Dive Brief:

• The U.S. Third Circuit Court of Appeals has ruled unanimously in favor of PPL EnergyPlus and other competitive electricity suppliers and overturned a New Jersey law that would have provided new power plants with preferential capacity prices.
• The court said the law overstepped state authority and intruded into Federal Energy Regulatory Commission (FERC) jurisdiction under the Federal Power Act.
• The decision upheld the New Jersey District Court's decision on the legislation.

Dive Insight:

The appeals court agreed with a similar decision reached earlier this year by the U.S. Fourth Circuit Court of Appeals that the Maryland Public Service Commission’s order subsidizing natural gas generation also intruded on FERC’s authority, this time on its power to regulate interstate wholesale electricity sales.

The courts affirmed the arguments from PPL and other competitive electricity suppliers that state subsidies for plant development and generation cause higher electricity prices and shift risk from developers to consumers, whereas structured and regulated competitive markets provide more accurate price signals. 

The competitive electricity suppliers argued the PJM Interconnection market is a good example of a market with price signals that support power plant development without state subsidies.

Things have changed dramatically since the actions by New Jersey legislators and the Maryland commission, with natural gas prices dropping so sharply and quickly that markets are demanding natural gas faster than developers can supply it.

Last winter’s cold snap in the Northeast drove so much demand for natural gas that utilities were forced to turn to old coal plants when the gas supply was exhausted. Power producers in the region are now holding on to outdated coal plants in anticipation of the same eventuality this winter.