Maryland PSC cannot subsidize natural gas-fired development, court rules

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A U.S. appeals court unanimously ruled that the Maryland Public Service Commission overstepped its bounds when it subsidized natural gas-fired development in the state.

A three-judge panel of the U.S. Court of Appeals for the Fourth Circuit ruled that the commission infringed on the Federal Energy Regulatory Commission’s (FERC) exclusive authority to regulate the wholesale sale of electricity in interstate commerce by “circumventing and displacing federal rules.” The decision affirmed a U.S. District Court order in October that invalidated the PSC’s order.

The April 2012 PSC order required Baltimore Gas and Electric Co., Potomac Electric Power Co. and Delmarva Power & Light Co. to enter into long-term power supply contracts with CPV Maryland LLC to build a 661-MW gas-fired power plant in Maryland. The order essentially guaranteed that the developer would receive subsidized energy and capacity prices when it sold its output, allowing it to bid in artificially low prices into PJM’s annual capacity auction. PPL and other merchant generators filed a lawsuit seeking to block the auction, saying the order infringed on FERC’s exclusive authority to regulate the wholesale sale of electricity.

Because of competitive markets and ample supply resources, gas-fired generation is being built in PJM without state subsidies.

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