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SCOTUS: Long-Term Capacity Contracts Not Conditioned On Clearing RPM Don’t Suffer "Fatal" Flaw
April 20,2016 The Supreme Court yesterday affirmed a lower court's ruling invalidating capacity contracts (CfDs) ordered by the Maryland PSC between the state's EDCs and generation developers, on the grounds that such contracts are pre-empted by FERC's jurisdiction over wholesale rates Of most note, however, is the Court's finding that the Maryland contracts were pre-empted because their terms required the capacity suppliers to clear PJM's Reliability Pricing Model. "So long as a State does not condition payment of funds on capacity clearing the auction, the State’s program would not suffer from the fatal defect that renders Maryland’s program unacceptable," the Court said. This finding is of particular note given that certain ratepayer-backed support for utility-affiliated Ohio generation is not premised on the capacity clearing RPM. Specifically, the Court found that Maryland's construct essentially replaced the RPM rate, which the Court says is the wholesale rate determined by FERC, with a state-determined capacity rate. "We reject Maryland’s program only because it disregards an interstate wholesale rate required by FERC," the Court said "Nothing in this opinion should be read to foreclose Maryland and other States from encouraging production of new or clean generation through measures 'untethered to a generator’s wholesale market participation,'" the Court said See the Court's decision here
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