Opposition Brief — Nazarian v. PPL Energyplus, LLC, 135 S. Ct. 1582 (2015) (No. 14-614)

Nos. 14-614, 14-623

In the

Supreme Court of the United States

DOUGLAS R. M. NAZARIAN, et al.,

Petitioners,

Vv

PPL ENERGYPLUS, LLC, et al.,

Respondents.

CPV MARYLAND, LLC,

Petitioner,

V

PPL ENERGYPLUS, LLC, et ai.,

Respondents.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Fourth Circuit

BRIEF IN OPPOSITION

PAUL D. CLEMENT

Counsel of Record

ERIN E. MURPHY

CANDICE C. WONG

BANCROFT PLLC

1919 M Street NW, Suite 470

Washington, DC 20036

(202) 234-0090

pclement@bancroftplic.com

Counsel for Respondents

(Additional Counsel Listed on Inside Cover)

February 11, 2015

TAMARA LINDE

Executive Vice President

and General Counsel

PSEG SERVICES CORP

80 Park Plaza

Newark, NJ 07102

SHANNEN W COFFIN

STEPTOE &

JOHNSON LLP

1330 Connecticut Ave. NW

Washington, DC 20036

Counsel for

PSEG Power, LLC

JESSE A. DILLON

Assistant General Counsel

PPL SERVICES CORP.

Two N. Ninth Street

Allentown, PA 18101

DAVID L. MEYER

MORRISON & FOERSTER

2000 Pennsy!vania Ave. NW

Suite 6000

Washington, DC 20006

Counsel for

The PPL Companies

DAVID MUSSELMAN

Associate General Counsel

ESSENTIAL POWER, LLC

150 College Road West

Princeton, NJ 08540

Counsel for

Essential Power, LLC

QUESTION PRESENTED

Whether the Court of Appeals correctly concluded

that a novel state scheme that guarantees a generator

a price different from the price approved by the

Federal Energy Regulatory Commission (“FERC”) for

its electricity and capacity sales into the federally

regulated wholesale market intrudes upon FERC’s

exclusive jurisdiction over rates “received ... for or in

connection” with wholesale sales. 16 U.S.C. §824d(a).

ll

PARTIES TO THE PROCEEDING

Petitioners are CPV Maryland, LLC; and the

Chairman and Commissioners of the Maryland Public

Service Commission (at the time of the relevant

orders, Douglas R.M. Nazarian, Harold Williams,

Lawrence Brenner, Kelly Speakes-Backman, and W.

Kevin Hughes), who were sued in their official

capacities as Chairman.

Respondents are 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; Public

Service Electric and Gas Company (PSEG Power

LLC); and Essential Power, LLC.

il

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6, respondents state:

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 (“PPL Parties”), are wholly-owned, indirect

subsidiaries of PPL Corporation, a publicly traded

corporation. No other publicly-held company has a

10% or greater ownership interest in the PPL Perties

or PPL Corporation.

Public Service Electric and Gas Company

(“PSE&G”) is a wholly-owned subsidiary of Public

Service Enterprise Group Incorporated, a publicly

traded corporation. No other publicly held company

has a 10% or greater ownership interest in Public

Service Electric and Gas Company or Public Service

Enterprise Group Incorporated.

Essential Power, LLC, formerly known as North

American Energy Alliance, LLC, is a Delaware limited

liability company. No publicly held corporation holds

an interest in Essential Power, LLC.

iv

TABLE OF CONTENTS

ty tb: : | i

PARTIES TO THE PROCEEDING ...................0000..4. ii

CORPORATE DISCLOSURE STATEMENT........... iii

, REE Vv

TE SEE ne er 1

STATEMENT OF THE CASE .............:cccccccssssseeseeeees 3

A. Federal Regulatory Background.................. 3

B. The Rapid Expansion of the Federal

RSE EEERERRE Vance Seas mee 5

C. PJM and the Reliability Pricing Mode)....... 7

D. Maryland’s Generation Order.................... 10

E. Procedural Background.............................- 12

REASONS FOR DENYING THE PETITIONS....... 15

I. This Factbound, Splitless Case Does Not

Merit This Court’s Review .....................c000000008+ 15

A. The Carefully Circumscribed Decision

Below Accords With Well-Settled and

Unchallenged Preemption Principles ........ 15

B. The Decision Accords With FERC’s View.. 18

C. Petitioners’ Pleas for Error Correction

teint al tcninrdhietldtliiati 21

Il. The Decision Below Is Consciously Narrow

And Lacks Exceptional Importance.................. 28

IE irsiciisicnsictsincinincnticinniaistieinninntionetdneneneninened 32

Vv

TABLE OF AUTHORITIES

Cases

Arizona v. United States,

EE a ne ae 25

Ark. Elec. Coop. Corp.

v. Ark. Pub. Serv. Comm'n,

Se ies Mion denenencnitinpnmiinndantininenian 25

Atl. City Elec. Co. v. FERC,

296 F.3d 1 (D.C. Cir. 2002)..........ccccsccccssssecseees 21, 22

Conn. Dep't of Pub. Util. Control v. FERC,

569 F.3d 477 (D.C. Cir. 2009)...............00000s0000 22, 23

Graver Tank & Mfg. Co.

v. Linde Air Prods. Co.,

A ee ee eee Ee 16

Gulf States Utils. Co. v. FPC,

RES See aren m a 4

Medtronic, Inc. v. Lohr,

SSE SEA Re a eI een an an ae 18

Miss. Indus. v. FERC,

BES F-Be BEES GAC. Cie. 1667) .......cccocccccccccceseccesess: 5

Miss. Power & Light Co.

v. Mississippi ex rel. Moore,

I uous 24

Morgan Stanley Capital Grp. Inc.

uv. Pub. Util. Dist. No. 1

of Snohomish Cnty.,

I ele 25

N.J. Bd. of Pub. Utils. v. FERC,

Pe ae Fe I Ce iitdictercecctensecnerneninemencios 20

vi

New York v. FERC,

I i 3,5

PPL EnergyPlus, LLC v. Solomon,

RE Se ae RT AT 14

Pub. Utils. Comm’n of RI.

vu. Attleboro Steam & Elec. Co..,

| REEF IRERSSTEES SS I ean RAS ONS aR oes Ra 4

Silkwood v. Kerr-McGee Corp.,

ETI UE ER ERED Se Be DO RN Pe 25

Statutes

SLO AEE TTOR 15

Le SEE EE RAED Te Re EN IS, 4,5

a TIT ininaeteeciahalnintiignceinealatdcapseeadi passim

tA eR te sania Sor, Me east Sea 4

Other Authorities

Entergy Servs., Inc.,

120 FERC 961,020 (2007)...........0......0000000000..0000e000 25

Jeff Newman, CPV breaks ground on gas

plant, Gazette.Net (Dec. 3, 2014) ...............ccccce. 31

PJM Interconnection, L.L.C.,

fo, kt eee 10, 17

PJM Interconnection, L.L.C.,

128 FERC 961,157 (2008)......................0000...00000 9, 10

PJM Interconnection, L.L.C.,

ee I I OR icncciccctccccoccnccosccssecccosccsies 20

RENE ET eR RID 26

Appellees’ Br., PPL EnergyPlus, LLC

v. Solomon, No. 13-4330

I I 28

vl

U.S. Br., PPL EnergyPlus, LLC v. Solomon,

No. 13-4330 (3d Cir. Mar. 20, 2014).........000000000..

S.B. 400, 2007 Reg. Sess. (Md.),

Ot ISTE STI GID 00.00000c0csccccscccsccccccsccesscceses

INTRODUCTION

This case involves an avowedly narrow decision

resolving a factbound preemption question on which

there is no division in authority. Indeed, although

New Jersey and Maryland embarked on a similar

course that was challenged in cases on parallel tracks

through the Third and Fourth Circuits, the

unanimous judgment of all four courts—two district

and two circuit—and all eight judges who have

weighed in on the issue is that the novel state-

mandated contractual mechanisms adopted by New

Jersey and Maryland are preempted. As the courts

have all recognized, these naked efforts to guarantee

in-state generators a price for wholesale electricity

sales into the federally regulated wholesale market

that is different from the rate set by the prevailing

federal regulatory mechanisms are _ squarely

preempted by FERC’s exclusive jurisdiction over

wholesale rates. That conclusion is a straightforward

application of the unremarkable proposition that,

even when it comes to matters within the states’

legitimate authority, such as_ regulating or

incentivizing generating facilities, means matter as

well as ends. And whatever else a state may do to

encourage new generation, it may not dictate the rates

and terms of wholesale sales.

In fact, petitioners do not even dispute that legal

principle; instead, they just fight the premise that

Maryland actually set wholesale rates. But the courts

below resolved that dispute in respondents’ favor for

good reason: By forcing in-state utilities to guarantee

a new generator a rate fixed by the state for each unit

of electricity or capacity that it sells into the interstate

2

wholesale market for 20 years—regardless of the

prices set by that market through its FERC-approved

auction mechanism—Maryland simply replaced

FERC’s rates and terms with ones more to its liking.

Moreover, Maryland made no secret about the fact

that it guaranteed a preferred generator this fixed,

long-term price in an effort to “improve” on a federal

marketplace with which the state was dissatisfied.

Indeed, the state resorted to this measure only after

FERC explicitly rejected its request to adopt the very

same long-term pricing guarantee mechanism as a

federal regulatory solution. It does not take an

“extravagant” view of the Federal Power Act to

recognize that it preempts this direct and transparent

incursion on FERC’s exclusive authority over rates

“received ... for or in connection with” wholesale sales.

That does not mean that states are without tools

to incentivize new _ generation. States retain

substantial latitude in such matters—including

latitude to retreat from the federal wholesale market

entirely if they no longer believe that it is serving their

interests. FERC itself stressed this point in its amicus

brief before the Third Circuit opining that this

particular form of state action is preempted, and every

court to consider this issue has been at pains to

emphasize the same. Petitioners’ dire warnings that

the decision below endangers a laundry list of other

incentive schemes thus falls flat. Indeed, the Fourth

Circuit explicitly disclaimed any effort to pass

judgment on the myriad other programs to which

petitioners have sought to analogize throughout this

litigation. Instead, the court simply reiterated that,

whether for the best of reasons, the worst of reasons,

or any reason in between, states simply do not have

3

the authority to set the rates and terms of wholesale

transactions. That manifestly correct conclusion does

not warrant this Court’s review.

STATEMENT OF THE CASE

A. Federal Regulatory Background

Historically, state electricity markets were

“vertically integrated,” meaning utilities were

responsible both for delivering electricity to customers

and for generating the electricity that they delivered.

See New York v. FERC, 535 U.S. 1, 5 (2002). Because

their operations were almost exclusively intrastate,

these vertically integrated markets were heavily

regulated by states, which set the rates that a utility

could charge retail customers based on costs the utility

incurred in generating, transmitting, and delivering

electricity.

Because electricity demand fluctuates at different

times of year, an electricity supplier must be equipped

to serve not just relatively static demand, but also

significantly increased demand during peak periods.

Traditionally, vertically integrated utilities did this by

building generating plants intended to operate only

when demand was at its peak—even if that meant

they operated as little as 20 or 30 hours a year. The

obvious inefficiencies of numerous companies with

underutilized peak generating facilities soon led

utilities to look for ways to sell excess electricity to

each other, in hopes of diminishing costs attributable

to too many plants spending most of the year idle. To

facilitate this “wholesale” market, utilities began

building high voltage transmission lines across which

electricity could be transferred from utility to utility

for ultimate retail sale.

4

As these wholesale transactions began to cross

state lines, the question arose whether states had

authority to regulate them, or whether the dormant

Commerce Clause reserved this nascent interstate

market to the federal government. This Court

answered that question in Public Utilities Commission

of Rhode Island v. Attleboro Steam & Electric Co., 273

U.S. 83, 89 (1927). Reasoning that these wholesale

transactions are “fundamentally interstate from

beginning to end,” the Court concluded that the

dormant Commerce Clause prohibited states from

regulating them, and held that such regulation could

come only from “exercise of the power vested in

Congress.” Jd. at 89-90.

Congress responded with the Federal Power Act

of 1935 (“FPA”), which established a new federal

agency (then the Federal Power Commission, now

FERC) charged with providing “effective federal

regulation of the expanding business of transmitting

and selling electric power in interstate commerce.”

Gulf States Utils. Co. v. FPC, 411 U.S. 747, 758 (1973).

Section 201(b) of the FPA grants FERC exclusive

jurisdiction over “the transmission of electric energy

in interstate commerce” and “the sale of electric

energy at wholesale in interstate commerce,”

including the power to determine what “rates and

charges made, demanded, or received ... for or in

connection with the transmission or sale” of electricity

at wholesale are “just and reasonable.” 16 U.S.C.

§§824(b), 824d(a), 824e.

Section 201(b) further provides that FERC has

jurisdiction over “all facilities for such transmission or

sale of electric energy, but shall not have jurisdiction,

5)

except as specifically provided in this subchapter and

subchapter III of this chapter, over facilities used for

the generation of electric energy or over facilities used

in local distribution or only for the transmission of

electric energy in intrastate commerce, or over

facilities for the transmission of electric energy

consumed wholly by the transmitter.” Id. §824(b)(1)

(emphasis added). That proviso underscored that

Congress recognized the interrelationship between in-

state generation and interstate sales and

transmission; while Congress preserved traditional

state authority over generation and intrastate

transmission, it consciously subordinated state

authority to FERC’s power to regulate interstate

transmissions and wholesale sales. See Miss. Indus.

vu. FERC, 808 F.2d 1525, 1545 n.74 (D.C. Cir. 1987)

(“[FERC] has been awarded jurisdiction over

generation facilities ‘to the extent provided in other

sections,’ including jurisdiction necessary to effectuate

regulation of interstate wholesale rates”).

B. The Rapid Expansion of the Federal

Wholesale Market

Although the wholesale market continued to

expand modestly over the years, it remained largely

ancillary to the traditional vertically integrated

regime. That began to change, however, in recent

decades with several federal initiatives that forced the

vertically integrated utilities that owned the

interstate transmission lines to provide wholesale

generators with access to those lines on a non-

discriminatory basis. See generally New York, 535

U.S. at 6-10. These and other regulatory measures

6

paved the way for explosive growth in wholesale

transactions over the past two decades.

As this expanded wholesale marketplace took

shape, states began to question whether vertical

integration still made sense. Many (but by no means

all) states ultimately opted to restructure their

electricity industries by disentangling their utilities’

generation, transmission, and distribution functions

and ordering utilities to open their distribution

networks to competitors. By allowing generators to

sell the bulk of their electricity into, and retail

suppliers to purchase the bulk of their electricity out

of, the interstate wholesale market, these states

reaped the benefits of lower prices resulting from a

more competitive market. At the same time, by

rendering their local electricity markets largely

dependent on the federally regulated wholesale

market, states necessarily ceded much of their

traditional regulatory authority.

In 1999, Maryland embraced this new model.

Through the Electric Customer Choice and

Competition Act, it restructured its market so that

electricity sold in Maryland would be purchased from

the interstate wholesale market, rather than

generated by vertically integrated utilities.

Consumers, in turn, would “benefit more from a

competitive market for their electricity rather than

being captive to a single utility that had a monopoly

on their electricity service.” PX606 at 36 (PSC Order

No. 81423). Regulated utilities known as electric

distribution companies (“EDCs”) now purchase

electricity at wholesale and resell and deliver it to

consumers over local distribution networks.

7

The significance of its decision to do away with

vertical integration was not lost on Maryland. By

spinning off its “utilities’ generating assets,”

Maryland ensured that “electricity previously subject

to traditional rate-of-return regulation (in which the

PSC set the utility’s profit through a state regulatory

proceeding) would now be purchased ... in the

federally regulated wholesale electricity market.”

PX391 at 10 (2007 PSC Interim Report). And by

relying on the wholesale market, the state anticipated

that it would no longer “evaluate the need for new

generation stations in Maryland”, “that need is

determined by the marketplace” instead. JA248. In

short, the state consciously opened itself up not just to

the “benefit [of] a competitive market,” PX606 at 36,

but also to the risks of participation in a federal

market that the state could not regulate.

C. PJM and the Reliability Pricing Model

As the interstate wholesale market expanded,

FERC encouraged participants to organize regional

transmission organizations (“RTOs”) to facilitate

wholesale market operations in large portions of the

country. PJM Interconnection, LLC, (“PJM”) is the

RTO that operates the wholesale market for a region

comprising all or part of 13 states, including

Maryland, and the District of Columbia. Subject to

FERC’s oversight and approval, PJM ensures that its

wholesale market will supply all retail sellers within

PJM enough electricity to meet consumer demand.

Among other things, PJM operates a wholesale

electricity market in which generation resources sell

electricity to PJM. PJM then sells that electricity to

load serving entities (“LSEs”), which resell it to

8

consumers to meet energy demands. To participate in

this market, generation resources bid their electricity

into a market for delivery either in the next hour or

the next 24 hours. PJM then accepts bids from lowest

to highest until it has enough electricity The highest

bid PJM must accept to satisfy the region’s needs

becomes the “market clearing price.” Each resource

that bid at or below that price will be paid the market

clearing price for all of its electricity, even if its bid

was lower.

PJM also operates a market for “capacity”—that

is, for the option to buy electricity to satisfy future

demand. To ensure that sufficient capacity will be

available throughout the region, PJM employs an

auction mechanism known as the reliability pricing

model (“RPM”). RPM’s central feature is a competitive

auction that PJM holds annually for a year three years

in the future. PJM determines how much capacity the

region will need for the relevant year, then holds an

auction at which sellers commit to sell, and PJM

commits to purchase, the targeted amount from all

types of generation resources for subsequent resale to

retail suppliers. The capacity auction operates much

like the hourly and daily electricity markets, with

PJM accepting bids from lowest to highest until it has

the requisite capacity, and making the highest bid

accepted the market clearing price. Each capacity

resource that cleared the market must sell PJM all the

capacity it bid, and, in return, will get paid the market

clearing price for all of that capacity. This forward

market is designed to provide price signals that

encourage new generation three years in advance

(which is sufficient time to construct a new generating

facility).

9

In both its electricity and its capacity markets,

PJM uses a pricing model that is designed to “reflect[]

the value of the energy at the specific location and

time it is delivered,” as well as “the effect of actual

operating conditions.” PX516 at 11. The clearing price

may be higher, for instance, in a zone where

transmission lines are congested, and generating

facilities will receive higher revenues for servicing

those areas. These different prices for different zones

are designed to establish “price signals that encourage

new generation sources to locate in areas where they

will receive higher prices,” thereby reducing the

impact of congestion on prices. Jd. Relying on these

signals, generation companies make decisions about

how much capacity development or transmission

planning is needed, what sources will provide that

new electricity, and where new power plants will be

located.

FERC recognizes that, in certain circumstances

and areas, the auction’s price signals alone may be

insufficient to incentivize new generation in certain

areas. To address those circumstances within the

PJM market construct, PJM established, and FERC

approved, the new entry price adjustment (“NEPA”)

for new resources that satisfy specific size and

locational conditions. The NEPA provides a special

three-year revenue guarantee to the new resources in

an effort to “provide support to the new entrant until

sufficient load growth would be expected to” do so.

PJM Interconnection, L.L.C., 128 FERC 961,157, at

4101 (2009). The NEPA is the one exception to PJM’s

general policy of non-discrimination—i.e., of seeking

to obtain the most cost-effective electricity, whether it

comes from new resources or existing ones. See id.

10

§102 (“Both new entry and retention of existing

efficient capacity are necessary to ensure reliability”).

D. Maryland’s Generation Order

Although Maryland voluntarily abandoned

vertical integration to reap the benefits of the federal

wholesale market, within a few years, it began to voice

concerns that PJM’s price signals were doing too little

to encourage new generation in Maryland and keep

prices down for Maryland consumers. Accordingly,

Maryland’s legislature passed a law requiring the

state’s public service commission (“PSC”) to “consider

changes”—including a possible return to vertical

integration—designed to provide consumers reliable

electricity “at the best possible price.” S.B. 400, 2007

Reg. Sess. (Md.), http://perma.cc/z6py-qzhe.

Rather than advocate a return to vertical

integration, the PSC attempted to convince FERC to

revise the PJM market to provide the longer-term

investment horizon that the PSC preferred.

Specifically, the PSC asked FERC to expand the

NEPA’s three-year price guarantee to at least ten

years. FERC explicitly rejected Maryland’s proposal.

PJM Interconnection, L.L.C., 126 FERC 961,275, at

4146 (2009). Although it “recognize[d] that a longer

commitment period may aid the developer in financing

a project,” FERC concluded that “giving new suppliers

longer payments and assurances unavailable to

existing suppliers” would upset the market’s “balance”

between new and existing generation and “long-term

forward price signals.” Id. 4149-50; see also id. 4150

(auction “was designed to provide long-term forward

price signals and not necessarily long-term revenue

assurance’ ).

11

At that point, Maryland decided to take matters

into its own hands, seeking to incentivize new in-state

generation by directing utilities to enter into contracts

that would guarantee new generators fixed revenues

for a period much longer than PJM does. To that end,

in 2011, the PSC issued a request for proposals to

build a new generating facility. The request required

the winning bidder to agree to build in Maryland a

new gas-fired facility that would sell all of its

electricity and capacity into the PJM market. In

return, it guaranteed the winning bidder something it

called a “Fixed/Indexed Pricing Contract for

Differences.” This pricing contract is not a contract

with the state itself. Rather, it is a contract that the

PSC orders Maryland’s EDCs (the private companies

that deliver electricity to end-users) to enter into, and

it guarantees the new generator a fixed, 20-year

revenue stream for all electricity and capacity that it

sells to PJM.

Under the pricing contract, the EDCs are

obligated to ensure that the new generator receives

this state-set “contract price”—regardless of what the

PJM market clearing price may be—“for each unit of

energy and capacity [that it] sells to PJM in the PJM

Markets” for 20 years. JA264. The contract payments

are explicitly conditioned on the sale of the generator’s

capacity in the PJM market: If the state-set “contract

price” is higher than the PJM price, the EDCs must

pay the new generator the difference for each unit of

electricity and capacity that the generator actually

sells into the PJM market. If the new generator fails

to clear the PJM market and sells nothing to PJM, the

EDC is not required to pay anything. The EDCs may

pass along any costs or credits achieved to ratepayers.

12

The PSC received three proposals and ultimately

selected only CPV’s. The state then issued an order

compelling each of the state’s EDCs to execute a 20-

year pricifig contract with CPV, which each did under

protest.

E. Procedural Background

Respondents are generating companies that, as a

result of Maryland's actions, suffered suppressed PJM

prices and reduced revenues for their sales in the PJM

markets and were forced to forgo certain investments

in new generating assets. Accordingly, respondents

challenged Maryland’s actions in the U.S. District

Court for the District of Maryland. After a six-day

trial that included extensive presentation of evidence

and testimony, the district court agreed with

respondents that Maryland’s state-mandated pricing

contract intrudes upon FERC’s exclusive jurisdiction

over the wholesale market because it “establishes the

price ultimately received by CPV for its actual

physical energy and capacity sales to PJM in the PJM

Markets.” Pet.App.113a.!

In a unanimous opinion authored by Judge

Wilkinson, the U.S. Court of Appeals for the Fourth

Circuit quickly affirmed. The court first dismissed the

state s argument that it lacked jurisdiction to consider

respondents challenge the generation order or the

pricing contracts. Pet.App.13a n.1. The court then

agreed with the District Court that Maryland’s action

are preempted. As the court explained, “[a]lthough

states plainly retain substantial latitude in directly

' Unless otherwise noted, all Petitioner-Appendix citations are

to the CPV petition s appendix in No. 14-623.

13

regulating generation facilities, they may not exercise

this authority in a way that impinges on FERC's

exclusive power over wholesale rates.” Pet.App.20a.

The court held that Maryland’s pricing contract does

just that, as it “functionally sets the rate that CPV

receives for its sales in the PJM auction” and

“supersedes the PJM rates that CPV would otherwise

earn.” Pet.App.17a, 19a; see also Pet.App.19a (pricing

contract “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”). As the court

put it: “Maryland has chosen to incentivize generation

by setting interstate wholesale rates. This particular

choice of means is impermissible.” Pet.App.21a.

The court also concluded that “principles of field

and conflict preemption in this case are mutually

reinforcing,” as Maryland’s pricing contract not only

displaces wholesale rates approved by FERC, but also

“disrupts [PJM’s price-signal] scheme by substituting

the state’s preferred incentive structure for that

approved by FERC.” Pet.App.21la, 23a. The contract

does so by guaranteeing CPV a fixed price for its sales

to PJM for 20 years, even though FERC explicitly

rejected Maryland’s proposal to expand NEPA’s three-

year guarantee for new generators as inconsistent

with its policy of non-discrimination between new and

existing generation. Pet.App.23a-24a. By providing

its own 20-year pricing guarantee, the court

explained, Maryland “sought to achieve through the

backdoor of its own regulatory process what it could

not achieve through the front door of FERC

proceedings.” Pet.App.24a. “Circumventing and

displacing federal rules in this fashion is not

permissible.” Pet.App.24a.

14

In reaching those conclusions, the Fourth Circuit

repeatedly stressed “the limited scope of [its] holding,

which is addressed to the specific program at issue.”

Pet.App.21; see also Pet.App.24a. As the court

reiterated in declining to opine on the validity of a

variety of programs to which petitioners sought to

analogize, “[i]t goes without saying that not ‘every

state statute that has some indirect effect’ on

wholesale rates is preempted.” Pet.App.2la. Here,

“however, the effect ... on matters within FERC’s

exclusive jurisdiction is neither indirect nor

incidental,” as the pricing contract “strikes at the

heart of the agency’s statutory power to establish rates

for the sale of electric energy in interstate commerce.”

Pet.App.2la. Whatever else states may do to incentive

generation, the court concluded, that particular choice

of means “is simply a bridge too far.” Pet.App.25a.

The Fourth Circuit’s decision was reinforced a few

months later by a unanimous decision of the U.S.

Court of Appeals for the Third Circuit holding a nearly

identical scheme adopted by New Jersey—a state that

had joined Maryland in its unsuccessful effort to

convince FERC to modify its own regulatory scheme—

preempted by FERC’s exclusive jurisdiction over

wholesale rates. See PPL EnergyPlus, LLC v.

Solomon, 766 F.3d 241 (2014) (petitions for certiorari

in Nos. 14-634 and 14-694 pending). The Third Circuit

reached that conclusion after soliciting the views of

the federal government, which agreed that New

Jerseys scheme encroaches on FERC’s exclusive

jurisdiction. In its brief taking that position, FERC

specifically noted the close resemblance of the

Maryland scheme.

15

REASONS FOR DENYING THE PETITIONS

I. This Factbound, Splitless Case Does Not

Merit This Court’s Review.

A. The Carefully Circumscribed Decision

Below Accords With Well-Settled and

Unchallenged Preemption Principles.

Petitioners ask this Court to review a consciously

“narrow” decision, Pet.App.24a, applying settled legal

principles to a novel state scheme. Petitioners do not

and cannot claim any division of authority on whether

that scheme is preempted by federal law, as every

court—indeed, every judge—to consider the question

has agreed that the scheme is preempted. As

challenges to the New Jersey and Maryland pricing

schemes have made their way through the federal

courts, eight judges out of eight have found the laws

preempted, and the pleas for en banc review of those

decisions were denied without dissent. None of this is

surprising. There may well be some difficult questions

about the overlap between state authority over

generation and federal authority over wholesale rates.

But whether a state may avowedly provide in-state

generators a different and more stable wholesale rate

than prevails on the federally regulated wholesale

market is not one of them.

It is beyond cavil that FERC has exclusive

regulatory power over the field of interstate wholesale

electricity sales. The FPA expressly grants FERC

jurisdiction over “the transmission of electric energy

in interstate commerce and the sale of such energy at

wholesale in interstate commerce.” 16 U.S.C. §824(a).

That broad authority encompasses exclusive

jurisdiction to regulate “rates and charges made,

16

demanded, or received ... for or in connection with”

interstate wholesale transactions. Jd. §824d(a). In

sum, “the text and structure of the FPA

unambiguously apportion[{] control over wholesale

rates to FERC.” Pet.App.22a. That principle is so

settled that even petitioners readily concede that

“States may not... set the price ... at which electricity

or capacity is sold at wholesale.” CPV-Pet.11.

Petitioners’ principal dispute is instead with the

lower courts’ factual finding that Maryland’s novel

pricing scheme did indeed set wholesale rates—hardly

a promising basis for seeking this Court’s review. See

Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 336

U.S. 271, 275 (1949) (this Court does not “review

concurrent findings of fact by two courts below in the

absence of a very obvious and exceptional showing of

error’). But petitioners’ arguments are readily refuted

by the pricing contract itself. On its face, the contract

“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.” Pet App.19a; see also

JA264. It is difficult to imagine a more clear-cut

example of a state determining the rate that a

generator “receive[s] ... for or in connection with” its

wholesale transactions. 16 U.S.C. §824d(a).

Indeed, the whole point of the pricing contract is

to guarantee that CPV’s wholesale sales to PJM will

be compensated at a price that is different from the

market clearing price set by PJM’s FERC-approved

auction mechanism. Any generator that clears the

auction already is entitled to the market clearing

price, so the contract makes sense only if it “effectively

supplants the rate generated by the auction with an

17

alternative rate preferred by the state”’—which it does.

Pet.App.17a. By “adopting terms and prices set by

Maryland, not those sanctioned by FERC,” this

scheme “strikes at the heart of the agency’s statutory

power to establish [wholesale] rates.” Pet.App.21a.

And to make matters worse, Maryland

guaranteed CPV this fixed, state-set rate for 20 years

even though FERC expressly rejected Maryland’s

request to expand NEPA’s three-year fixed revenue

guarantee to encourage more new generation. FERC

did so out of concern that “giving new suppliers longer

payments and assurances unavailable to existing

suppliers” would upset the PJM market's careful

“balance” between new and existing generation. PJM

Interconnection, 126 FERC 961,275, at 99149-50; see

also id. $150 (auction “was designed to provide long-

term forward price signals and not necessarily long-

term revenue assurance”). Maryland’s scheme thus

not only intrudes on an exclusively federal field, but

does so in a manner that conflicts overtly with FERC’s

regulation of that field. As the Court of Appeals

correctly concluded, that makes field and conflict

preemption principles “mutually reinforcing” here,

Pet.App.21la, as Maryland has both interfered with

FERC’s exclusive authority over wholesale rates and

created a “direct and transparent impediment to the

functioning of the PJM markets.” Pet.App.25a.

In short, the incursion on FERC’s authority in this

case is “neither indirect nor incidental,” but rather is

as “direct and transparent” as it could be.

Pet.App.21a, 25a. Maryland made no secret of its view

that the price signals the FERC-approved PJM

market was sending were not doing enough to benefit

18

Maryland. Indeed, the state candidly acknowledged

its view that the “market structures within PJM will

never provide the signals or the financial support to

build power plants in Maryland.” 3/5/13a.m. Tr.12:11-

15. Yet rather than exercise its option to retreat from

a federal market with which it was displeased, the

state took it upon itself to try to fix those perceived

deficiencies by changing the rates and terms for CPVs

sales in the PJM auction. Worse still, Maryland did

so in the face of FERC’s explicit refusal to take the

substantially similar “corrective” actions when

Maryland urged them.

It requires no “extravagant” view of FERC’s

jurisdiction, CPV-Pet.20, to recognize that this “is

simply a bridge too far.” Pet.App.25a. To be sure,

“states plainly retain substantial latitude in directly

regulating generation facilities” and incentivizing

their creation. Pet.App20a. But means matter as well

as ends. And states simply do not have the power “to

incentivize generation by setting interstate wholesale

rates.” Pet.App.2la. The decision below does nothing

more than reaffirm that unremarkable proposition.

B. The Decision Accords With FERC’s View.

The decision below accords not only with settled

preemption principles, but with FERC’s own view. See

Medtronic, Inc. v. Lohr, 518 U.S. 470, 495-96 (1996)

(“the federal agency to which Congress has delegated

its authority ... is uniquely qualified to determine

whether a particular form of state law ... should be

pre-empted”). Petitioners conspicuously fail to

mention that FERC, before the Fourth Circuit’s

decision, already weighed in on this very mechanism

19

for incentivizing new generation resources and opined

that it is preempted.

Although FERC was not a party to this case or the

parallel New Jersey proceeding, the Third Circuit

invited the federal government to submit a brief

providing its views on whether New Jersey’s

materially analogous scheme is preempted. In a brief

that was brought to the Fourth Circuit's attention

through a 28(j) letter and explicitly referenced

Maryland’s “similar program,” FERC opined in no

uncertain terms that New Jerseys scheme is

preempted by federal law. By “tying the subsidy

explicitly and directly to ... wholesale rates,” FERC

explained, New Jersey's scheme marks an “intrusion

upon the Commission’s exclusive jurisdiction to

regulate wholesale rates and practices ‘affecting’

rates.” U.S. Br.5 n.3, 14-15, PPL EnergyPlus, LLC v.

Solomon, No. 13-4330 (3d Cir. Mar. 20, 2014). In

doing so, however, FERC made a point of reiterating

that “states have numerous ways to incentivize

construction of new generation facilities that do not

directly affect the setting of FERC-jurisdictional

wholesale rates.” Jd. at 18.

Remarkably, petitioners nonetheless continue to

suggest that FERC actually endorsed Maryland’s (and

New Jersey's) scheme when it made various revisions

to PJM’s “minimum offer price requirements” in

anticipation of the participation of state-subsidized

generators like CPV See State-Pet.17-18; CPV-

Pet.29. But the minimum offer price requirements

address wholly distinct issues about the price at which

a new generator may bid into PJM’s auction—not

whether states may supplement the price that

20

generators may receive for or in connection with those

sales. As the Fourth Circuit noted, moreover, “FERC’s

own comments on the subject belie [petitioners’] claim

that the agency has affirmatively approved the

Generation Order.” Pet.App.24a. For example,

FERC’s orders specifically disclaimed any “intent ... to

pass judgment on state and local policies and

objectives with regard to the development of new

capacity resources.” PJM Interconnection, L.L.C., 137

FERC 461,145, at 93 (2011). And, of course, “[t]}he

fact that FERC was forced to mitigate the Generation

Order’s distorting effects” with its revisions to the

minimum offer price rule “tends to confirm rather

than refute the existence of a conflict.” Pet.App.24a.

All of that readily explains why the Third Circuit,

which had just issued a lengthy decision upholding the

minimum offer price rule, N.J. Bd. of Pub. Utils. v.

FERC, 744 F.3d 74 (3d Cir. 2014), gave no more

credence to this flawed argument than the Fourth

Circuit did when the New Jersey petitioners raised it

before that court.

In any event, there is no need to guess at FERC’s

views on the question. When asked to weigh in, FERC

was crystal clear: No matter its motivation, a state

may not manipulate prices in the federally regulated

wholesale market. Petitioners’ contrary view thus has

been refuted not only by every judge to consider it, but

by the federal agency that oversees that market.’

2 In suggesting that the decision below “prevented FERC from

reviewing [the pricing contracts] to determine whether they are

just and reasonable,” CPV-Pet.35 & n.34, CPV ignores the fact

that it chose not to seek FERC review of the contracts until after

21

C. Petitioners’ Pleas for Error Correction

Recycle Arguments That Were Soundly

Rejected Below.

Petitioners’ continued efforts to find fault with the

decision below succeed only in revealing that they, not

the courts below, suffer from “basic

misunderstandings about the FPA _ regulatory

framework.” CPV-Pet.24. Moreover, petitioners’

strained attempts to recast the pricing contracts as

various things they are not were thoroughly

considered and rejected by both courts below after

careful consideration of an expansive trial record.

At the outset, to the extent petitioners attempt to

manufacture some sort of circuit split, their efforts are

unavailing—as evidenced by the fact that they cannot

even seem to agree on the decisions with which the one

below purportedly conflicts. Maryland offers up

Atlantic City Electric Co. v. FERC, 295 F.3d 1 (D.C.

Cir. 2002), a case that CPV never even bothers to

cite—and that the state itself cited only once in its

briefing below, for a point having nothing to do with

the one raised here. But Atlantic City addressed the

altogether different question of whether FERC may

compel utilities who agree to let PJM use their

transmission lines to cede their statutory rights to file

“changes in rate design” for the transmission services

they provide—even if PJM itself has not made that a

condition of their participation. Jd. at 8. Maryland

makes the feeble analogy that because FERC could not

they had been invalidated by the courts below. At that point,

FERC quite logically concluded that, even setting aside

preemption concerns, it could not review contracts that were no

longer in force.

22

force this term upon PJM and its participants, “PJM’s

tariff could not displace CPV’s right to set its own rate

for wholesale sales, subject to FERC review.” State-

Pet.16. But the obvious flaw in this logic is that the

PJM clearing price is not forced upon CPV by FERC or

anyone else; it is simply the price that CPV agreed to

receive when it agreed to bid its capacity into the PJM

auction.

All of Maryland’s talk about CPV’s right to “decide

the rates and terms on which [it is] willing to sell”

electricity and capacity (talk that is noticeably absent

from CPV’s own petition) is therefore beside the point.

State-Pet.12. To be sure, CPV may decide what prices

it will accept for the electricity and capacity that it

sells to willing buyers. But as petitioners themselves

argue, see CPV-Pet.24, CPV here sells its electricity or

capacity not to any utility, but to PJM. And as

Atlantic City itself makes clear, “utilities may choose

to voluntarily give up, by contract, some of their rate-

filing freedom.” 295 F.3d at 10. That is precisely what

CPV does when it opts into the PJM auction. CPV

cannot then, at Maryland’s direction, opt out of the

prices set by the PJM auction for sales to PJM.

CPV, for its part, makes much of Connecticut

Department of Public Utility Control v. FERC, 569

F.3d 477 (D.C. Cir. 2009) (““CDPUC”), a case that

Maryland barely mentions, and that is equally

inapposite. CDPUC dealt with whether FERC had

jurisdiction to review a feature of the New England

bulk power system that estimated the target amount

of capacity the system would need. Although CDPUC

at least involved the line between FERC’s jurisdiction

over wholesale rates and states’ jurisdiction over

23

generation, it resoundingly affirmed that FERC’s

jurisdiction over capacity rates remains exclusive even

when it has the potential to affect generation-related

ends. As the court explained, FERC “may directly

establish prices for capacity ... even for the express

purpose of incentivizing construction of new generation

facilities,” and thus likewise has “the power to do so

indirectly by setting a target for capacity demand.” Id.

at 482 (emphasis added). If anything, then, CDPUC

only bolsters the decision below.

Petitioners fare no better with their efforts to

portray the decision below as inconsistent with settled

distinctions between state and federal power under

the FPA. Indeed, once again, petitioners cannot even

get on the same page in identifying the purported

problem. CPV insists that Maryland’s pricing contract

does not intrude on FERC’s exclusive jurisdiction

because it does not set the rate that CPV will receive

from PJM, but rather sets only the rate that CPV will

receive from the EDCs for each unit of electricity or

capacity that it sells to PJM. See CPV-Pet.25. But

that crabbed view of FERC’s jurisdiction as extending

only to the rate paid by the direct purchaser of

electricity or capacity is defeated by the plain text of

the FPA, which grants FERC jurisdiction over “fa]ll

rates and charges made, demanded, or received ... for

or in connection with the ... sale” of electricity at

wholesale. 16 U.S.C. §824d(a) (emphasis added). A

contract that requires a third party to ensure that a

seller receives a particular price for each unit of

electricity or capacity that it sells to PJM plainly

24

establishes the “rate” that the seller “receive[s] ... for

or in connection with” those wholesale sales.

Maryland, by contrast, takes the decidedly

different view that the pricing contracts do establish

the rate for CPV’s wholesale sales, but that the rate

they set should be subject to “just and reasonable”

review by FERC because it is not set by the state.

State-Pet.13. But the courts below resolved that

factual dispute in respondents’ favor for good reason:

The contract price, while initially proposed by CPV as

part of a procurement, “became operative only after

reviewed, evaluated, and accepted by the PSC in an

agency order.” Pet.App.110a n.48. Indeed, the

chairman of the PSC “testified that the contract price

accepted by the PSC in the Generation Order

represented a unilateral decision by the PSC, and that

... PSC had reserved the right to select none of the

proposed contract prices.” Pet.App.110a n.48.

Because Maryland did in fact set the rate at which

CPV will be compensated, it cannot avoid preemption

3 As the Court of Appeals noted, that conclusion follows directly

not just from the statutory text but also from this Court's decision

in Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487

U.S. 354 (1988). There, the Court made clear that a state may

not use its jurisdiction over retail sales to prevent utilities from

recovering from their consumers FERC-mandated rates for their

wholesale electricity purchases. /d. at 373. Such state

interference was “preempted because it denied full effect to the

rates set by FERC.” Pet.App.18a. A fortiori, a state directive

that third parties pay generators a different rate for their

wholesale sales to PJM denies full effect to the PJM rates

approved by FERC. See Pet.App.18a (“If states are required to

give full effect to FERC-mandated 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.”).

25

by appealing to FERC’s power to determine whether

rates are just and reasonable. It is black-letter law

that “any state law falling within [an exclusively

federal] field is preempted.” Silkwood v. Kerr-McGee

Corp., 464 U.S. 238, 248 (1984). That is so even if the

law purports to be “complementary” to federal

regulation. Arizona v. United States, 132 S. Ct. 2492,

2501-02 (2012). Indeed, it is so even if the federal

government has decided not to regulate at all. See

Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm’n, 461

U.S. 375, 383-84 (1983). By giving FERC exclusive

power to determine what wholesale rates are “just and

reasonable,” 16 U.S.C. §824d(a), Congress necessarily

foreclosed efforts by states to engage in their own

process of setting or reviewing the reasonableness of

wholesale rates—even if FERC might not object to

whatever rate a state would set. See Entergy Servs.,

Inc., 120 FERC 961,020, at 428 (2007) (reiterating

that FERC’s “ratemaking obligations under the FPA

cannot be delegated to a state”).

Petitioners fare no better in seeking to analogize

the pricing contracts to bilateral contracts, whether

long-term or short-term. See CPV-Pet.27-28.

Bilateral contracts are contracts between buyers and

sellers for the sale of electricity or capacity from one

party to the other. In other words, they are arms-

length transactions between a willing seller and buyer

for actual sales of electricity or capacity. See Morgan

Stanley Capital Grp. Inc. v. Pub. Util. Dist. No. 1 of

Snohomish Cnty., 554 U.S. 527, 531, 537 (2008)

(bilateral contracts are entered into under tariffs that

“simply state that the seller will enter into freely

negotiated contracts with purchasers’ (emphasis

added)). Here, by contrast, as CPV itself emphasizes

26

repeatedly, “Maryland's local utilities do not purchase

electricity or capacity from CPV under the contracts at

issue.” CPV-Pet.24 (emphasis added). CPV sells its

electricity or capacity not to the utility, but to PJM.

CPV-Pet.25. Contracts between sellers and non-

buyers that have merely been obligated by a state to

make payments (under protest) to subsidize sales of

electricity or capacity to someone else are nothing at

all like any kind of bilateral contract FERC has

approved.

Nor does it help CPV that a party who purchases

electricity or capacity through a bilateral contract may

proceed to sell that same electricity or capacity into

the PJM market. A party that purchases electricity at

one price and then sells that electricity into PJM at

another has not received two different prices for its

sale to PJM. As PJM’s own rules make clear, “the

capacity that is the subject of the [bilateral contract]

shall pass to the buyer” and “[ijn no event shall the

purchase and sale ... constitute a transaction with

[PJM].” PJM Tariff 4.6(a)(i)-(i). The buyer's

subsequent sale to PJM is another electricity or

capacity transaction entirely, and, in any event, none

of the wholesale prices it pays or receives is set by a

state. Here, by contrast, there is only one actual

electricity or capacity transaction taking place: the

transaction with PJM. The pricing contracts just force

the EDCs to ensure that CPV receives a particular

rate—and a rate different from PJM’s FERC-approved

rate—for that transaction. The problem here thus is

not that LCAPP generators are receiving more

revenue than the PJM auction supplies, see CPV-

Pet.26; it is that they are doing so even though they

27

are selling electricity and capacity to no one other than

PJM.

CPV alternatively attempts to paint the payments

under the pricing contracts as payments not for sales

of electricity or capacity, but for “new power plant

construction.” CPV-Pet.22. Once again, that is in the

teeth of the factual findings below, as both courts

found that those payments “plainly qualify as

compensation for interstate sales at wholesale, not

simply for CPV’s_ construction of a_ plant.”

Pet.App.17a. They could hardly find otherwise given

that payments are due under the pricing contracts

only if CPV physically delivers electricity or capacity

to PJM. If CPV constructed a plant but failed to clear

PJM, it would get nothing. Unsurprisingly, then, even

CPV’s own witness agreed that “the financial

considerations” in determining the contract price went

well “beyond recouping the costs for physically

constructing a generation facility,” JA293; as he

explained, “physical delivery of electricity was ... the

raison d’etre of going down this path.” 3/5/13a.m.

Tr.17:18-20 (emphasis added).

At bottom, no creative refashioning can change

the fact that Maryland’s scheme both by design and

intent supplants FERC-approved rates “received ...

for or in connection with” wholesale electricity sales to

PJM. Whatever else a state may do to incentivize new

generation, it may not do that. Pet.App.17a. Nor may

it manipulate the terms of wholesale transactions to

“achieve through the backdoor of its own regulatory

process what it could not achieve through the front

door of FERC proceedings.” Pet.App.24a. Because

Maryland's novel scheme plainly does both, the courts

28

below held that it is preempted by federal law There

is no reason for this Court to disturb that factbound,

splitless, and manifestly correct conclusion.‘

II. The Decision Below Is Consciously Narrow

And Lacks Exceptional Importance.

As a straightforward application of settled law to

a novel state program—one that deliberately and

directly set out to reform a market over which FERC

concededly has exclusive regulatory jurisdiction—the

decision below has far less legal or practical

significance than petitioners suggest. Indeed, the

Fourth Circuit carefully avoided precisely the kinds of

broad-brush pronouncements that petitioners seek to

attribute to it in their efforts to magnify the

importance of this case. Petitioners’ dire warnings

that the decision below “hobbles” or “cripples” states’

efforts to support new generation therefore fall flat.

CPV-Pet.18, State-Pet.1.

According to petitioners, the decision below rests

on the faulty premise that the PJM market must be

the “exclusive source of ‘incentives’ for constructing

power plants.” CPV-Pet.30. But in fact, the Fourth

Circuit emphasized that states have plenty of avenues

for incentivizing new generation; they just may not

alter the incentives that the PJM market produces by

‘ That is particularly so given that the Maryland's actions here

are invalid for the additional reason that they violate the

dormant Commerce Clause. See Appellees’ Br.49-58, PPL

EnergyPlus, LLC v. Solomon, No. 13-4330 (3d Cir. Feb. 18, 2014);

Appellees’ Br.51-60 (Doc. 65). While the Fourth Circuit had no

need to reach that issue in light of its holding that the Act was

preempted, Pet.App.25a n.3, that remains an alternative basis

for affirming the District Court’s injunction.

29

establishing different and more stable price

guarantees for sales in that market (particularly when

FERC has already rejected that approach). In

reaching that conclusion, the court explicitly

disclaimed any attempt to “express an opinion on

other state efforts to encourage new generation ... that

may or may not differ in important ways from the

Maryland initiative.” Pet.App.2la. Likewise, the

court made a point of reiterating that “not ‘every state

statute that has some indirect effect’ on wholesale

rates is preempted,” and that “not every state

regulation that incidentally affects federal markets is

preempted.” Pet.App.21la, 24a-25a.

Indeed, although petitioners continue to largely

ignore them, there is no question that states retain

numerous other means of incentivizing generation.

For instance, Maryland could have procured capacity

outside of the PJM auction through FERC’s fixed

resource requirement option, which allows

distributors to do so through true bilateral contracts

(i.e., contracts between two parties for the actual sale

of electricity) or by constructing their own generation

facilities. It could have established an agency to build

state-owned power plants and sell directly to

Maryland’s retail consumers. It could have bypassed

the wholesale market altogether and returned to the

vertically integrated regime that many states still

retain. In fact, the PSC expressly recognized that a

return to vertical integration would enable Maryland

to regain complete control over regulatory decisions,

yet nonetheless opted not to pursue that path.

Nothing in the decision below casts doubt on the

continued validity of those alternatives—let alone

30

“creates a regulatory vacuum for generation planning

and development.” State-Pet.26.

Nor is there any merit to petitioners’ contention

that the decision below somehow jeopardizes a whole

laundry list of other state incentive schemes. See

State-Pet.22-28; CPV-Pet.32-34. Petitioners

conspicuously fail to identify a single one of these

programs (other than New Jersey's materially

analogous one) that has been invalidated. Moreover,

for the most part, the programs they invoke involve

different factual circumstances, such as contracts for

electricity or capacity sales outside of an RTO’s market

mechanism. In any event, whether the lower courts

will confine the decision below to this specific scheme

or construe it to have implications for other factual

scenarios remains to be seen. For this Court to wade

into those issues now therefore would be premature—

particularly when every single federal judge to

consider this specific scheme has agreed that the

preemption problem could not be clearer.

Petitioners fare no better with their suggestion

that the particular incentive scheme at issue here is

critical to the development of new generating

facilities. That suggestion is belied by the numerous

other options state retain and the paucity of states

that have insisted on attempting anything like this. It

also is belied by the developments in this very case:

After insisting that it would not and could not build a

new generating facility without the fixed revenue

stream that the pricing contracts guarantee, CPV

proceeded with its plans to build the very same plant

at issue here, even though those contracts were

31

invalidated. See Jeff Newman, CPV breaks ground on

gas plant, Gazette.Net (Dec. 3, 2014).

In short, as the Fourth Circuit correctly

recognized, this case is not about whether states

retain power to regulate or incentivize generating

facilities. Of course they do. This case is instead about

the much narrower question of whether states may

incentivize generation by setting their own rates for

wholesale transactions. Even petitioners concede that

they may not. In doing so, they effectively concede

that this case is ultimately about an even narrower

question—namely, whether the particular state

scheme at issue here does in fact set the rate that CPV

“receive[s] ... for or in connection with” its sales of

energy and capacity to PJM. 16 U.S.C. §824d(a). As

both courts below recognized, there can be no serious

dispute that it does. That factbound, splitless, and

manifestly correct conclusion by four federal courts

and eight judges on what really amounts to a question

of fact does not warrant this Court’s review.

32

CONCLUSION

For the foregoing reasons, this Court should deny

the petitions for certiorari.

Respectfully submitted,

PAUL D. CLEMENT

Counsel of Record

ERIN E. MURPHY

CANDICE C. WONG

BANCROFT PLLC

1919 M Street NW

Suite 470

Washington, DC 20036

(202) 234-0090

pclement@bancroftplic.com

Counsel for Respondents

33

TAMARA LINDE JESSE A. DILLON

Executive Vice President Assistant General Counsel

and General Counsel PPL SERVICES CORP.

PSEG SERVICES CORP TwoN. Ninth Street

80 Park Plaza Allentown, PA 18101

Newark, NJ 07102

DAVID L. MEYER

SHANNEN W. COFFIN MORRISON & FOERSTER

STEPTOE & 2000 Pennsylvania Ave. NW

JOHNSON LLP Suite 6000

1330 Connecticut Ave. NW Washington, DC 20006

Washington, DC 20036

Counsel for

Counsel for The PPL Companies

PSEG Power, LLC

DAVID MUSSELMAN

Associate General Counsel

ESSENTIAL POWER, LLC

150 College Road West

Princeton, NJ 08540

Counsel for

Essential Power, LLC

February 11, 2015