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October 4, 2013
NEM Fall Policy Leadership Roundtable

Please plan to attend NEM’s Fall Policy Leadership Roundtable to be held in Harrisburg, Pennsylvania on October 28-30, 2013. PA PUC Chairman Powell, Vice Chairman Coleman, Commissioner Cawley and Commissioner Witmer are confirmed to participate as well as PA State Representatives Jeff Pyle and Bryan Barbin. Other top State Officials and Stakeholders have also been invited. Registration is now available on the NEM website, and a special NEM rate of $139.00 per night is available at the Hilton Harrisburg (717-237-6408). The Draft Agenda is available at this hotlink.

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Court Finds Maryland Commission Generation Order to be Unconstitutional

A federal district court in Maryland issued a decision reviewing a 2012 Maryland PSC order that directed the state's electric utilities to enter into a contract for differences with CPV Maryland to finance the building of generation in the state. The court found the Maryland Commission's Order, "violates the Supremacy Clause of the United States Constitution by virtue of field preemption."

The Court reasoned, "it appears well accepted that Congress intended to use the FPA to give FERC exclusive jurisdiction over setting wholesale electric energy and capacity rates or prices and thus intended this field to be occupied exclusively by federal regulation. Thus, state action that regulates within this field is void under the doctrine of field preemption." "While Maryland may retain traditional state authority to regulate the development, location, and type of power plants within its borders, the scope of Maryland's power is necessarily limited by FERC's exclusive authority to set wholesale energy and capacity prices under, inter alia, the Supremacy Clause and the field preemption doctrine. Based on this principle, Maryland cannot secure the development of a new power plant by regulating in such a manner as to intrude into the federal field of wholesale electric energy and capacity price-setting. Furthermore, Maryland's stated purpose to use the Generation Order to secure the existence of sufficient and reliable electric energy for Maryland residents does not permit invasion into a federally occupied field. Where a state action falls within a field Congress intended the federal government alone to occupy, the good intentions and importance of the state's objective are immaterial to the field preemption analysis."

Addressing the specific issue of the Commission's approval of the contract for differences, the Court found, "the Generation Order fixes the monetary value of the energy and capacity generated by CPV's facility and actually sold by CPV into the PJM Markets. The monetary value of CPV's wholesale energy and capacity sales dictated by the PSC in the Generation Order is determined outside of the auction mechanisms approved by FERC and utilized by PJM. Accordingly, the Court finds that the Generation Order, through the CfD, establishes the price ultimately received by CPV for its actual physical energy and capacity sales to PJM in the PJM Markets. However, under field preemption principles, the PSC is impotent to take regulatory action to establish the price for wholesale energy and capacity sales. FERC has exclusive domain in that field and has fixed the price for wholesale energy and capacity sales in the PJM Markets as the market-based rate produced by the auction processes approved by FERC and utilized by PJM."

The full text of the Order is available on the NEM Website.

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MIPSC and Michigan Energy Office Release Draft "Additional Areas" Energy Report

Following on Governor Snyder's Special Message on Energy and the Environment that was issued last year which charged the Commission and Michigan Energy Office with undertaking an information gathering process to formulate state energy policy, the second of four draft reports have been issued, on the subject of "additional areas," specifically reliability, electric rates and utility ratemaking and natural gas infrastructure. Of particular interest, the report observes, "that Michigan’s electricity rates have increased relative to the national average each year since 2009." The report opines that the rate increase is attributable to load loss, an increase in the delivered cost of coal, environmental upgrades and renewables and energy efficiency. The report also notes the utilities' proposal to address increased rates to large consumers is to provide the utilities with, "the discretionary ability to offer economic development rates, appropriately designed, with MPSC oversight." Comments on the report are due October 22. The full text of the Additional Areas Report is available on the NEM Website.

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