In a decision with major implications for the recently approved, customer-punishing power purchase agreement (PPA) cases of AEP and FirstEnergy, the U.S. Supreme Court ruled unanimously that a Maryland Public Service Commission (Maryland PSC) plan to boost in-state generating capacity with subsidies paid by ratepayers unlawfully intruded on the Federal Energy Regulatory Commission’s (FERC) jurisdiction over wholesale rates.
The court affirmed that FERC has the exclusive authority to set wholesale energy and capacity prices and oversee whether those rates and charges are just and reasonable.
An OMA Energy Group analysis of the decision notes: “The Court’s decision bolsters OMA Energy Group’s position in the AEP and FirstEnergy PPA cases before FERC. Just like in the Maryland case, the PPAs in the AEP and FirstEnergy cases guarantee a rate that is distinct from the clearing price set in PJM’s capacity auction. The PPAs at issue in the AEP and FirstEnergy cases guarantee a payment to the generators different from the clearing price set in the PJM auction.”
OMA Energy Group has argued that this type of arrangement, just like in Maryland, impermissibly interferes with FERC’s authority to oversee wholesale rates as the guaranteed revenue stream from customers will make the affiliate generating units agnostic to wholesale-market prices, distort wholesale-market price signals, and deter new entry from competitive generation suppliers.
Read more in this energy blog by OMA counsel Bricker & Eckler.