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Maryland Use of Subsidies to Build Power Plants Goes to U.S. Supreme Court

Ruling could have effect on virtually identical issue that’s led to litigation in New Jersey

natural gas power plant

The U.S. Supreme Court has agreed to hear a Maryland case involving efforts to spur the building of new power plants, a case that could have implications for the lengthy litigation in New Jersey over essentially the same issue.

Both states sought to encourage the development of new generating units, each relying on subsidies from ratepayers to encourage construction of the facilities. That approach was rejected by lower courts as being preempted by jurisdiction given to the Federal Energy Regulatory Commission.

The court did not take up the New Jersey case, but because it raises an issue similar to the one involving Maryland, it could affect the state’s litigation, according to John Reinert, a spokesman for the Board of Public Utilities.

But the issue may be moot by the time the nation’s highest court reaches its decision -- at least as far as New Jersey is concerned. Since the lower court’s decision invalidating the state’s program, two of the power plants initially awarded ratepayer subsidies have move ahead in development even without the incentives.

In addition, two other natural-gas-fired plants also are planned to be built in New Jersey without any financial assistance from the state. The new power plants are located in Newark, Woodbridge, West Deptford Township, and Sewaren.

With residents and businesses paying some of the highest electric bills in the country, Gov. Chris Christie signed a bipartisan bill in 2011 that would give subsidies from ratepayers to developers of power plants over 15 years as an incentive to build new generating units.

The law, backed by many business groups, was viewed as a way to reduce those costs by increasing electric-generating capacity in the state. Critics, however, said the bill could cost consumers up to $2 billion over the length of the contracts.

Power suppliers quickly challenged the program in the courts and before FERC, all of which agreed that the program was preempted by the federal agency. The U.S. Solicitor General in an opinion requested by the Supreme Court agreed with that conclusion.

To some, that history makes it unlikely the high court will reverse direction on the subsidy programs.

“Four different judicial bodies have ruled on this issue,’’ said Glen Thomas, president of the PJM Providers Group, a coalition of power suppliers. He noted FERC also rejected the subsidy programs. “So far, the proposal is 0-for-5 in my book.’’

The irony is that big changes in the energy sector have led to lower prices for consumers, largely due to cheap and plentiful supplies of natural gas used to power most new generating units.

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