The U.S. Supreme Court agreed Monday to wade into a Maryland dispute with national implications, over whether a state can offer ratepayer subsidies to get a power plant built in its borders.
The high court decided to hear two cases involving a deal the state Public Service Commission struck to get the first new power plant built in Maryland in years. Seeking to address a perceived shortage of energy-generating facilities in the state and address potential reliability problems, the commission solicited bids and offered a long-term contract for the power, with a guaranteed price.
Competitive Power Ventures, a Silver Spring-based company that specializes in developing natural gas and wind power plants, led a partnership that won the bidding and announced plans to build a 725-megawatt gas-fired plant in Charles County. The commission directed three of the state's utilities, including Baltimore Gas and Electric Co., to buy power from CPV at the going market rate.
The PSC agreed to have ratepayers make up the difference if CPV's guaranteed price was higher.
But PPL Corp., one of the nation's largest suppliers of energy to utilities, challenged the deal, arguing that the state's rate subsidy to CPV interfered with the Federal Energy Regulatory Commission's jurisdiction over interstate wholesale energy sales. U.S. District Court Judge Marvin J. Garbis in Baltimore agreed, throwing out the state contract in 2013, and the U.S. 4th Circuit Court of Appeals in Richmond, Va., upheld the lower court's ruling.
After the courts threw out the deal, CPV broke ground in December on the $775 million project in Waldorf. CPV is partnered with two Japanese firms, Marubeni Corp. and Toyota Tsusho, in building the plant, which will generate enough electricity to power 700,000 homes.
Lawyers for the commission, though, argue that the lower court's decision "imperils dozens of state laws under which private parties are investing billions in needed generation plants, from clean-coal facilities in Illinois to offshore wind in Massachusetts."
Not mentioned — perhaps because it has yet to draw a successful proposal — was Maryland's 2014 law guaranteeing a ratepayer subsidy to the developer of an offshore wind project off Maryland's coast.
George Lewis, a spokesman for Talen Energy Corp., a PPL spinoff, said the Pennsylvania-based company opposes on principle state policies, regulations or laws that would provide incentives to build new power plants. The company also successfully challenged a New Jersey law that was aimed at subsidizing power plant construction there, he noted.
"The idea of subsidizing generation that the market could build without the consumers having to pay the cost of the subsidy, just philosophically it's a concept we would disagree with," Lewis said.
He contended that subsidies undermine competition and can cost consumers in the long run, by requiring them to pay for facilities that the market otherwise wouldn't support.
Talen owns three coal-fired power plants in the Baltimore area that were once owned by BGE. The company acquired those after the dispute erupted over the gas-fired plant in Charles County.
The commission's position has drawn support from national groups representing state and local utility regulators as well as owners of publicly owned utilities.
The American Public Power Association and National Rural Electric Cooperative Association, for instance, warned in a friend-of-the-court brief that if the lower court ruling stands, it will "substantially disrupt the sound functioning of the nation's wholesale electric power markets ... and is likely to impede the orderly development of needed electric infrastructure at reasonable cost."