A Maryland Public Service Commission (PSC) order issued last year that required utilities to enter into long-term power supply contracts with a developer chosen by the PSC to build a natural gas-fired plant was invalidated by a U.S. District Court judge Monday.
The PSC’s order, which had been challenged by PPL Corp., violated the Constitution’s supremacy clause because “Congress intended FERC alone to regulate wholesale energy and capacity prices, and…the generation order sets or establishes the wholesale energy and capacity prices to be received by CPV [Competitive Power Ventures],” said a 149-page decision handed down by Judge Marvin Garbis of the U.S. District Court for the District of Maryland.
“We’re pleased with the U.S. District Court’s decision, which upholds the integrity of competitive generation markets,” said Robert J. Grey, executive vice president and general counsel for PPL Corp. CPV did not respond to a request for comment by press time.
The PSC’s April 2012 order required public utilities in the state to enter into long-term contracts with a CPV “that essentially would guarantee that the developer would receive subsidized energy and capacity prices when it sells its output, giving it an unfair advantage over other generators and allowing it to bid in artificially low prices into PJM’s annual capacity auction,” PPL said.
Regardless of the price set by the federally regulated wholesale market, the PSC order provided that Maryland-based utilities “would assure that CPV received a guaranteed price fixed by a contractual formula,” said Garbis’ decision. The resulting secure income stream was to have financed construction of the generating facility.
“PPL has long argued that state programs that subsidize power plant development ultimately wind up costing consumers more, create barriers to future investment and unnecessarily shift the financial risk of new construction from developers to ratepayers…Because of competitive markets, gas-fired generation is being built in PJM without state subsidies, and there are ample supply resources in the wholesale electricity market to meet the state’s and region’s energy needs,” PPL said.
The PSC selected CPV’s 660 MW St. Charles Energy Center after a four-year process that was part of an initiative to upgrade the state’s energy infrastructure. The facility, which was to be built in Charles County, MD, would have represented a more than $500 million private infrastructure investment and provided “hundreds of millions of dollars” in savings to ratepayers over the initiative’s 20-year life span, CPV said following the PSC’s selection. CPV first unveiled plans for the combined-cycle power plant more than six years ago (see Daily GPI, July 26, 2007).
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