Federal Energy Regulatory Commission

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?

 

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

  1. 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?​

  2. 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 . . .

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NRG Power Marketing v. Maine Public Utilities

Issues

Does Mobile-Sierra’s public interest standard applies for reviewing challenges to contract rates apply to cases in which when non-contracting third parties challenge energy rates?

 

The Federal Energy Regulatory Commission (“FERC”) declared that future challenges to contract rates relating to New England's energy market will be evaluated under Mobile-Sierra’s public interest standard, which presumes that freely negotiated rates are just and reasonable as long as there is no serious threat to the public interest. Petitioners, NRG Power Marketing, LLC, et al. (“NRG Power”) support FERC’s use of the public interest standard. However, respondents, Maine Public Utilities Commission, et al. (“Maine Public Utilities”) contend that the use of the public interest standard deprives non-contracting third party challengers of their statutory right to evaluation under a more scrutinizing just and reasonable standard. Maine Public Utilities finds the statutory standard preferable because challengers merely have to prove that a rate is unjust and unreasonable to succeed in challenging the contract rate. The D.C. Circuit Court of Appeals agreed with Maine Public Utilities that the just and reasonable standard is the appropriate standard of review when challenges are initiated by non-contracting third parties. The Supreme Court's decision in this case will impact the stability of the electrical energy market, influence future investments in it, and, ultimately, affect New England’s supply of electricity.

Questions as Framed for the Court by the Parties

Section 206 of the Federal Power Act (FPA), 16 U.S.C. §824e(a), requires that rates for the transmission and sale of electricity in interstate commerce be "just and reasonable." Under the Mobile-Sierra doctrine-named for this Court's decisions in United Gas Pipeline Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956), and FPC v. Sierra Pacific Power Co., 350 U.S. 348 (1956)-the Federal Regulatory Commission ("FERC") must "presume that the rate set out in a freely negotiated wholesale-energy contract meets the 'just and reasonable' requirement imposed by law," and that "presumption may be overcome only if FERC concludes that the contract seriously harms the public interest." Morgan Stanley Capital Group Inc. v. Pub. Util. Dist. No. 1, 128 S. Ct. 2733, 2737 (2008). In the decision below, the court of appeals held that, "when a rate challenge is brought by a non-contracting third party, the Mobile-Sierra doctrine simply does not apply." The question presented is:

Whether Mobile-Sierra's public-interest standard applies when a contract rate is challenged by an entity that was not a party to the contract.

The D.C. Circuit Court of Appeals challenged the FERC’s approval of a comprehensive settlement that redesigned the structure of New England’s electricity market. See Maine Public Utilities Commission v. FERC, 520 F.3d 464, 467 (D.C. Cir.

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