federal Support 18, 24-26 (June 2012), available at http://goo.g/f6KxQw. While some RPS-driven purchases will fall under the Public Utili- ty Regulatory Policies Act of 1978 (PURPA), Pub. L. No. 95-617, 92 Stat. 3117, many will fall outside it because the resources ex- ceed PURPA’s size thresholds, see 16 U.S.C. § 796(17)(A)(ii), or because FERC has terminated PURPA purchase requirements in certain markets, e.g., United Illuminating Co., 123 FERC § 61,269, P 1 (2008). 26 issues can be considered later runs the risk that tre- mendous damage will be done in the meantime. Much of the nation’s existing generation was built decades ago and is out of step with current needs. The fleet re- quires an overhaul, and the states are the regulators with authority to oversee it. But the Third and Fourth Circuit decisions threaten existing state actions and will chill new ones, to the country’s great and lasting harm. For every day that new generation facilities are delayed, the reliability, economic, and environmental benefits they would have provided are lost forever. Ill. The decision creates a generation- planning vacuum, and will reduce investment in needed facilities. The decision below struck down Maryland’s order as conflicting with what the court perceived to be fed- eral reliance on short-term wholesale price signals to develop new generation. App. 25a. That reasoning ele- vates PJM’s auction and FERC’s capacity-sales regula- tion to power-supply planning and development roles they were never intended to have and cannot fulfill, while gutting the states’ ability to perform those jobs. The decision creates a regulatory vacuum for genera- tion planning and development—at the worst possible time. A. The decision erects barriers to long-term contracting needed to support investment. As Morgan Stanley explained, “[mJarkets are not perfect, and one of the reasons that parties enter into wholesale-power contracts is precisely to hedge against the volatility that market imperfections produce.” 554 U.S. at 547. That is especially true here where the state is seeking to induce, in a highly volatile market, a several-hundred-million dollar investment in a new 27 power plant with a useful life measured in decades. In five of the first seven auctions, capacity prices in the part of PJM where CPV’s plant will be located varied more than 20 percent from year to year.3’ Other PJM sub-regions are even more volatile, with one generator noting that during the 2013 auction capacity prices dropped more than fifty-six percent from the previous year, sending “shockwaves through the investment community and creat[ing] a great deal of uncertainty in the market.”38 Prices elsewhere may be more volatile still. The annual capacity price in New England’s most recent auction more than doubled from the previous year, increasing annual consumer costs by nearly two billion dollars.%9 This Court has explained that “uncertainties re- garding rate stability and contract sanctity can have a chilling effect on investments ... and this, in turn, can harm customers in the long run.” Morgan Stanley, 554 U.S. at 551 (citation omitted). Indeed, the “vast majori- ty” of new power plants, especially renewable-energy facilities, are built either by vertically integrated utili- ties or “with the support of long-term contracts.”4° The U.S. Chamber of Commerce agrees: “The amount of 37 See Second Performance Assessment of PJM’s Reliability Pricing Model, supra note 4, at 11-15. 38 Am. mise. Power, stnanypnand ee ae available at http:// eDE ’ sinesa/ri olatile.aspx (last visit- ed Nov. 21, 2014). 88 TSO New England, Finalized Auction Results Confirm Slight Power System Resource o_o in 2017- 2018 oe. 28, = available at e.com 36 l R © The Brattle Grp., The Importance of Long-Term Contracting for Facilitating Renewable Energy Project Development 1 (May 7, 2013) (Brattle Report), available at http://goo.g/2SA15x. 28 incremental wind or solar that gets deployed in com- petitive power markets, for instance, will depend on the ability of developers to enter into long-term con- tracts to sell the electricity from their projects.”4! By one estimate, just two percent of all new genera- tion in 2011 was built by an independent power pro- ducer based solely on wholesale market revenues.‘? An update for 2013 reached almost identical findings. Just 2.4 percent of new capacity built in 2013 was based solely on market revenues.‘3 The decision below con- signs states to exclusive reliance on markets that have neither supported construction of major new genera- tion facilities nor will be able to do so because they cov- er periods “far too short” to provide “the long-term as- assurance of revenues ... needed to adequately support generation investments.”*4 B. Neither wholesale markets nor FERC can substitute for state-supervised generation planning and contracting. Congress left the states in charge of regulating gen- eration facilities and retail utility power supply portfo- 41 U.S. Chamber of Commerce, Assessing the Impact of Potential New Carbon Regulations in the United States 29 (Inst. for 21st Century Energy 2014), available at http://www.energyxxi.org/epa- regs-report. 42 Brattle Report, supra note 39, at 10 (citing Elise Caplan, What Drives New Generation Construction? An Analysis of the Financial Arrangements behind New Electric Generation Projects in 2011, Elec. J., July 2012, at 48). 43 Am. Pub. Power Ass’n, Power Plants Are Not Built on Spec: 2014 Update 2, available at http://appanet.files.cms-plus.com/ PDFs/94 2014 Power Plant Study.pdf. 44 Mathew J. Morey et al., Ensuring Adequate Power Supplies for Tomorrow's Electricity Needs 60 (June 16, 2014), available at 29 lios because those decisions have important local con- sequences. Facilities have different effects on local air and water quality, noise levels, local economies, and a state’s ability to comply with federal environmental mandates. Neither FERC nor the organized wholesale power markets are able, legally or practically, to perform the states’ traditional power-supply planning role. FERC acknowledges that the organized wholesale markets choose resources based on price, location, and near- term reliability needs, and are blind to other important considerations. PJM Interconnection, LLC, 137 FERC { 61,145, P 90 (PJM’s capacity auction does not “recog- nize ... environmental or technological goals, nor does it contemplate reliability concerns beyond a three-year forecast.”). The wholesale markets do not attempt to promote fuel diversity.45 and FERC deems itself power- less to incorporate environmental impacts into its ratemaking decisions. Grand Council of the Crees (of Quebec) v. FERC, 198 F.3d 950, 957 (D.C. Cir. 2000). Regulators must be able to require utilities to pro- cure needed generation that the market does not elicit, and Congress reserved that authority to the states, not FERC. Congress expressly denied FERC the authority to “compel the enlargement of generating facilities,” even as a means of remedying insufficient service, FPA §§ 207, 202(b), 16 U.S.C. §§ 824f, 824a(b), and FERC cannot order a public utility to file a rate for service it has not chosen to provide, Atlantic City, 295 F.3d at 10. Corina Rivera Linares, PJM’s Boston: “World’s Largest and Fastest Fuel Change” Taking Place Now, TransmissionHub (Oct. 22, 2014), available at http://goo.gl/BWBxxM (quoting FERC Chairman LaFleur’s statement that fuel diversity “was never part of the design”). 30 Under the FPA, only the states can order utilities to build new facilities or support them by contracting with generation developers. But the decision below tramples that authority. C. The decision guts the states’ authority at the worst time. The decision below wrongly implies that losing the authority at issue here is a small thing because states may be able to support investment with non-contract incentives. See App. 23a (asserting the “limited scope” of its holding); see also Solomon, 766 F.3d at 253 & n.4. That is cold comfort. Just as volatile short-term market prices are ill-suited to inducing needed investment, the same is true of tax incentives and similar non-contract measures that can be repealed at a legislature’s whim. Durable, capital-intensive utility assets are rarely built on such shifting sands. Long-term contracts—enduring and enforceable—are required. And the need for states to be able to direct retail contracting to support new generation is about to be- come even more acute. On the same Jay the decision below was issued, the U.S. Environmental Protection Agency proposed a rule requiring each state to reduce power plant carbon dioxide emission rates by a specific amount.*® Achieving mandated cuts while preserving reliability will require the states to manage actively a major shift in their power supplies, reducing reliance on coal- and oil-fired resources and increasir~ the use of natural-gas-fired generators, renewable resources, * U.S. Envtl. Protection Agency, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Gen- erating Units, Proposed Rule, No. EPA-HQ-OAR-2013-0602 (June 2, 2014), 79 Fed. Reg. 34,829 (June 18, 2014). 31 and nuclear facilities.47 To accomplish this transfor- mation while maintaining reliability, many states will need to direct utilities to enter long-term contracts for cleaner new resources and shorter-term contracts to retain existing supplies temporarily. The decision be- low ties the states’ hands at the wo st possible time. CONCLUSION The petition for a writ of certiorari should be grant- ed. Respectfully submitted, Scott H. Strauss* Peter J. Hopkins Jeffrey A. Schwarz *Counsel of Record Spiegel & McDiarmid LLP 1875 Eye Street, NW, Suite 700 Washington, DC 20006 (202) 879-4000 scott.strauss@spiegelmcd.com 47 See U.S. Envtl. Protection Agency, Clean Power Plan Toolbox for States, http://www2.epa.gov/cleanpowerplantoolbox (last visit- ed Nov. 21, 2014). APPENDIX TABLE OF CONTENTS Appendix A: Opinion, PPL EnergyPlus LLC uv. Nazarian, 753 F.3d 467 (4th Cir. 2014).......... la Appendix B: Order No. 84815, In re Whether New Generating Facilities Are Needed to Meet Long-Term Demand for Standard Offer Service, 297 P.U.R.4th 336 (Md. Pub. Serv. Comm’n 2012).....................0.000c0000000 29a Appendix C: Memorandum of Decision, PPL EnergyPlus LLC v. Nazarian, 974 F. Supp. 2d 780 (D. Md. 2019)............................... 62a Appendix D: Order Denying Rehearing, PPL EnergyPlus LLC v. Nazarian, Nos. 13-2419, 13-2424 (4th Cir. June 30, 2014) ... 197a Appendix E: Judgment, PPL EnergyPlus LLC v. Nazarian, Nos. 13-2419, 13-2424 (4th eras 202a Appendix F: U.S. Const., art. VI, cl. 2.............. 207a Appendix G: Federal Power Act § 201, EERIE SS RES or ee 208a Appendix H: Federal Power Act § 205, 16 U.S.C. § 824d o...cccceccccecessesesseseseesesecsceeeneens 21la Appendix I: Order Granting Extension of Time to File Petition for a Writ of Certiorari, Nazarian v. PPL Energy Plus, LLC, No. 14A282 (U.S. Sept. 15, 2014). ............0..... 214a la APPENDIX A PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-2419 PPL ENERGYPLUS, LLC; PPL BRUNNER ISLAND, LLC; PPL HOLTWOOD, LLC; PPL MARTINS CREEK, LLC; PPL MONTOUR, LLC; PPL SUSQUEHANNA, LLC; LOWER MOUNT BETHEL ENERGY, LLC; PPL NEW JERSEY SOLAR, LLC; PPL NEW JERSEY BIOGAS, LLC; PPL RENEWABLE ENERGY, LLC; PSEG POWER LLC; ESSENTIAL POWER, LLC, Plaintiffs Appellees, v. DOUGLAS R.M. NAZARIAN; HAROLD WILLIAMS; LAWRENCE BRENNER; KELLY SPEAKES- BACKMAN; KEVIN HUGHES, Defendants — Appellants, and CPV MARYLAND, LLC, 2a Defendant. AMERICAN PUBLIC POWER ASSOCIATION; NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION; NRG ENERGY INC., MARYLAND OFFICE OF PEOPLE'S COUNSEL; CONNECTICUT PUBLIC UTILITIES REGULATORY AUTHORITY; CONNECTICUT DEPARTMENT OF ENERGY AND ENVIRONMENTAL PROTECTION; GEORGE JEPSEN, Attorney General for the State of Connecticut; CONNECTICUT OFFICE OF CONSUMER COUNSEL; NEW # ENGLAND CONFERENCE OF PUBLIC UTILITIES COMMISSIONERS, INC.; MAINE PUBLIC UTILITIES COMMISSION; RHODE ISLAND PUBLIC UTILITIES COMMISSION; VERMONT PUBLIC SERVICE BOARD; VERMONT DEPARTMENT OF PUBLIC SERVICE; CALIFORNIA PUBLIC UTILITIES COMMISSION; PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK (NYPSC); PUBLIC SERVICE COMMISSION OF THE DISTRICT OF COLUMBIA; DELAWARE PUBLIC SERVICE COMMISSION; NEW JERSEY BOARD OF PUBLIC UTILITIES; NEW JERSEY DIVISION OF RATE COUNSEL; MARYLAND ENERGY ADMINISTRATION; AMERICAN WIND ENERGY ASSOCIATION; THE MID- ATLANTIC RENEWABLE ENERGY COALITION, Amici Supporting Appellants, 3a PJM POWER PROVIDERS GROUP; ELECTRIC POWER SUPPLY ASSOCIATION; EDISON ELECTRIC INSTITUTE, Amici Supporting Appellees. No. 13-2424 PPL ENERGYPLUS, LLC; PPL BRUNNER ISLAND, LLC; PPL HOLTWOOD, LLC; PPL MARTINS CREEK, LLC; PPL MONTOUR, LLC; PPL SUSQUEHANNA, LLC; LOWER MOUNT BETHEL ENERGY, LLC; PPL NEW JERSEY SOLAR, LLC; PPL NEW JERSEY BIOGAS, LLC; PPL RENEWABLE ENERGY, LLC; PSEG POWER LLC; ESSENTIAL POWER, LLC, Plaintiffs - Appellees, v. CPV MARYLAND, LLC, Defendant — Appellant, and DOUGLAS R.M. NAZARIAN; HAROLD WILLIAMS; LAWRENCE BRENNER; KELLY SPEAKES-BACKMAN; KEVIN HUGHES, Defendants. 4a AMERICAN PUBLIC POWER ASSOCIATION; NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION; NRG ENERGY INC.; MARYLAND OFFICE OF PEOPLE'S COUNSEL; CONNECTICUT PUBLIC UTILITIES REGULATORY AUTHORITY; CONNECTICUT DEPARTMENT OF ENERGY AND ENVIRONMENTAL PROTECTION; GEORGE JEPSEN, Attorney General for the State of Connecticut; CONNECTICUT #£=OFFICE OF CONSUMER COUNSEL; NEW ENGLAND CONFERENCE OF PUBLIC UTILITIES COMMISSIONERS, INC.; MAINE PUBLIC UTILITIES COMMISSION; RHODE ISLAND PUBLIC UTILITIES COMMISSION; VERMONT PUBLIC SERVICE BOARD; VERMONT DEPARTMENT OF PUBLIC SERVICE; CALIFORNIA PUBLIC UTILITIES COMMISSION; PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK (NYPSC); PUBLIC SERVICE COMMISSION OF THE DISTRICT OF COLUMBIA; DELAWARE PUBLIC SERVICE COMMISSION; NEW JERSEY BOARD OF PUBLIC UTILITIES; NEW JERSEY DIVISION OF RATE COUNSEL; MARYLAND ENERGY ADMINISTRATION; AMERICAN WIND ENERGY ASSOCIATION; THE MID-ATLANTIC RENEWABLE ENERGY COALITION, Amici Supporting Appellant, PJM POWER PROVIDERS GROUP; ELECTRIC POWER SUPPLY ASSOCIATION; EDISON ELECTRIC INSTITUTE, 5a Amici Supporting Appellees. Appeals from the United States District Court for the District of Maryland, at Baltimore. Marvin J. Garbis, Senior District Judge. (1:12-cv-01286-MJG) Argued: May 13, 2014 Decided: June 2, 2014 Before WILKINSON, KEENAN, and DIAZ, Circuit Judges. Affirmed by published opinion. Judge Wilkinson wrote the opinion, in which Judge Keenan and Judge Diaz joined. ARGUED: Scott H. Strauss, SPIEGEL & MCDIARMID, LLP, Washington, D.C.; Clifton Scott Elgarten, CROWELL & MORING LLP, Washington, D.C., for Appellants. Paul D. Clement, BANCROFT, PLLC, Washington, D.C., for Appellees. ON BRIEF: H. Robert Erwin, Ransom E. Davis, Baltimore, Maryland; Peter J. Hopkins, Jeffrey A. Schwarz, SPIEGEL & MCDIARMID LLP, Washington, D.C., for Appellants Douglas R.M. Nazarian, Harold Williams, Lawrence Brenner, Kelly Speakes-Backman, and Kevin Hughes. Larry F Eisenstat, Richard Lehfeldt, Jennifer N. Waters, CROWELL & MORING LLP, Washington, D.C., for Appellant CPV Maryland, LLC. 6a Erin E. Murphy, Candice Chiu, BANCROFT PLLC, Washington, D.C., for Amici. Jesse A. Dillon, PPL SERVICES CORP., Allentown, Pennsylvania; David L. Meyer, MORRISON & FOERSTER LLP, Washington, D.C., for Appellees PPL EnergyPlus, LLC, PPL Brunner Island, LLC, PPL Holtwood, LLC, PPL Martins Creek, LLC, PPL Montour, LLC, PPL Susquehanna, LLC, Lower Mount Bethel Energy, LLC, PPL New Jersey Solar, LLC, PPL New Jersey Biogas, LLC, and PPL Renewable Energy, LLC. Tamara Linde, Vice President-Regulatory, Vaughn L. McKoy, General State Regulatory Counsel, PSEG SERVICES CORP., Newark, New Jersey; Shannen W. Coffin, STEPTOE & JOHNSON LLP, Washington, D.C., for Appellee PSEG Power, LLC. David Musselman, ESSENTIAL POWER, LLC, Princeton, New Jersey, for Appellee Essential Power, LLC. Susan N. Kelly, Senior Vice President of Policy Analysis and General Counsel, Delia D. Patterson, Assistant General Counsel, AMERICAN PUBLIC POWER ASSOCIATION, Washington, D.C.; Jay A. Morrison, Vice President, Regulatory Issues, Pamela M. Silberstein, Associate Director, Power Supply Issues, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION, Arlington, Virginia, for Amici American Public Power Association and National Rural Electric Cooperative Association. Abraham Silverman, Cortney Madea, NRG ENERGY, INC., Princeton, New Jersey; Jeffrey A. Lamken, Martin V. Totaro, Washington, D.C., Kaitlin R. O'Donnell, MOLOLAMKEN LLP, New York, New York, for Amicus NRG Energy Inc. Paula M. Carmody, William F. Fields, MARYLAND OFFICE OF PEOPLE'S COUNSEL, Baltimore, Maryland, for Amicus Maryland Office of People's Counsel. Randall L. Speck, 7a Jeffrey A. Fuisz, Kimberly B. Frank, Susanna Y. Chu, KAYE SCHOLER LLP, Washington, D.C., for Amici. Clare E. Kindall, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL, New Britain, Connecticut, for Amicus Connecticut Public Utilities Regulatory Authority. Robert D. Snook, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL, New Britain, Connecticut, for Amicus Connecticut Department of Energy and Environmental Protection. John S. Wright, Assistant Attorney General, Michael C. Wertheimer, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL, New Britain, Connecticut, for Amicus George Jepsen, Attorney General for the State of Connecticut. Elin Swanson Katz, Joseph A. Rosenthal, CONNECTICUT OFFICE OF CONSUMER COUNSEL, New Britain, Connecticut, for Amicus Connecticut Office of Consumer Counsel. Sarah Hofmann, Executive Director, NEW ENGLAND CONFERENCE OF PUBLIC UTILITIES COMMISSIONERS, _INC., Montpelier, Vermont, for Amicus New England Conference of Public Utilities Commissioners, Inc. Lisa Fink, STATE OF MAINE PUBLIC UTILITIES COMMISSION, Augusta, Maine, for Amicus Maine Public Utilities Commission. Amy K. D'Alessandro, RHODE ISLAND PUBLIC UTILITIES COMMISSION, Warwick, Rhode Island, for Amicus Rhode Island Public Utilities Commission. June Tierney, General Counsel, VERMONT PUBLIC SERVICE BOARD, Montpelier, Vermont, for Amicus Vermont Public Service Board. Edward McNamara, Regional Policy Director, VERMONT DEPARTMENT OF PUBLIC SERVICE, Montpelier, Vermont, for Amicus Vermont Department of Public Service. Frank Lindh, Candace Morey, CALIFORNIA PUBLIC 8a UTILITIES COMMISSION, San Francisco, California, for Amicus California Public Utilities Commission. Kimberly A. Harriman, Acting General Counsel, Jonathan D. Feinberg, Solicitor, Alan Michaels, Assistant Counsel, PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK, Albany, New York, for Amicus Public Service Commission of the State of New York. Richard A. Beverly, Richard S. Herskovitz, PUBLIC SERVICE COMMISSION OF THE DISTRICT OF COLUMBIA, Washington, D.C., for Amicus Public Service Commission of the District of Columbia. Kathleen Makowski, Deputy Attorney General, DELAWARE PUBLIC SERVICE COMMISSION, Dover, Delaware, for Amicus Delaware Public Service Commission. John Jay Hoffman, Acting Attorney General, Richard F. Engel, Deputy Attorney General, Lisa J. Morelli, Deputy Attorney General, Alex Moreau, Deputy Attorney General, Jennifer S. Hsia, Deputy Attorney General, NEW JERSEY DEPARTMENT OF LAW AND PUBLIC SAFETY, Trenton, New Jersey, for Amicus New Jersey Board of Public Utilities. Stefanie A. Brand, Director, NEW JERSEY DIVISION OF RATE COUNSEL, Trenton, New Jersey, for Amicus New Jersey Division of Rate Counsel. Douglas F. Gansler, Attorney General, Brent A. Bolea, Assistant Attorney General, Steven M. Talson, Assistant Attorney General, MARYLAND ENERGY ADMINISTRATION, Annapolis, Maryland, for Amicus Maryland Energy Administration. Gene Grace, AMERICAN WIND ENERGY ASSOCIATION, Washington, D.C., for Amici American Wind Energy Association and The Mid-Atlantic Renewable Energy Coalition. Glen Thomas, PJM POWER PROVIDERS GROUP, King of Prussia, Pennsylvania; John Lee Shepherd, Jr., Karis 9a Anne Gong, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Washington, D.C., for Amicus PJM Power Providers Group. David G. Tewksbury, Stephanie S. Lim, Ashley C. Parrish, KING & SPALDING LLP, Washington, D.C., for Amicus The Electric Power Supply Association. Edward H. Comer, Vice President, General Counsel and Corporate Secretary, Henri D. Bartholomot, Associate General Counsel, Regulatory and Litigation, EDISON ELECTRIC INSTITUTE, Washington, D.C., for Amicus Edison Electric Institute. WILKINSON, Circuit Judge: At issue is a Maryland program to subsidize the participation of a new power plant in the federal wholesale energy market. Appellees are energy firms that compete with this new plant in interstate commerce. They contend that the Maryland scheme is preempted under the Federal Power Act's authorizing provisions, which grant exclusive authority over interstate rates to the Federal Energy Regulatory Commission. The district court agreed. For the reasons that follow, we affirm. I. A. For much of the 20th century, the energy market was dominated by vertically integrated firms that produced, transmitted, and delivered power to end-use customers. New York v. FERC, 535 U.S. 1, 5, 122 S. Ct. 1012, 152 L. Ed. 2d 47 (2002); PPL EnergyPlus, LLC v. Nazarian, 974 F. Supp. 2d 790, 798 (D. Md. 2013) (opinion below). These firms were 10a subject to extensive local regulation, though state power in this respect was limited by the strictures of the dormant Commerce Clause. See Pub. Utils. Comm'n v. Attleboro Steam & Elec. Co., 273 U.S. 83, 89, 47 S. Ct. 294, 71 L. Ed. 549 (1927). The Federal Power Act (FPA), passed in 1935, was designed in part to fill the regulatory gap created by the dormant Commerce Clause and cover the then- nascent field of interstate electricity sales. It vests the Federal Energy Regulatory Commission (FERC) with authority over the "transmission of electric energy in interstate commerce" and the "sale of electric energy at wholesale in interstate commerce." 16 U.S.C. § 824(b)(1). Federal regulation has become increasingly prominent as the energy market has shifted away from local monopolies to a system of interstate competition. See New York, 535 U.S. at 7. Rather than ensuring the reasonableness of interstate transactions by directly setting rates, FERC has chosen instead to achieve its regulatory aims indirectly by protecting "the integrity of the interstate energy markets." N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74, 81 (3d Cir. 2014). To this end, FERC has authorized the creation of "regional transmission organizations" to oversee certain multistate markets. PJM Interconnection, LLC (PJM), superintended by FERC, administers a large regional market that (as relevant here) includes Maryland and the District of Columbia. PJM operates both energy and capacity markets. The energy market is essentially a real-time market that enables PJM to buy and sell electricity to lla distributors for delivery within the next hour or 24 hours. The capacity market is a forward-looking market, which gives buyers the option to purchase electricity in the future. In the capacity market, PJM sets a quota based on how much capacity it predicts will be needed three years hence and then relies on a Reliability Pricing Model (RPM) to determine the appropriate price per unit. Auction participants bid to sell capacity for a single year, three years in the future. PJM stacks the bids from lowest to highest and, starting at the bottom, accepts bids until it has acquired sufficient capacity to satisfy its quota. The highest-priced bid that PJM must accept to meet this quota establishes the market-clearing price. Every generator who bids at or below this level "clears" the market and is paid the clearing price, regardless of the price at which it actually bid. Existing generators are permitted to bid at zero as "price-takers," meaning they agree to sell at whatever the clearing price turns out to be. Both the capacity and energy markets are designed to efficiently allocate supply and demand, a function which has the collateral benefit of incentivizing the construction of new power plants when necessary. Clearing prices occasionally differ based on geographical subdivisions designed by FERC to stimulate new construction by signaling that certain regions are prone to supply shortages. Such price signals are not the sole mechanism for incentivizing generation, however. PJM's new _ entry price 12a adjustment (NEPA) guarantees certain new producers a fixed price for three years to "support . the new entrant until sufficient load growth [ie., increased demand] would be expected to” do so. PJM Interconnection, LLC, 128 FERC 4 61,157, at 4 101 (2009). In 2006, FERC instituted a requirement (the minimum offer price rule, or MOPR) that new generators in certain circumstances bid at or above a specified price, fixed according to the agency's estimation of a generic energy project's cost. This rule was designed to prevent the manipulation of clearing prices through the exercise of buyer market power. The MOPR originally exempted certain state-supported generators, however, and permitted them to bid at Zero. Following a complaint lodged by several competitors, FERC eliminated the exemption for state- sanctioned plants. The new rule required such plants to bid initially at the agency-specified minimum price unless they could demonstrate that their actual costs were lower than this default price. FERC held that this adjustment was necessary to protect the integrity of its markets against below-cost bids by subsidized plants that might artificially suppress clearing prices. See PJM Interconnection, LLC, 137 FERC 4 61,145, at 7 96 (2011). As these features suggest, the federal markets are the product of a finely-wrought scheme that attempts to achieve a variety of different aims. FERC rules encourage the construction of new plants and sustain existing ones. They seek to preclude state distortion of wholesale prices while preserving general 13a state authority over generation sources. They satisfy short-term demand and ensure sufficient long-term supply. In short, the federal scheme is carefully calibrated to protect a host of competing interests. It represents a comprehensive program of regulation that is quite sensitive to external tampering. B. In 1999, Maryland decided to abandon the vertical integration model and throw in its lot with the federal interstate markets. Deregulation was accomplished by the Electric Customer Choice and Competition Act, Md. Code Ann., Pub. Utils. § 7-501, et seq., which divested utilities of their generation resources, effectively compelling Maryland energy firms to participate in the federal wholesale markets. See PPL EnergyPlus, LLC, 974 F. Supp. 2d at 815. The state believed that these markets would ultimately produce more efficient and cost-effective service than traditional monopolies, thus providing state residents the benefit of lower prices. See In the Matter of Baltimore Gas and Electric Company's Proposal, Order No. 81423, at 36 (Md. Pub. Serv. Comm'n, May 2007). Maryland's decision to participate in the federal scheme and enjoy its benefits was necessarily accompanied by a relinquishment of the regulatory autonomy the state had formerly enjoyed with respect to traditional utility monopolies. Maryland soon became concerned, though, that the RPM was failing to adequately incentivize new generation. PPL EnergyPlus, LLC, 974 F. Supp. 2d at 795. To solve this perceived problem, the Maryland Public Service Commission (MPSC) solicited proposals for the construction of a new power plant. The plant 14a was to be located in the "SWMAAC zone," an area comprising part of Maryland and all of D.C., which the state believed was at heightened risk for reliability problems. In order to attract offers, the MPSC offered the successful bidder a fixed, twenty-year revenue stream secured by contracts for differences (CfDs) that the state would compel one or more of its local electric distribution companies (EDCs) to enter. Maryland's plan was ultimately formalized in the Generation Order, issued by MPSC in 2012. Intervenor-appellant Commercial Power Ventures Maryland, LLC (CPV) submitted the winning bid and was awarded the promised CfDs. The CfDs required CPV to build a plant and sell its energy and capacity on the federal interstate wholesale markets. If CPV successfully cleared the market, it would be eligible for payments from the EDCs amounting to the difference between CPV's revenue requirements per unit of energy and capacity sold (set forth in its winning bid) and its actual sales receipts. These costs would in turn be passed on to the EDCs' retail ratepayers. If CPV's receipts exceeded its approved revenue requirements, it would be obligated to pay the difference to the EDCs. The CfDs did not require CPV to actually sell any energy or capacity to the EDCs. Plaintiffs-appellees are existing power plants in competition with CPV who allege that the Generation Order is unconstitutional and has resulted in the suppression of PJM prices, a reduction in their revenue from the PJM market, and a distortion of the price signals that market participants rely on in determining whether to construct new capacity. After a six-day bench trial, the district court found the 15a Generation Order field preempted. It reasoned that the CfD payments had the effect of setting the ultimate price that CPV receives for its sales in the PJM auction, thus intruding on FERC's exclusive authority to set interstate wholesale rates. It did not reach appellees’ conflict preemption claim and rejected their dormant Commerce Clause claim. This appeal followed. Il. Plaintiffs argue that the Generation Order and the resulting CfDs are preempted by federal law under the Supremacy Clause. U.S. Const. art. VI, cl. 2. They ground this contention in two alternative theories: field preemption and conflict preemption. We address each in turn.! A. Preemption of all varieties is ultimately a question of congressional intent. Nw. Cent. Pipeline Corp. v. State Corp. Comm'n, 489 U.S. 493, 509, 109 S. Ct. 1262, 103 L. Ed. 2d 509 (1989). Here, the district court found the Generation Order invalid under the doctrine of field preemption, which applies when "Congress has legislated comprehensivelv to occupy an entire field of regulation, leaving no room for the States to supplement federal law." Jd. Actual conflict ! As a threshold matter, appellants assert that we lack jurisdiction under the filed rate doctrine. See Appellants’ Br. at 9. This claim is meritless, however, given that a judgment in plaintiffs’ favor would require this court neither “to invalidate a filed rate nor to assume a rate would be charged other than the rate adopted by the federal agency in question.” Pub. Util. Dist. No. 1 v. IDACORP Inc., 379 F.3d 641, 650 (9th Cir. 2004) (internal quotation marks omitted). 16a between a challenged state enactment and relevant federal law is unnecessary to a finding of field preemption; instead, it is the mere fact of intrusion that offends the Supremacy Clause. See N. Natural Gas Co. v. State Corp. Comm'n, 372 U.S. 84, 97-98, 83 S. Ct. 646, 9 L. Ed. 2d 601 (1963). "If Congress evidences an intent to occupy a given field, any state law falling within that field is pre-empted." Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S. Ct. 615, 78 L. Ed. 2d 443 (1984). Statutory text and structure provide the most reliable guideposts in this inquiry. See Medtronic, Inc. vu. Lohr, 518 U.S. 470, 486, 116 S. Ct. 2240, 135 L. Ed. 2d 700 (1996) ("Congress’ intent, of course, primarily is discerned from the language of the pre-emption statute and the statutory framework surrounding it.") (internal quotation marks omitted). The FPA's "declaration of policy" states: It is declared that the business of transmitting and selling electric energy for ultimate distribution to the public is affected with a public interest, and that Federal regulation of matters relating to generation to the extent provided in this subchapter and subchapter ITI of this chapter and of that part of such business which consists of the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce is necessary in the public interest, such Federal regulation, however, to extend only to those matters which are not subject to regulation by the States. 16 U.S.C. § 824(a); see also id. at § 824(b). 17a The breadth of this grant of authority is confirmed by the FPA's similarly capacious substantive and remedial provisions. For example, 16 U.S.C. § 824d(a) states that: All rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful. A wealth of case law confirms FERC's exclusive power to regulate wholesale sales of energy in interstate commerce, including the justness and reasonableness of the rates charged. "The [FPA] long has been recognized as a comprehensive scheme of federal regulation of all wholesales of [energy] in interstate commerce," Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300, 108 S. Ct. 1145, 99 L. Ed. 2d 316 (1988) (internal quotation marks omitted), and "FERC's jurisdiction over interstate wholesale rates is exclusive," Appalachian Power Co. v. Pub. Serv. Comm'n, 812 F.2d 898, 902 (4th Cir. 1987); see also New England Power Co. v. New Hampshire, 455 U.S. 331, 340, 102 S. Ct. 1096, 71 L. Ed. 2d 188 (1982).2 In 2 Schneidewind dealt with the Natural Gas Act rather than the FPA. However, because "the relevant provisions of the two statutes are in all material respects substantially identical,” the Supreme Court has adopted an “established practice of citing interchangeably decisions interpreting the pertinent sections of the two statutes.” Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578 n.7, 18a this area, "if FERC has jurisdiction over a subject, the States cannot have jurisdiction over the same subject." Miss. Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, 377, 108 S. Ct. 2428, 101 L. Ed. 2d 322 (1988) (Scalia, J., concurring in the judgment). Indeed, the Supreme Court has expressly rejected the proposition that the "scope of [FERC's] jurisdiction is to be determined by a case-by-case analysis of the impact of state regulation upon the national interest." Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 966, 106 S. Ct. 2349, 90 L. Ed. 2d 943 (1986) (quoting FPC v. S. Cal. Edison Co., 376 U.S. 205, 215, 84 S. Ct. 644, 11 L. Ed. 2d 638 (1964)) (internal quotation marks omitted). Instead, "Congress meant to draw a bright line easily ascertained, between state and federal jurisdiction ... . This was done in the [FPA] by making [FERC] jurisdiction plenary and extending it to all wholesale sales in interstate commerce except those which Congress has made explicitly subject to regulation by the States." Id. (quoting S. Cal. Edison Co., 376 U.S. at 215-16) (internal quotation marks omitted). The federal scheme thus "leaves no room either for direct state regulation of the prices of interstate wholesales of [energy], or for state regulations which would indirectly achieve the same result." N. Natural Gas Co., 372 U.S. at 91 (citation omitted). "Even where state regulation operates within its own field, it may not intrude indirectly on areas of exclusive federal authority." Pub. Utils. Comm'n v. FERC, 900 F.2d 269, 274 n.2, 283 U.S. App. D.C. 285 (D.C. Cir. 1990) 101 S. Ct. 2925, 69 L. Ed. 2d 856 (1981) (internal quotation marks omitted). 19a (internal quotation marks omitted). As a result, states are barred from relying on mere formal distinctions in "an attempt" to evade preemption and "regulate matters within FERC's exclusive jurisdiction." Schneidewind, 485 U.S. at 308. B. Applying these principles, we conclude that the Generation Order is field preempted because it functionally sets the rate that CPV receives for its sales in the PJM auction. The CfD payments, which are conditioned on CPV clearing the federal market, plainly qualify as compensation for interstate sales at wholesale, not simply for CPV's construction of a plant. Furthermore, the Order ensures -- through a system of rebates and subsidies calculated on the basis of the PJM market rate -- that CPV receives a fixed sum for every unit of capacity and energy that it clears (up to a certain ceiling). The scheme thus effectively supplants the rate generated by the auction with an alternative rate preferred by the state. See Appalachian Power Co., 812 F.2d at 904 (holding that the agreement at issue did not "set a rate per se," but that it nevertheless "sufficiently resemble[d] a filed rate to come within the realm of exclusive federal jurisdiction"). The Order thus compromises the integrity of the federal scheme and intrudes on FERC's jurisdiction. Maryland and CPV argue that the Generation Order does not actually set a rate because it does not directly affect the terms of any transaction in the federal market. Relevantly, appellants contend, the Order does not fix the rate that PJM pays to CPV for 20a its sales in the auction; instead, it merely fixes the rate that CPV receives for such sales. On the basis of this asymmetry, appellants contend that the CfD payments represent a separate supply-side subsidy implemented entirely outside the federal market. We cannot accept this argument. The case of Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, 108 S. Ct. 2428, 101 L. Ed. 2d 322 (1988), is illustrative. There, FERC ordered a utility to purchase a specified percentage of a particular generator's output. Jd. at 363. The utility petitioned Mississippi to approve an increase in its retail rates to cover the costs imposed by the order, but the state insisted that it retained the authority to determine whether the purchases were prudent before acceding to the request. Id. at 365-67. The Supreme Court rejected this argument, ruling that the state was required to treat the utility's FERC-mandated payments as "reasonably incurred operating expenses for the purpose of setting” the utility's retail rates. Jd. at 370; see also Nantahala Power & Light Co., 476 U.S. 953, 106 S. Ct. 2349, 90 L. Ed. 2d 943 (rejecting a similar state effort to bar a utility from passing FERC- mandated wholesale rates through to consumers). Mississippi's prudence review was preempted because it denied full effect to the rates set by FERC, even though it did not seek to tamper with the actual terms of an interstate transaction. As the district court recognized, see PPL EnergyPlus, LLC, 974 F. Supp. 2d at 831, the principles articulated in Mississippi Power & Light Co. apply with equal force to this dispute. If states are required to give full effect to FERC-mandated 2la wholesale rates on the demand side of the equation, it stands to reason that they are also required to do so on the supply side. Here, the contract price guaranteed by the Generation Order supersedes the PJM rates that CPV would otherwise earn -- rates established through a FERC-approved market mechanism. The Order ensures that CPV receives a fixed price for every unit of energy and capacity it sells in the PJM auction, regardless of the market price. The fact that it does not formally upset the terms of a federal transaction is no defense, since the functional results are precisely the same. As in the above-mentioned cases, Maryland has "eroded the effect of the FERC determination and undermined FERC's exclusive jurisdiction." Appalachian Power Co., 812 F.2d at 904. Our conclusion that the Generation Order "seeks to regulate a field that the [FPA] has occupied also is supported by the imminent possibility of collision between" the state and federal regimes. Schneidewind, 485 U.S. at 310. While the potential for collision between the two schemes is discussed in detail in Part D, a high probability of conflict tends to suggest that Congress intended federal authority in a particular field to be uniform and exclusive. See id. Even if "collision between the state and federal regulation" in this case is not "an inevitable consequence," it is sufficiently likely to warrant invalidating the Maryland program "in order to assure the effectuation of the comprehensive federal regulation ordained by Congress." N. Natural Gas Co., 372 U.S. at 92. 22a Appellants argue that this court should apply a robust version of the presumption against preemption to save the Maryland scheme. See, e.g., Intervenor- Appellant's Br. at 14. As its name suggests, this presumption militates against findings of federal preemption, especially in areas of traditional state authority. See Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 91 L. Ed. 1447 (1947). However, the presumption "is not triggered when the State regulates in an area where there has been a history of significant federal presence." United States v. Locke, 529 U.S. 89, 108, 120 S. Ct. 1135, 146 L. Ed. 2d 69 (2000). The presumption "is almost certainly not applicable here because the federal government has long regulated wholesale electricity rates." IDACORP Inc., 379 F.3d at 648 n.7. Nevertheless, even were we to apply the presumption, we would find it overcome by the text and structure of the FPA, which unambiguously apportions control over wholesale rates to FERC. Appellants emphasize the FPA's decree that FERC "shall not have jurisdiction, except as specifically provided in this subchapter and subchapter III of this chapter, over facilities used for the generation of electric energy." 16 U.S.C. § 824(b)(1). They contend that the Generation Order falls on the state side of the jurisdictional line, since it is designed to ensure that Maryland enjoys an adequate supply of generation capacity. Although states plainly retain substantial latitude in directly regulating generation facilities, they may not exercise this authority in a way that impinges on FERC's exclusive power to specify 23a wholesale rates. As the Supreme Court noted in a similar context: [T]he problem of this case is not as to the existence or even the scope of a State's power to [regulate generation facilities]; the problem is only whether the Constitution sanctions the particular means chosen by [the state] to exercise the conceded power if those means threaten effectuation of the federal regulatory scheme. N. Natural Gas Co., 372 U.S. at 93. Here, Maryland has chosen to incentivize generation by setting interstate wholesale rates. This particular choice of means is impermissible. Wholesale energy prices "fixed by FERC must be given binding effect by state authorities" even "in areas subject to state jurisdiction." California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 851 (9th Cir. 2004) (internal quotation marks omitted). Nonetheless, it is important to note the limited scope of our holding, which is addressed to the specific program at issue. We need not express an opinion on other state efforts to encourage new generation, such as direct subsidies or tax rebates, that may or may not differ in important ways from the Maryland initiative. It goes without saying that not "every state statute that has some indirect effect" on wholesale rates is preempted, Schneidewind, 485 U.S. at 308, for "there can be little if any regulation of production that might not have at least an incremental effect on the costs of purchasers in some market," Nw. Cent. Pipeline Corp., 489 U.S. at 514. In this case, however, the effect of the 24a Generation Order on matters within FERC's exclusive jurisdiction is neither indirect nor incidental. Rather, the Order strikes at the heart of the agency's statutory power to establish rates for the sale of electric energy in interstate commerce, see 16 U.S.C. § 824e(a), by adopting terms and prices set by Maryland, not those sanctioned by FERC. D. Appellants’ position is further complicated by the fact that the principles of field and conflict preemption in this case are mutually reinforcing. As relevant here, conflict preemption 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." Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 373, 120 S. Ct. 2288, 147 L. Ed. 2d 352 (2000) (internal quotation marks and alterations omitted). "What is a sufficient obstacle is a matter of judgment, to be informed by examining the federal statute as a whole and identifying its purpose and intended effects." Id. "A state law may pose an obstacle to federal purposes by interfering with the accomplishment of Congress's actual objectives, or by interfering with the methods that Congress selected for meeting those legislative goals." College Loan Corp. v. SLM Corp, 396 F.3d 588, 596 (4th Cir. 2005). (emphasis omitted). In a system of “interlocking” jurisdiction, such as that created by the FPA, "[ijt is inevitable that jurisdictional tensions will arise” -- even if each sovereign formally remains within the confines of its 25a “assigned sphere." Nw. Cent. Pipeline Corp., 489 U.S. at 506, 515 & n.12 (internal quotation marks and alteration omitted). "Thus, conflict-pre-emption analysis must be applied sensitively in this area, so as to prevent the diminution of the role Congress reserved to the States while at the same time preserving the federal role." Jd. at 515. Here, "the impact of state regulation of production on matters within federal control is so extensive and disruptive of" the PJM markets that preemption is appropriate. Id. at 517-18. As an initial matter, the Generation Order has the potential to seriously distort the PJM auction's price signals, thus "interfer[ing] with the method by which the federal statute was designed to reach its goals." IDACORP Inc., 379 F.3d at 650. PJM's price signals are intended to promote a variety of objectives, including incentivizing new generation sources. See PJM Interconnection, LLC, 132 FERC 4 61,173, at 61,870 (2010); see also PPL EnergyPlus, LLC, 974 F. Supp. 2d at 813. Market participants necessarily rely on these signals in determining whether to construct new capacity or expand existing resources. The signals appear to be serving their purpose; according to FERC, the evidence "suggests that RPM has in fact succeeded in securing sufficient capacity to meet reliability requirements for the PJM _ region." PJM Interconnection, LLC, 137 FERC 4 61,145, at 4 3 (2011). Maryland's initiative disrupts this scheme by substituting the state's preferred incentive structure for that approved by FERC. See PPL EnergyPlus, LLC v. Hanna, No. 11-745, 977 F. Supp. 2d 372, 2013 U.S. Dist. LEXIS 147273, 2013 WL 5603896, at *36 (D.N.J. 26a Oct. 11, 2013) (describing the distorting impact of a similar New Jersey program on the business decisions of private participants in the PJM auctior). Two features of the Order render its likely effect on federal markets particularly problematic. First, as noted, the CfDs are structured to actually set the price received at wholesale. They therefore directly conflict with the auction rates approved by FERC. Second, the duration of the subsidy -- twenty years -- is substantial. The Order is preempted for the further reason that it conflicts with NEPA, which represents an exception to PJM's otherwise steadfast commitment to a uniform market clearing price. In order to stimulate plant construction, NEPA carves out a three-year period during which certain new generators are eligible to receive a fixed price for the capacity they sell in the PJM markets. See PJM Interconnection, LLC, 128 FERC 4 61,157, at 9 92 (2009). CPV petitioned FERC to extend the NEPA period to ten years on the grounds that the three-year period was insufficient to achieve its objective. Jd. at § 93. FERC rejected CPV's request, stating that "[bjoth new entry and retention of existing efficient capacity are necessary to ensure reliability and both should receive the same price so that the price signals are not skewed in favor of new entry." Id. at § 102. The Generation Order represents an effort by the state to directly override this explicit policy choice. As a functional matter, the CfDs extend the NEPA period for CPV to twenty years, a duration vastly exceeding the current NEPA term and double the term that CPV unsuccessfully requested FERC to institute. Maryland has sought to achieve through the backdoor 27a of its own regulatory process what it could not achieve through the front door of FERC proceedings. Circumventing and displacing federal rules in this fashion is not permissible. Appellants assert that no conflict is present because FERC explicitly accommodated -- via the MOPR -- the participation of subsidized plants in its auction. See, e.g., Intervenor-Appellant's Reply Br. at 23. The fact that FERC was forced to mitigate the Generation Order's distorting effects using the MOPR, however, tends to confirm rather than refute the existence of a conflict. Furthermore, FERC's own comments on the subject belie appellants’ claim that the agency has affirmatively approved the Generation Order. See PJM Interconnection, LLC, 137 FERC at 4 3 ("Our intent is not to pass judgment on state and local policies and objectives with regard to the development of new capacity resources... ."). As was the case with our field preemption holding, our conflict preemption ruling is narrow and focused upon the program before us. Obviously, not every state regulation that incidentally affects federal markets is preempted. Such an outcome "would thoroughly undermine precisely the division of the regulatory field that Congress went to so much trouble to establish .. . , and would render Congress’ specific grant of power to the States to regulate production virtually meaningless." Nw. Cent. Pipeline Corp., 489 U.S. at 515. The Generation Order, however, is simply a bridge too far. It presents a direct and transparent 28a impediment to the functioning of the PJM markets, and is therefore preempted.’ Ill. For the foregoing reasons, we hold the Generation Order preempted under federal law and affirm the judgment of the district court. AFFIRMED 3 Our conclusion that the Generation Order is preempted renders it unnecessary for us to reach plaintiffs’ dormant Commerce Clause arguments, which were rejected by the district court. See Schneidewind, 485 U.S. at 311 ("Because we have concluded that Act 144 is pre-empted by the NGA, we need not decide whether, absent federal occupation of the field, Act 144 violates the Commerce Clause."). 29a APPENDIX B ORDER NO. 84815 IN THE MATTER OF BEFORE THE WHETHER NEW PUBLIC SERVICE GENERATING COMMISSION FACILITIES ARE OF MARYLAND NEEDED TO MEET LONG- TERM CASE NO. 9214 DEMAND FOR STANDARD OFFER SERVICE Issue Date: April 12, 2012 Among our most important responsibilities as regulators is to ensure that electricity is available to all Maryland ratepayers, whenever and wherever they need it. Electric service is no longer a luxury reserved for the wealthy few -- it is the life blood of modern society. Our primary statutory mandate is to assure "safe, adequate, reasonable and proper service for any class of public service company. ._,”! including Maryland's electric companies. Put another way, the public expects us to keep the lights on (and water treatment plants, and heat pumps, and air conditioners, and medical equipment, and everything else on which we depend) in Maryland. The General Assembly has given us tools to fulfill that obligation, and in doing so has expressed the distinct 1 Maryland Code Annotated, Public Utilities Article ("PUA"), § 5-101(a) (emphasis added). 30a expectation that we will use those tools when appropriate rather than relying blindly on the operation of market forces. Our concern about the adequacy of electric generation in Maryland began with the Public Service Commission's ("Commission") Summer 2007 Electricity Planning Conference,? and while it has been postponed by subsequent exogenous events, it has not disappeared. Consequently, for the reasons set forth below, in this Order we direct Baltimore Gas and Electric Company ("BGE"), Potomac Electric Power Company ("Pepco"), and Delmarva Power & Light Company ("Delmarva") to enter into a Contract for Differences with CPV Maryland, LLC ("CPV"), under which CPV will construct a 661 megawatt (MW) natural gas-fired combined-cycle generation plant in Waldorf in Charles County, Maryland, with a commercial operation date of June 1, 2015. Procedural Background We initiated this case on September 29, 2009, by Order No. 82936, "to investigate whether [the Commission] should exercise its authority to order electric utilities to enter into long-term contracts to anchor new generation or to construct, acquire, or lease, and operate, new electric generating facilities in Maryland.”3 We initially directed parties interested in making proposals for new generating 2 In the Matter of the Commission's Maryland Electricity Planning Conference, Public Conference No. PC 9. 3 In the Matter of Whether New Generating Facilities are Needed to Meet Long-Term Demand for Standard Offer Service, Case No. 9214, Order No. 82936, pp. 2-3. 3la facilities to file such proposals by December 1, 2009, but we subsequently tolled the filing date.‘ After reviewing comments filed in the case, on December 29, 2010, the Commission prepared a draft Request for Proposals for New Generation ("RFP") and invited comments on the draft.5 Nearly thirty parties filed comments addressing the draft RFP. As a result of those comments, the Commission made changes in the RFP and on September 29, 2011 directed BGE, Pepco, Delmarva, and The Potomac Edison Company ("PE") to issue the modified RFP *® In the Notice to Issue the RFP, the Commission noted that it would hold a hearing on January 31, 2012 on the need for new generation and, if required, the amount needed, and invited any written comments to be filed by January 13, 2012. As a result of some of the early comments and questions concerning the RFP and its schedule for bids, the Commission issued an Amended RFP on December 8, 2011, which extended the due dates for bids to January 20, 2012, and encouraged each bidder to submit two proposals, one for a fixed gas price offering and another for a variable gas price offering. Twenty parties availed themselves of the opportunity to file comments 4 Id., Notice of Tolling Submission Date of Proposals, Nov. 10, 2009. 5 Id., Notice of Comment Period on Request for Proposals for New Generating Facilities, Dec. 29, 2010. 8 Id. Notice of Approval of Request for Proposals for New Generation to be Issued by Maryland Electric Distribution Companies, Sep. 29, 2010. The comments received and the changes to the draft RFP are summarized in the Notice and will not be repeated here. 32a concerning the need for new generation.’ Fourteen of those parties testified at the January 31, 2012 hearing and answered the Commission's questions.® Finally, several parties have filed Motions in the case. On October 21, 2011, Northland Power Inc. and Eastaico Aluminum Company each filed a Request to Modify the RFP On October 31, 2011, Pepco and Delmarva filed an Application for Rehearing. On January 25, 2012, NRG Energy, Inc. filed a Motion to Postpone Procurement of New Generation. Each of these Motions will be addressed in this Order. ’ Written comments were filed by: GE Energy; PJM Power Providers Group (P3); BGE; Genon Mid-Atlantic, LLC; Exelon Corporation; Calpine Corporation; Office of People's Counsel C‘OPC"); CPV Maryland, LLC ("CPV"); Commission's technical staff ("Staff’ ); PJM Interconnection, LLC ("PJM"); PSEG Energy Resources & Trade LLC ("PSEG"); Pepco & Delmarva (Joint Comments); PE; The Electric Power Supply Association ("EPSA"); Retail Energy Supply Association ("“RESA"); Sierra Club & Chesapeake Climate Action Network (Joint Comments); Maryland Energy Administration ("MEA"); PPL Energy Plus, LLC ("PPL"); and the Independent Market Monitor for PJM ("IMM"). In response to a Commission request, PJM filed Supplemental Comments on Jan. 31, 2012. CPV filed additional comments following the hearing, on February 6, 2012. In addition, Boston Pacific filed its Evaluation Report dated August 12, 2011 and the Governor filed a letter concerning the RFP on Oct. 20, 2011. Finally, on March 29, 2012 the four Maryland Electric Distribution Companies ("EDCs") -- BGE, Pepco, Delmarva, and PE -- filed a letter expressing technical concerns with the Contract for Differences. 8 The following parties testified at the hearing: Boston Pacific; PJM; the IMM; MEA; OPC; Staff; Sierra Club & Chesapeake Climate Action Network; Pepco & Delmarva; CPV; NRG Energy, Inc.; EPSA; PPL; P3; and GE Energy. 33a The RFP In the Amended RFP, dated December 2, 2011, the EDCs seek bids for new, natural gas-fired Generation Capacity Resources (as defined by PJM) to be located inside the Southwest MAAC Locational Deliverability Area. The RFP seeks proposals in any quantity not to exceed 1,500 MW on an installed capacity basis, to be operational no earlier than June 1, 2015 and no later than June 1, 2017 '° The RFP requires the Supplier to offer and deliver the generation output into the PJM capacity, energy and ancillary services markets, and the EDCs do not take physical delivery of the generation.'! The Supplier must bid the capacity into the PJM Base Residual Auction ("BRA") "in accordance with BRA rules and regulations as they exist throughout the term of the Contract. The Supplier will not be paid for any year in which the Supplier's Generation Capacity Resource does not clear the BRA."!2 Thus, the risk of not clearing in the BRA is left on the Supplier, not ratepayers. Anyone is eligible to bid, provided they meet the PJM membership requirements and are willing to meet the RFP contractual requirements. !3 The RFP specifies that the Supplier and the EDC will enter into a financial arrangement under a Contract for Differen [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0312%3A02. Public record. Not legal advice.