Supreme Court seeks US view on generator subsidies

OREANDA-NEWS. The Supreme Court wants the US government to weigh in on the legality of state programs intended to get new power plants to locate in Maryland and New Jersey that federal courts struck down for interfering with wholesale power markets.

The court today asked the Department of Justice's solicitor general, who represents the US before the Supreme Court, to provide the government's view on four cases that are trying to restore the state programs. The high court's request signals a potential interest in reviewing the cases, which could set precedent over how much of a role states have in federally regulated power markets.

Maryland and New Jersey created their state programs out of concern that they lacked enough local power plants and that unpredictable capacity prices in the PJM Interconnection could not attract new power plants. The states in response entered contracts offering new power plants a guaranteed capacity price for 15 or 20 years, with state ratepayers paying the difference between that price and the PJM capacity price set in an auction for all market participants in the 13-state wholesale market.

But three-judge panels in two federal appeals courts unanimously invalidated the programs in both states after finding they interfered with capacity markets under the exclusive jurisdiction of the Federal Energy Regulatory Commission (FERC). The courts rejected the states' arguments that the contracts were essentially a hedge against capacity price volatility.

Maryland and New Jersey last year asked the Supreme Court to reinstate the programs, which they argue were a permissible way to ensure sufficient resource adequacy. Power plant developer Competitive Power Ventures has also appealed to the court, hoping the 700MW Woodbridge gas-fired plant in New Jersey and the 661MW St. Charles gas-fired plant in Maryland can still qualify under the program.

The energy investment firm ClearView Energy Partners said today the conventional wisdom was the legal appeals still face "long odds," given that the programs were invalidated unanimously by two federal courts. A Supreme Court reversal of the decisions would have "bearish implications" for capacity prices because it would allow generation under the programs to bid low, the firm said.