(Slip Opinion) OCTOBER TERM, 2015 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
HUGHES, CHAIRMAN, MARYLAND PUBLIC SERVICE
COMMISION, ET AL. v. TALEN ENERGY MARKETING,
LLC, FKA PPL ENERGYPLUS, LLC, ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FOURTH CIRCUIT
No. 14–614. Argued February 24, 2016—Decided April 19, 2016*
The Federal Power Act (FPA) vests in the Federal Energy Regulatory
Commission (FERC) exclusive jurisdiction over wholesale sales of
electricity in the interstate market, but “leaves to the States alone,
the regulation of [retail electricity sales].” FERC v. Electric Power
Supply Assn., 577 U. S. ___, ___. In Maryland and other States that
have deregulated their energy markets, “load serving entities” (LSEs)
purchase electricity at wholesale from independent power generators
for delivery to retail consumers. Interstate wholesale transactions in
deregulated markets typically occur through (1) bilateral contracting,
where LSEs agree to purchase a certain amount of electricity from
generators at a certain rate over a certain period of time; and (2)
competitive wholesale auctions administered by Regional Transmis-
sion Organizations (RTOs) and Independent System Operators
(ISOs), nonprofit entities that manage certain segments of the elec-
tricity grid.
PJM Interconnection (PJM), an RTO overseeing a multistate grid,
operates a capacity auction. The capacity auction is designed to iden-
tify need for new generation and to accommodate long-term bilateral
contracts for capacity. PJM predicts demand three years into the fu-
ture and assigns a share of that demand to each participating LSE.
Owners of capacity to produce electricity in three years’ time then bid
——————
* Together with No. 14–623, CPV Maryland, LLC v. Talen Energy
Marketing, LLC, fka PPL EnergyPlus, LLC, et al., also on certiorari to
the same court
2 HUGHES v. TALEN ENERGY MARKETING, LLC
Syllabus
that capacity into the auction for sale to PJM at rates the sellers set
in their bids. PJM accepts bids until it has purchased enough capaci-
ty to satisfy anticipated demand. All accepted capacity sellers receive
the highest accepted rate, called the “clearing price.” LSEs then
must purchase, from PJM, enough electricity to satisfy their assigned
share of overall projected demand. FERC extensively regulates the
structure of the capacity auction to ensure that it efficiently balances
supply and demand, producing a just and reasonable clearing price.
Concerned that the PJM capacity auction was failing to encourage
development of sufficient new in-state generation, Maryland enacted
its own regulatory program. Maryland selected, through a proposal
process, petitioner CPV Maryland, LLC (CPV), to construct a new
power plant and required LSEs to enter into a 20-year pricing con-
tract (called a contract for differences) with CPV at a rate CPV speci-
fied in its proposal. Under the terms of the contract, CPV sells its
capacity to PJM through the auction, but—through mandated pay-
ments from or to LSEs—receives the contract price rather than the
clearing price for these sales to PJM. In a suit filed by incumbent
generators (respondents here) against members of the Maryland Pub-
lic Service Commission—CPV intervened as a defendant—the Dis-
trict Court issued a declaratory judgment holding that Maryland’s
program improperly sets the rate CPV receives for interstate whole-
sale capacity sales to PJM. The Fourth Circuit affirmed.
Held: Maryland’s program is preempted because it disregards the in-
terstate wholesale rate FERC requires. A state law is preempted
where “Congress has legislated comprehensively to occupy an entire
field of regulation,” Northwest Central Pipeline Corp. v. State Corpo-
ration Comm’n of Kan., 489 U. S. 493, 509, as well as “ ‘where, under
the circumstances of [a] particular case, [the challenged state law]
stands as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress,’ ” Crosby v. National Foreign
Trade Council, 530 U. S. 363, 373. Exercising its exclusive authority
over interstate wholesale sales, see 16 U. S. C. §824(b)(1), FERC has
approved PJM’s capacity auction as the sole ratesetting mechanism
for capacity sales to PJM, and has deemed the clearing price per se
just and reasonable. However, Maryland—through the contract for
differences—guarantees CPV a rate distinct from the clearing price
for its interstate capacity sales to PJM. By adjusting an interstate
wholesale rate, Maryland’s program contravenes the FPA’s division
of authority between state and federal regulators.
That Maryland was attempting to encourage construction of new
in-state generation does not save its program. States may regulate
within their assigned domain even when their laws incidentally af-
fect areas within FERC’s domain. But they may not seek to achieve
Cite as: 578 U. S. ____ (2016) 3
Syllabus
ends, however legitimate, through regulatory means that intrude on
FERC’s authority over interstate wholesale rates, as Maryland has
done here. See Mississippi Power & Light Co. v. Mississippi ex rel.
Moore, 487 U. S. 354, 373; Nantahala Power & Light Co. v. Thorn-
burg, 476 U. S. 953, 966. Maryland and CPV analogize the contract
for differences to traditional bilateral contracts for capacity. Unlike
traditional bilateral contracts, however, the contract for differences
does not transfer ownership of capacity from one party to another
outside the auction. Instead, Maryland’s program operates within
the auction, mandating LSEs and CPV to exchange money based on
the cost of CPV’s capacity sales to PJM.
Maryland’s program is rejected only because it disregards an inter-
state wholesale rate required by FERC. Neither Maryland nor other
States are foreclosed from encouraging production of new or clean
generation through measures that do not condition payment of funds
on capacity clearing the auction. Pp. 11–15.
753 F. 3d 467, affirmed.
GINSBURG, J., delivered the opinion of the Court, in which ROBERTS,
C. J., and KENNEDY, BREYER, ALITO, SOTOMAYOR, and KAGAN, JJ.,
joined. SOTOMAYOR, J., filed a concurring opinion. THOMAS, J., filed an
opinion concurring in part and concurring in the judgment.
Cite as: 578 U. S. ____ (2016) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 14–614 and 14–623
_________________
W. KEVIN HUGHES, CHAIRMAN, MARYLAND PUBLIC
SERVICE COMMISSION, ET AL., PETITIONERS
14–614 v.
TALEN ENERGY MARKETING, LLC, FKA PPL
ENERGYPLUS, LLC, ET AL.
CPV MARYLAND, LLC, PETITIONER
14–623 v.
TALEN ENERGY MARKETING, LLC, FKA PPL
ENERGYPLUS, LLC, ET AL.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[April 19, 2016]
JUSTICE GINSBURG delivered the opinion of the Court.
The Federal Power Act (FPA), 41 Stat. 1063, as amended,
16 U. S. C. §791a et seq., vests in the Federal Energy
Regulatory Commission (FERC) exclusive jurisdiction over
wholesale sales of electricity in the interstate market.
FERC’s regulatory scheme includes an auction-based
market mechanism to ensure wholesale rates that are just
and reasonable. FERC’s scheme, in Maryland’s view,
provided insufficient incentive for new electricity genera
tion in the State. Maryland therefore enacted its own
regulatory program. Maryland’s program provides subsi
dies, through state-mandated contracts, to a new genera
tor, but conditions receipt of those subsidies on the new
2 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of the Court
generator selling capacity into a FERC-regulated whole
sale auction. In a suit initiated by competitors of Mary
land’s new electricity generator, the Court of Appeals for
the Fourth Circuit held that Maryland’s scheme imper
missibly intrudes upon the wholesale electricity market, a
domain Congress reserved to FERC alone. We affirm the
Fourth Circuit’s judgment.
I
A
Under the FPA, FERC has exclusive authority to regu
late “the sale of electric energy at wholesale in interstate
commerce.” §824(b)(1). A wholesale sale is defined as a
“sale of electric energy to any person for resale.” §824(d).
The FPA assigns to FERC responsibility for ensuring that
“[a]ll rates and charges made, demanded, or received by
any public utility for or in connection with the transmis
sion or sale of electric energy subject to the jurisdiction of
the Commission . . . shall be just and reasonable.”
§824d(a). See also §824e(a) (if a rate or charge is found to
be unjust or unreasonable, “the Commission shall deter
mine the just and reasonable rate”). “But the law places
beyond FERC’s power, and leaves to the States alone, the
regulation of ‘any other sale’—most notably, any retail
sale—of electricity.” FERC v. Electric Power Supply Assn.,
577 U. S. ___, ___ (2016) (EPSA) (slip op., at 1) (quoting
§824(b)). The States’ reserved authority includes control
over in-state “facilities used for the generation of electric
energy.” §824(b)(1); see Pacific Gas & Elec. Co. v. State
Energy Resources Conservation and Development Comm’n,
461 U. S. 190, 205 (1983) (“Need for new power facilities,
their economic feasibility, and rates and services, are
areas that have been characteristically governed by the
States.”).
“Since the FPA’s passage, electricity has increasingly
become a competitive interstate business, and FERC’s role
Cite as: 578 U. S. ____ (2016) 3
Opinion of the Court
has evolved accordingly.” EPSA, 577 U. S., at ___ (slip op.,
at 4). Until relatively recently, most state energy markets
were vertically integrated monopolies—i.e., one entity,
often a state utility, controlled electricity generation,
transmission, and sale to retail consumers. Over the past
few decades, many States, including Maryland, have
deregulated their energy markets. In deregulated mar
kets, the organizations that deliver electricity to retail
consumers—often called “load serving entities” (LSEs)—
purchase that electricity at wholesale from independent
power generators. To ensure reliable transmission of
electricity from independent generators to LSEs, FERC
has charged nonprofit entities, called Regional Transmis
sion Organizations (RTOs) and Independent System Op
erators (ISOs), with managing certain segments of the
electricity grid.
Interstate wholesale transactions in deregulated mar
kets typically occur through two mechanisms. The first is
bilateral contracting: LSEs sign agreements with genera
tors to purchase a certain amount of electricity at a certain
rate over a certain period of time. After the parties have
agreed to contract terms, FERC may review the rate for
reasonableness. See Morgan Stanley Capital Group Inc. v.
Public Util. Dist. No. 1 of Snohomish Cty., 554 U. S. 527,
546–548 (2008) (Because rates set through good-faith
arm’s-length negotiation are presumed reasonable, “FERC
may abrogate a valid contract only if it harms the public
interest.”). Second, RTOs and ISOs administer a number
of competitive wholesale auctions: for example, a “same
day auction” for immediate delivery of electricity to LSEs
facing a sudden spike in demand; a “next-day auction” to
satisfy LSEs’ anticipated near-term demand; and a “capac
ity auction” to ensure the availability of an adequate
supply of power at some point far in the future.
These cases involve the capacity auction administered
by PJM Interconnection (PJM), an RTO that oversees the
4 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of the Court
electricity grid in all or parts of 13 mid-Atlantic and Mid
western States and the District of Columbia. The PJM
capacity auction functions as follows. PJM predicts elec
tricity demand three years ahead of time, and assigns a
share of that demand to each participating LSE. Owners
of capacity to produce electricity in three years’ time bid to
sell that capacity to PJM at proposed rates. PJM accepts
bids, beginning with the lowest proposed rate, until it has
purchased enough capacity to satisfy projected demand.
No matter what rate they listed in their original bids, all
accepted capacity sellers receive the highest accepted rate,
which is called the “clearing price.”1 LSEs then must
purchase from PJM, at the clearing price, enough electric
ity to satisfy their PJM-assigned share of overall projected
demand. The capacity auction serves to identify need for
new generation: A high clearing price in the capacity
auction encourages new generators to enter the market,
increasing supply and thereby lowering the clearing price
in same-day and next-day auctions three years’ hence; a
low clearing price discourages new entry and encourages
retirement of existing high-cost generators.2
The auction is designed to accommodate long-term
bilateral contracts for capacity. If an LSE has acquired a
——————
1 For
example, if four power plants bid to sell capacity at, respectively,
$10/unit, $20/unit, $30/unit, and $40/unit, and the first three plants
provide enough capacity to satisfy projected demand, PJM will pur
chase capacity only from those three plants, each of which will receive
$30/unit, the clearing price.
2 Because PJM operates the electricity grid in a very large region of
the country, PJM divides its overall grid into geographic subregions
and makes adjustments to the clearing price to reflect operating condi
tions in those subregions. For instance, PJM may pay a higher rate in
or near areas where transmission-line congestion limits the amount of
electricity that can be imported from other areas. The elevated clearing
price might encourage a company to site a new power plant in a subre
gion where the need for local generation is great rather than elsewhere
in PJM’s grid.
Cite as: 578 U. S. ____ (2016) 5
Opinion of the Court
certain amount of capacity through a long-term bilateral
contract with a generator, the LSE—not the generator—is
considered the owner of that capacity for purposes of the
auction. The LSE sells that capacity into the auction,
where it counts toward the LSE’s assigned share of PJM-
projected demand, thereby reducing the net costs of the
LSE’s required capacity purchases from PJM.3 LSEs
generally bid their capacity into the auction at a price of
$0, thus guaranteeing that the capacity will clear at any
price. Such bidders are called “price takers.” Because the
fixed costs of building generating facilities often vastly
exceed the variable costs of producing electricity, many
generators also function as price takers.
FERC extensively regulates the structure of the PJM
capacity auction to ensure that it efficiently balances
supply and demand, producing a just and reasonable
clearing price. See EPSA, 577 U. S., at ___ (slip op., at 5)
(the clearing price is “the price an efficient market would
produce”). Two FERC rules are particularly relevant to
——————
3 To take a simplified example, assume an LSE has signed a long
term bilateral contract with a generator to purchase 50 units of electric
ity annually at a price of $40/unit (total annual cost: $2,000). In a
given year when the auction clearing price is $50/unit, assume PJM
requires the LSE to purchase 100 units of electricity to satisfy its share
of projected demand. The LSE bids the 50 units of capacity it already
owns into the PJM auction, and PJM pays the LSE $2,500 for those 50
units. Although the LSE then must pay PJM $5,000 for the 100 units it
must purchase to satisfy projected demand, the net cost to the LSE of
auction participation is only $2,500. Note that the effective price the
LSE pays for 50 of the 100 units it must purchase from PJM—the
amount purchased through the long-term contract—is the contract
price, not the clearing price. That is, the LSE pays the utility $2,000
for 50 units of capacity, receives $2,500 from PJM after selling that
capacity into the auction, and then pays $2,500 to PJM to purchase 50
units of capacity, resulting in a net cost of $2,000—the contract price—
for those 50 units. The LSE, of course, must pay the full clearing
price—$50/unit—for the other 50 units it is obliged to purchase to
satisfy its full share of projected demand.
6 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of the Court
these cases. First, the Minimum Offer Price Rule (MOPR)
requires new generators to bid capacity into the auction at
or above a price specified by PJM, unless those generators
can prove that their actual costs fall below the MOPR
price. Once a new generator clears the auction at the
MOPR price, PJM deems that generator an efficient en
trant and exempts it from the MOPR going forward, allow
ing it to bid its capacity into the auction at any price it
elects, including $0. Second, the New Entry Price Ad
justment (NEPA) guarantees new generators, under cer
tain circumstances, a stable capacity price for their first
three years in the market. The NEPA’s guarantee elimi
nates, for three years, the risk that the new generator’s
entry into the auction might so decrease the clearing price
as to prevent that generator from recovering its costs.
B
Around 2009, Maryland electricity regulators became
concerned that the PJM capacity auction was failing to
encourage development of sufficient new in-state genera
tion. Because Maryland sits in a particularly congested
part of the PJM grid, importing electricity from other
parts of the grid into the State is often difficult. To ad
dress this perceived supply shortfall, Maryland regulators
proposed that FERC extend the duration of the NEPA
from three years to ten. FERC rejected the proposal.
PJM, 126 FERC ¶62,563 (2009). “[G]iving new suppliers
longer payments and assurances unavailable to existing
suppliers,” FERC reasoned, would improperly favor new
generation over existing generation, throwing the auc
tion’s market-based price-setting mechanism out of bal
ance. Ibid. See also PJM, 128 FERC ¶61,789 (2009)
(order on petition for rehearing) (“Both new entry and
retention of existing efficient capacity are necessary to
ensure reliability and both should receive the same price
so that the price signals are not skewed in favor of new
Cite as: 578 U. S. ____ (2016) 7
Opinion of the Court
entry.”).
Shortly after FERC rejected Maryland’s NEPA proposal,
the Maryland Public Service Commission promulgated the
Generation Order at issue here. Under the order, Mary
land solicited proposals from various companies for con
struction of a new gas-fired power plant at a particular
location, and accepted the proposal of petitioner CPV
Maryland, LLC (CPV). Maryland then required LSEs to
enter into a 20-year pricing contract (the parties refer to
this contract as a “contract for differences”) with CPV at a
rate CPV specified in its accepted proposal.4 Unlike a
traditional bilateral contract for capacity, the contract for
differences does not transfer ownership of capacity from
CPV to the LSEs. Instead, CPV sells its capacity on the
PJM market, but Maryland’s program guarantees CPV
the contract price rather than the auction clearing price.
If CPV’s capacity clears the PJM capacity auction and
the clearing price falls below the price guaranteed in the
contract for differences, Maryland LSEs pay CPV the
difference between the contract price and the clearing
price. The LSEs then pass the costs of these required
payments along to Maryland consumers in the form of
higher retail prices. If CPV’s capacity clears the auction
and the clearing price exceeds the price guaranteed in the
contract for differences, CPV pays the LSEs the difference
between the contract price and the clearing price, and the
LSEs then pass the savings along to consumers in the
form of lower retail prices. Because CPV sells its capacity
exclusively in the PJM auction market, CPV receives no
payment from Maryland LSEs or PJM if its capacity fails
to clear the auction. But CPV is guaranteed a certain rate
if its capacity does clear, so the contract’s terms encourage
——————
4 New Jersey implemented a similar program around the same time.
The duration of the price guarantee for the New Jersey program is 15
years rather than Maryland’s 20.
8 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of the Court
CPV to bid its capacity into the auction at the lowest
possible price.5
Prior to enactment of the Maryland program, PJM had
exempted new state-supported generation from the
MOPR, allowing such generation to bid capacity into the
——————
5 Two simplified examples illustrate how Maryland’s program inter
acts with the PJM capacity auction. First, consider a hypothetical
situation where the clearing price falls below the price guaranteed in
the contract for differences. Assume that CPV’s plant produces 10,000
units of electricity a year, and that the 20-year price guaranteed under
the contract is $30/unit. Assume further that, in a given year during
the duration of the price guarantee, the clearing price is $20/unit, and
CPV’s capacity clears the auction. CPV receives payments from Mary
land LSEs of $10/unit, or $100,000, and payments from PJM of
$20/unit, or $200,000. The rate CPV receives from the capacity auction
is therefore $30/unit—the contract price—not $20/unit—the clearing
price. Under PJM auction rules, Maryland LSEs then must purchase
from PJM, at the clearing price of $20/unit, enough capacity to satisfy
their assigned shares of anticipated demand. Assume that PJM re
quires Maryland LSEs to purchase 40,000 units of capacity. Total
capacity-auction expenses for Maryland LSEs would therefore include
both the payment to CPV ($100,000) and the full cost of purchasing
capacity from PJM ($800,000), or $900,000. Absent Maryland’s pro
gram, the LSEs’ capacity-auction expenses would have included only
the total cost of capacity purchases from PJM, or $800,000.
Now assume instead that the clearing price in a given year is
$40/unit, which exceeds the $30/unit contract price, and that CPV’s
capacity clears the auction. CPV receives payments from PJM of
$40/unit, or $400,000. CPV then must pay Maryland LSEs the differ
ence between the contract price and the clearing price—in this case,
$10/unit, or $100,000. The rate CPV receives from the capacity auction
is therefore the contract price—$30/unit—the same price CPV received
in the above example. Maryland LSEs then must purchase from PJM,
at the clearing price of $40/unit, enough capacity to satisfy their share
of anticipated demand. Assume that PJM again requires Maryland
LSEs to purchase 40,000 units of capacity. Total capacity-auction
expenses for Maryland LSEs would therefore include the full cost of
capacity purchases from PJM ($1,600,000), minus the payment from
CPV ($100,000), or $1,500,000. Absent Maryland’s program, the LSEs
would have had to pay $1,600,000 to PJM without receiving any offset
ting payments from CPV.
Cite as: 578 U. S. ____ (2016) 9
Opinion of the Court
auction at $0 without first clearing at the MOPR price.
Responding to a complaint filed by incumbent generators
in the Maryland region who objected to Maryland’s pro
gram (and the similar New Jersey program), FERC elimi
nated this exemption. PJM, 135 FERC ¶61,106 (2011).
See also 137 FERC ¶61,145 (2011) (order on petition for
rehearing) (“Our intent is not to pass judgment on state
and local policies and objectives with regard to the devel
opment of new capacity resources, or unreasonably inter
fere with those objectives. We are forced to act, however,
when subsidized entry supported by one state’s or locali
ty’s policies has the effect of disrupting the competitive
price signals that PJM’s [capacity auction] is designed to
produce, and that PJM as a whole, including other states,
rely on to attract sufficient capacity.”); New Jersey Bd. of
Pub. Util. v. FERC, 744 F. 3d 74, 79–80 (CA3 2014) (up
holding FERC’s elimination of the state-supported genera
tion exemption). In the first year CPV bid capacity from
its new plant into the PJM capacity auction, that capacity
cleared the auction at the MOPR rate, so CPV was there
after eligible to function as a price taker.
In addition to seeking the elimination of the state-
supported generation exemption, incumbent generators—
respondents here—brought suit in the District of Mary
land against members of the Maryland Public Service
Commission in their official capacities. The incumbent
generators sought a declaratory judgment that Maryland’s
program violates the Supremacy Clause by setting a
wholesale rate for electricity and by interfering with
FERC’s capacity-auction policies.6 CPV intervened as a
——————
6 Because neither CPV nor Maryland has challenged whether plain
tiffs may seek declaratory relief under the Supremacy Clause, the
Court assumes without deciding that they may. See Brief for Public
Utility Law Project of New York, Inc., as Amicus Curiae 21 (arguing
that the incumbent generators should have been required to exhaust
administrative remedies before filing suit).
10 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of the Court
defendant. After a six-day bench trial, the District Court
issued a declaratory judgment holding that Maryland’s
program improperly sets the rate CPV receives for inter
state wholesale capacity sales to PJM. PPL Energyplus,
LLC v. Nazarian, 974 F. Supp. 2d 790, 840 (Md. 2013).
“While Maryland may retain traditional state authority to
regulate the development, location, and type of power
plants within its borders,” the District Court explained,
“the scope of Maryland’s power is necessarily limited by
FERC’s exclusive authority to set wholesale energy and
capacity prices.” Id., at 829.7
The Fourth Circuit affirmed. Relying on this Court’s
decision in Mississippi Power & Light Co. v. Mississippi ex
rel. Moore, 487 U. S. 354, 370 (1988), the Fourth Circuit
observed that state laws are preempted when they “den[y]
full effect to the rates set by FERC, even though [they do]
not seek to tamper with the actual terms of an interstate
transaction.” PPL EnergyPlus, LLC v. Nazarian, 753
F. 3d 467, 476 (2014). Maryland’s program, the Fourth
Circuit reasoned, “functionally sets the rate that CPV
receives for its sales in the PJM auction,” “a FERC-
approved market mechanism.” Id., at 476–477. “[B]y
adopting terms and prices set by Maryland, not those
sanctioned by FERC,” the Fourth Circuit concluded, Mary
land’s program “strikes at the heart of the agency’s statu
tory power.” Id., at 478.8 The Fourth Circuit cautioned
that it “need not express an opinion on other state efforts
to encourage new generation, such as direct subsidies or
——————
7 Respondents also raised arguments under the Dormant Commerce
Clause and 42 U. S. C. §1983. The District Court rejected those argu
ments, PPL Energyplus, LLC v. Nazarian, 974 F. Supp. 2d 790, 841–
855 (Md. 2013), the Fourth Circuit did not address them, and they are
irrelevant at this stage.
8 For the same reason, the Third Circuit found New Jersey’s similar
program preempted. PPL Energyplus, LLC v. Solomon, 766 F. 3d 241,
246 (2014).
Cite as: 578 U. S. ____ (2016) 11
Opinion of the Court
tax rebates, that may or may not differ in important ways
from the Maryland initiative.” Ibid.
The Fourth Circuit then held that Maryland’s program
impermissibly conflicts with FERC policies. Maryland’s
program, the Fourth Circuit determined, “has the poten
tial to seriously distort the PJM auction’s price signals,”
undermining the incentive structure FERC has approved
for construction of new generation. Ibid. Moreover, the
Fourth Circuit explained, Maryland’s program “conflicts
with NEPA” by providing a 20-year price guarantee to a
new entrant—even though FERC refused Maryland’s
request to extend the duration of the NEPA past three
years. Id., at 479.
We granted certiorari, 577 U. S. ___ (2015), and now
affirm.
II
The Supremacy Clause makes the laws of the United
States “the supreme Law of the Land; . . . any Thing in the
Constitution or Laws of any State to the Contrary not
withstanding.” U. S. Const., Art. VI, cl. 2. Put simply,
federal law preempts contrary state law. “Our inquiry
into the scope of a [federal] statute’s pre-emptive effect is
guided by the rule that the purpose of Congress is the
ultimate touchstone in every pre-emption case.” Altria
Group, Inc. v. Good, 555 U. S. 70, 76 (2008) (internal
quotation marks omitted). A state law is preempted
where “Congress has legislated comprehensively to occupy
an entire field of regulation, leaving no room for the States
to supplement federal law,” Northwest Central Pipeline
Corp. v. State Corporation Comm’n of Kan., 489 U. S. 493,
509 (1989), as well as “where, under the circumstances of
a particular case, the challenged state law stands as an
obstacle to the accomplishment and execution of the full
purposes and objectives of Congress,” Crosby v. National
Foreign Trade Council, 530 U. S. 363, 373 (2000) (brackets
12 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of the Court
and internal quotation marks omitted).
We agree with the Fourth Circuit’s judgment that Mary
land’s program sets an interstate wholesale rate, con
travening the FPA’s division of authority between state
and federal regulators. As earlier recounted, see supra, at
2, the FPA allocates to FERC exclusive jurisdiction over
“rates and charges . . . received . . . for or in connection
with” interstate wholesale sales. §824d(a). Exercising
this authority, FERC has approved the PJM capacity
auction as the sole ratesetting mechanism for sales of
capacity to PJM, and has deemed the clearing price per se
just and reasonable. Doubting FERC’s judgment, Mary
land—through the contract for differences—requires CPV
to participate in the PJM capacity auction, but guarantees
CPV a rate distinct from the clearing price for its inter
state sales of capacity to PJM. By adjusting an interstate
wholesale rate, Maryland’s program invades FERC’s
regulatory turf. See EPSA, 577 U. S., at ___ (slip op.,
at 26) (“The FPA leaves no room either for direct state
regulation of the prices of interstate wholesales or for
regulation that would indirectly achieve the same result.”
(internal quotation marks omitted)).9
That Maryland was attempting to encourage construc
tion of new in-state generation does not save its program.
States, of course, may regulate within the domain Con
gress assigned to them even when their laws incidentally
——————
9 According to Maryland and CPV, the payments guaranteed under
Maryland’s program are consideration for CPV’s compliance with
various state-imposed conditions, i.e., the requirements that CPV build
a certain type of generator, at a particular location, that would produce
a certain amount of electricity over a particular period of time. The
payments, Maryland and CPV continue, are therefore separate from
the rate CPV receives for its wholesale sales of capacity to PJM. But
because the payments are conditioned on CPV’s capacity clearing the
auction—and, accordingly, on CPV selling that capacity to PJM—the
payments are certainly “received . . . in connection with” interstate
wholesale sales to PJM. 16 U. S. C. §824d(a).
Cite as: 578 U. S. ____ (2016) 13
Opinion of the Court
affect areas within FERC’s domain. See Oneok, Inc. v.
Learjet, Inc., 575 U. S. ___, ___ (2015) (slip op., at 11)
(whether the Natural Gas Act (NGA) preempts a particu
lar state law turns on “the target at which the state law
aims”).10 But States may not seek to achieve ends, how
ever legitimate, through regulatory means that intrude on
FERC’s authority over interstate wholesale rates, as
Maryland has done here. See ibid. (distinguishing be
tween “measures aimed directly at interstate purchasers
and wholesalers for resale, and those aimed at subjects
left to the States to regulate” (internal quotation marks
omitted)).11
The problem we have identified with Maryland’s pro
gram mirrors the problems we identified in Mississippi
Power & Light and Nantahala Power & Light Co. v.
Thornburg, 476 U. S. 953 (1986). In each of those cases, a
State determined that FERC had failed to ensure the
reasonableness of a wholesale rate, and the State there
fore prevented a utility from recovering—through retail
rates—the full cost of wholesale purchases. See Missis-
sippi Power & Light, 487 U. S., at 360–364; Nantahala,
——————
10 Although Oneok, Inc. v. Learjet, Inc., 575 U. S. ___ (2015), involved
the NGA rather than the FPA, the relevant provisions of the two
statutes are analogous. This Court has routinely relied on NGA cases
in determining the scope of the FPA, and vice versa. See, e.g., id., at
14–15 (discussing FPA cases while determining the preemptive scope of
the NGA).
11 Maryland’s program, Maryland and CPV assert, is consistent with
federal law because FERC has accommodated the program by eliminat
ing the MOPR’s state-supported generation exception. Even assuming
that this change has prevented Maryland’s program from distorting the
auction’s price signals, however—a point the parties dispute—
Maryland cannot regulate in a domain Congress assigned to FERC and
then require FERC to accommodate Maryland’s intrusion. See North-
west Central Pipeline Corp. v. State Corporation Comm’n of Kan., 489
U. S. 493, 518 (1989) (“The NGA does not require FERC to regulate
around a state rule the only purpose of which is to influence purchasing
decisions of interstate pipelines, however that rule is labeled.”).
14 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of the Court
476 U. S., at 956–962. This Court invalidated the States’
attempts to second-guess the reasonableness of interstate
wholesale rates. “ ‘Once FERC sets such a rate,’ ” we ob
served in Mississippi Power & Light, “ ‘a State may not
conclude in setting retail rates that the FERC-approved
wholesale rates are unreasonable. A State must rather
give effect to Congress’ desire to give FERC plenary au
thority over interstate wholesale rates, and to ensure that
the States do not interfere with this authority.’ ” 487
U. S., at 373 (quoting Nantahala, 476 U. S., at 966). True,
Maryland’s program does not prevent a utility from recov
ering through retail sales a cost FERC mandated it in-
cur—Maryland instead guarantees CPV a certain rate for
capacity sales to PJM regardless of the clearing price. But
Mississippi Power & Light and Nantahala make clear that
States interfere with FERC’s authority by disregarding
interstate wholesale rates FERC has deemed just and
reasonable, even when States exercise their traditional
authority over retail rates or, as here, in-state generation.
The contract for differences, Maryland and CPV re
spond, is indistinguishable from traditional bilateral
contracts for capacity, which FERC has long accommo
dated in the auction. See supra, at 4–5, and n. 3. But the
contract at issue here differs from traditional bilateral
contracts in this significant respect: The contract for dif
ferences does not transfer ownership of capacity from one
party to another outside the auction. Instead, the contract
for differences operates within the auction; it mandates
that LSEs and CPV exchange money based on the cost of
CPV’s capacity sales to PJM. Notably, because the con
tract for differences does not contemplate the sale of ca
pacity outside the auction, Maryland and CPV took the
position, until the Fourth Circuit issued its decision, that
the rate in the contract for differences is not subject to
FERC’s reasonableness review. See §824(b)(1) (FERC has
jurisdiction over contracts for “the sale of electric energy at
Cite as: 578 U. S. ____ (2016) 15
Opinion of the Court
wholesale in interstate commerce.” (emphasis added)).12
Our holding is limited: We reject Maryland’s program
only because it disregards an interstate wholesale rate
required by FERC. We therefore need not and do not
address the permissibility of various other measures
States might employ to encourage development of new or
clean generation, including tax incentives, land grants,
direct subsidies, construction of state-owned generation
facilities, or re-regulation of the energy sector. Nothing in
this opinion should be read to foreclose Maryland and
other States from encouraging production of new or clean
generation through measures “untethered to a generator’s
wholesale market participation.” Brief for Respondents
40. So long as a State does not condition payment of funds
on capacity clearing the auction, the State’s program
would not suffer from the fatal defect that renders Mary
land’s program unacceptable.13
* * *
For the reasons stated, the judgment of the Court of
Appeals for the Fourth Circuit is
Affirmed.
——————
12 Our opinion does not call into question whether generators and
LSEs may enter into long-term financial hedging contracts based on the
auction clearing price. Such contracts, also frequently termed contracts
for differences, do not involve state action to the same degree as Mary
land’s program, which compels private actors (LSEs) to enter into
contracts for differences—like it or not—with a generator that must sell
its capacity to PJM through the auction.
13 Because the reasons we have set out suffice to invalidate Mary
land’s program, we do not resolve whether, as the incumbent genera
tors also assert, Maryland’s program is preempted because it counter
acts FERC’s refusal to extend the NEPA’s duration, or because it
interferes with the capacity auction’s price signals.
Cite as: 578 U. S. ____ (2016) 1
SOTOMAYOR, J., concurring
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 14–614 and 14–623
_________________
W. KEVIN HUGHES, CHAIRMAN, MARYLAND PUBLIC
SERVICE COMMISSION, ET AL., PETITIONERS
14–614 v.
TALEN ENERGY MARKETING, LLC, FKA PPL
ENERGYPLUS, LLC, ET AL.
CPV MARYLAND, LLC, PETITIONER
14–623 v.
TALEN ENERGY MARKETING, LLC, FKA PPL
ENERGYPLUS, LLC, ET AL.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[April 19, 2016]
JUSTICE SOTOMAYOR, concurring.
I write separately to clarify my understanding of the
pre-emption principles that should guide this Court’s
analysis of the Federal Power Act and that underpin its
conclusion in these cases.
The process through which consumers obtain energy
stretches across state and federal regulatory domains.
The Federal Power Act authorizes the States to regulate
energy production. 16 U. S. C. §824(b). It then instructs
the Federal Government to step in and regulate wholesale
purchases and energy transportation. §824(a). Finally,
it allows the States to assume control over the ultimate
sale of energy to consumers. §824(b). In short, the
Federal Power Act, like all collaborative federalism stat-
utes, envisions a federal-state relationship marked by
interdependence.
2 HUGHES v. TALEN ENERGY MARKETING, LLC
SOTOMAYOR, J., concurring
Pre-emption inquiries related to such collaborative
programs are particularly delicate. This Court has said
that where “coordinate state and federal efforts exist
within a complementary administrative framework, and in
the pursuit of common purposes, the case for federal pre-
emption becomes a less persuasive one.” New York State
Dept. of Social Servs. v. Dublino, 413 U. S. 405, 421
(1973). That is not to say that pre-emption has no role in
such programs, but courts must be careful not to confuse
the “congressionally designed interplay between state and
federal regulation,” Northwest Central Pipeline Corp. v.
State Corporation, Comm’n of Kan., 489 U. S. 493, 518
(1989), for impermissible tension that requires pre-
emption under the Supremacy Clause.
In this context, therefore, our general exhortation not to
rely on a talismanic pre-emption vocabulary applies with
special force. See Hines v. Davidowitz, 312 U. S. 52, 67
(1941) (“This Court . . . has made use of the following
expressions: conflicting; contrary to; occupying the field;
repugnance; difference; irreconcilability; inconsistency;
violation; curtailment; and interference. But none of these
expressions provides an infallible constitutional test or an
exclusive constitutional yardstick” (footnote omitted)).
I understand today’s opinion to reflect these principles.
Using the purpose of the Federal Power Act as the “ulti-
mate touchstone” of its pre-emption inquiry, Altria Group,
Inc. v. Good, 555 U. S. 70, 76 (2008), rather than resting
on generic pre-emption frameworks unrelated to the Fed-
eral Power Act, the Court holds that Maryland has im-
permissibly impeded the performance of one of FERC’s
core regulatory duties. Ensuring “just and reasonable”
wholesale rates is a central purpose of the Act. See 16
§824d(a). Pursuant to its mandate to set such rates,
FERC has approved the PJM Interconnection capacity
auction as the proper mechanism to determine the “just
and reasonable” rate for the sale of petitioner CPV Mary-
Cite as: 578 U. S. ____ (2016) 3
SOTOMAYOR, J., concurring
land, LLC’s energy at wholesale. Ante, at 12. Maryland,
however, has acted to guarantee CPV a rate different from
FERC’s “just and reasonable” rate and has thus contra-
vened the goals of the Federal Power Act. Ibid. Such
actions must be preempted. Mississippi Power & Light Co.
v. Mississippi ex rel. Moore, 487 U. S. 354, 374 (1988)
(“States may not regulate in areas where FERC has
properly exercised its jurisdiction to determine just and
reasonable wholesale rates”). The Court, however, also
rightly recognizes the importance of protecting the States’
ability to contribute, within their regulatory domain, to
the Federal Power Act’s goal of ensuring a sustainable
supply of efficient and price-effective energy. Ante, at 15.
Endorsing those conclusions, I join the Court’s opinion
in full.
Cite as: 578 U. S. ____ (2016) 1
Opinion of THOMAS, J.
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 14–614 and 14–623
_________________
W. KEVIN HUGHES, CHAIRMAN, MARYLAND PUBLIC
SERVICE COMMISSION, ET AL., PETITIONERS
14–614 v.
TALEN ENERGY MARKETING, LLC, FKA PPL
ENERGYPLUS, LLC, ET AL.
CPV MARYLAND, LLC, PETITIONER
14–623 v.
TALEN ENERGY MARKETING, LLC, FKA PPL
ENERGYPLUS, LLC, ET AL.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[April 19, 2016]
JUSTICE THOMAS, concurring in part and concurring in
the judgment.
The Court concludes that Maryland’s regulatory pro-
gram invades the Federal Energy Regulatory Commis-
sion’s (FERC) exclusive jurisdiction over interstate whole-
sale sales of electric energy. Ante, at 12. I agree that the
statutory text and framework compel that conclusion, and
that Maryland’s program therefore cannot stand. Because
the statute provides a sufficient basis for resolving these
cases, I would not also rest today’s holding on principles of
implied pre-emption. See, e.g., ante, at 11–12. For that
reason, I join the Court’s opinion only to the extent that it
rests on the text and structure of the Federal Power Act
(FPA), 41 Stat. 1063, as amended, 16 U. S. C. §791a et seq.
The FPA divides federal and state jurisdiction over the
regulation of electricity sales. As relevant here, the FPA
2 HUGHES v. TALEN ENERGY MARKETING, LLC
Opinion of THOMAS, J.
grants FERC the authority to regulate “the sale of electric
energy at wholesale in interstate commerce.” §824(b)(1).
That federal authority over interstate wholesale sales is
exclusive. See, e.g., Nantahala Power & Light Co. v.
Thornburg, 476 U. S. 953, 966 (1986) (recognizing that
Congress “vested” in FERC “exclusive jurisdiction” and
“plenary authority over interstate wholesale rates”); Mis-
sissippi Power & Light Co. v. Mississippi ex rel. Moore, 487
U. S. 354, 377 (1988) (Scalia, J., concurring in judgment)
(“It is common ground that if FERC has jurisdiction over a
subject, the States cannot have jurisdiction over the same
subject”).
To resolve these cases, it is enough to conclude that
Maryland’s program invades FERC’s exclusive jurisdic-
tion. Maryland has partially displaced the FERC-
endorsed market mechanism for determining wholesale
capacity rates. Under Maryland’s program, CPV Mary-
land, LLC, is entitled to receive, for its wholesale sales
into the capacity auction, something other than what
FERC has decided that generators should receive. That is
a regulation of wholesale sales: By “fiddling with the
effective . . . price” that CPV receives for its wholesale
sales, Maryland has “regulate[d]” wholesale sales “no less
than does direct ratesetting.” FERC v. Electric Power
Supply Assn., 577 U. S. ___, ___ (2016) (Scalia, J., dissent-
ing) (slip op., at 6) (emphasis deleted) (addressing analo-
gous situation involving retail sales). Maryland’s program
therefore intrudes on the exclusive federal jurisdiction
over wholesale electricity rates.
Although the Court applies the FPA’s framework in
reaching that conclusion, see ante, at 12, it also relies on
principles of implied pre-emption, see, e.g., ante, at 11–12.
Because we can resolve these cases based on the statute
alone, I would affirm based solely on the FPA. Accord-
ingly, I concur in the judgment and I join the Court’s
opinion to the extent that it holds that Maryland’s pro-
gram invades FERC’s exclusive jurisdiction.