BILATERAL CONTRACTS

Hughes v. Talen Energy Marketing, LLC; CPV Maryland, LLC v. Talen Energy Marketing, LLC

Issues

Did Maryland usurp the Federal Energy Regulation Commission’s authority to approve rates in federal energy markets by entering fixed-rate contracts with an energy provider?

Court below

United States Court of Appeals for the Fourth Circuit

The Federal Power Act (“FPA”) gives the Federal Energy Regulatory Commission (“FERC”) power to regulate interstate energy markets. If the FPA does not address a particular area of regulation, then states can regulate that area. One of FERC’s powers is approving wholesale energy rates. In Hughes, the Court will consider whether Maryland encroached on FERC’s rate-setting power by entering fixed-rate contracts with an energy producer. Petitioners W. Kevin Hughes, the chairman of the Maryland Public Service Commission, and CPV Maryland, LLC (“CPV”), the “energy producer” in this case, argue that Maryland is within its rights to secure new sources of energy through competitive bidding. Maryland does not usurp FERC’s authority unless it actually dictates what price producers sell at, which it did not, Hughes and CPV claim. But respondent Talen Energy Marketing, a CPV competitor, contends that Maryland overstepped its authority by offering fixed-rate contracts, which Talen claims essentially guarantee revenue, to entice bidders like CPV. The outcome of this case may implicate state and FERC regulation of energy markets, and the growth of renewable energy.

Questions as Framed for the Court by the Parties

When a seller offers to build generation and sell wholesale power on a fixed-rate contract basis, does the FPA field-preempt a state order directing retail utilities to enter into the contract?
Does FERC’s acceptance of an annual regional capacity auction preempt states from requiring retail utilities to contract at fixed rates with sellers who are willing to commit to sell into the auction on a long-term basis?

The Federal Energy Regulatory Commission (“FERC”) regulates interstate electricity markets. To that end, FERC “authorized the creation of ‘regional transmission organizations,’ to oversee [] multistate markets.” See PPL EnergyPlus, LLC v. Nazarian, 753 F.3d 467, 472 (2014). “FERC rules encourage the construction of new plants and sustain existing ones . . .