Federal Court Blocks Maryland Order to Build New CCPP

A federal court on Sept. 30 shot down Maryland’s drive to spur construction of a new combined cycle power plant outside of PJM’s capacity auctions.

Ruling in favor of various entities that had sued to block the plan, the U.S. District Court for the District of Maryland found that the state’s order last year for three Maryland utilities to enter into power purchase agreements with Commercial Power Ventures (CPV), which has been seeking to build a 661-MW plant near Washington, D.C., impermissibly invaded the Federal Energy Regulatory Commission’s (FERC’s) authority over wholesale power prices.

The case grew out of Maryland’s concern with meeting its future power needs, and with PJM’s ability to incentivize construction of new capacity within the state. Last April, after several years of study and hearings, the Public Service Commission (PSC) of Maryland ordered Baltimore Gas and Electric, Potomac Electric Power, and Delmarva Power & Light to execute contracts with CPV that would provide a guaranteed revenue stream to support construction of the plant.

The state has argued for several years that PJM’s Reliability Pricing Model (RPM) has failed to attract sufficient new generation capacity to Maryland and, as a result, the state is at risk of running short of power over the next few years. PJM insists that the RPM has supported substantial new construction and adequate reserves, while detractors insist it is too complex and inefficient to ensure adequate capacity across the entire region.

The PSC order was structured such that the utilities would be required to make up the difference any time the CPV’s revenue from PJM power auctions fell below a fixed price. The utilities and several energy market firms filed suit to block the order shortly after it was issued.

On Monday, U.S. District Judge Marvin J. Garbis ruled that FERC’s exclusive authority over wholesale power prices precluded Maryland from setting prices outside of PJM’s FERC-approved methods. While states retain authority over power plant construction and operation, the court said, once the plant begins generating power, “the prices or rates received by that generator in exchange for wholesale energy and capacity sales are within the sole purview of the federal government.” Thus, the order violated the Supremacy Clause of the U.S. Constitution, which bars states from regulating matters the federal government has reserved for itself.

Maryland officials expressed disappointment with the ruling, though no decision has yet been made on whether to appeal.

—Thomas W. Overton, JD, gas technology editor