A June 2 appeals court ruling affirming a lower court's decision that Maryland's contract for differences to build new capacity is preempted by federal law shows why a state which has not previously abandoned its vertically integrated model will not be eager to do so.

Describing the background of the case, the 4th Court of Appeal said:

"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." [emphasis added]

Whatever customer benefits retail choice holds in driving new and innovative products and services, do we expect states to be held hostage to FERC domain in order to achieve these benefits? What governor or state legislator will want to cede authority and gamble by "throwing their lot in" with what can be described, at best, as controversial FERC-organized markets.

The fantasy of further state abandonment of vertical integration is further challenged by the fact that most of the benefits (or expected benefits) of retail choice may soon be possible without having to require the customer to switch their load serving entity, meaning states can reap the value-added services intended from retail choice without opening up the market to LSE competition -- with such value-added services driven by business models (distributed generation, in-home energy service providers/usage managers) not dependent on the provider acting as an LSE.

If retail suppliers want to meaningfully expand retail choice, they will need to convince states that opening themselves up to FERC regulation will not harm their constituents, and actions such as the Appeals Court ruling on preemption (whatever the individual merits of the PSC's CfDs may or may not be) do not give states any comfort that they will get a fair shake under FERC rule

See: 4th Circuit Ruling

Tags:
FERC   Capacity Market   Retail Choice  

Comment on this story


ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com
TPV-SALES-EXECUTIVE -- Back Office Provider -- Other
Sr-Market-Risk-Analyst -- Wholesale Supplier/Trader -- New York - New York City Metro
Energy-Regulatory-Specialist -- Other -- Other
More Stories on RetailEnergyX.com:
FERC Orders $230 Million In Penalties Against GreenHat, Related Parties '
FERC Issues Show Cause Order To GreenHat With Proposed $229 Million Fine For Alleged 'Manipulation'
SPP, MISO Institute Rotating Outages, Showing ERCOT 'Energy-Only' Market Design Not Cause Of Outages
FERC Rules That Entering Bilateral FTR Data Into PJM System Does Not Create A Separate Contract
Danly Named FERC Chairman