1 (Slip Opinion) OCTOBER TERM, 2015

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 jurisdic tion over wholesale sales of electricity in the interstate market , but “leaves to the States alone, the regulation of [reta il electricity sales].” FERC v. Electric Power Supply Assn., 577 U. S. ___, ___. In Mary land and other States that have deregulated their energy market s, “load serving entities” (LSEs) purchase electricity at wholesale fr om independent power generators for delivery to retail consumers. In terstate wholesale transactions in deregulated markets typically occur through (1) bilateral contracting, where LSEs agree to purchase a ce rtain amount of electricity from generators at a certain rate over a certain period of time; and (2) competitive wholesale auctions admi nistered by Regional Transmis

sion Organizations (RTOs) and Independent System Operators (ISOs), nonprofit entities that mana ge certain segments of the elec

tricity grid.

PJM Interconnection (PJM), an RTO overseeing a multistate grid, operates a capacity auction. The ca pacity 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 electric ity in three years’ time then bid

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* 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 court2 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 te rms of the contract, CPV sells its capacity to PJM through the auction, but—through mandated pay

ments from or to LSEs—receives th e 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 interv ened 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 requ ires. A state law is preempted where “Congress has legislated comp rehensively 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 acco mplishment 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, se e 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 di stinct 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 achieve3 Cite as: 578 U. S. ____ (2016)

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 ca pacity from one party to another outside the auction. Instead, Ma ryland’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 encour aging 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.

G INSBURG

, J., delivered the opinion of the Court, in which R OBERTS

, C. J., and K ENNEDY , B REYER , A LITO , S OTOMAYOR , and K AGAN , JJ., joined. S OTOMAYOR , J., filed a concurring opinion. T HOMAS , J., filed an opinion concurring in part and concurring in the judgment._________________

_________________ 1 Cite as: 578 U. S. ____ (2016)

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 tonotify the Reporter of Decisions, Supreme Court of the United States, Washington, 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]

J USTICE G INSBURG 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 wh olesale rates that are just and reasonable. FERC’s scheme, in Maryland’s view,provided insufficient incentive for new electricity generation in the State. Maryland therefore enacted its ownregulatory program. Maryland’s program provides subsidies, through state-mandated contracts, to a new generator, but conditions receipt of those subsidies on the new2 HUGHES v. TALEN ENERGY MARKETING, LLC

Opinion of the Court

generator selling capacity into a FERC-regulated wholesale auction. In a suit initiated by competitors of Maryland’s new electricity generato r, the Court of Appeals forthe Fourth Circuit held that Maryland’s scheme impermissibly 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 regulate “the sale of electric ener gy at wholesale in interstate commerce.” §824(b)(1). A wholesale sale is defined as a “sale of electric energy to any pe rson for resale.” §824(d). The FPA assigns to FERC responsibility for ensuring that “[a]ll rates and charges made, demanded, or received byany public utility for or in connection with the transmission 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 tobe unjust or unreasonable, “the Commission shall determine 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 characte ristically governed by the States.”). “Since the FPA’s passage, electricity has increasingly become a competitive interstate business, and FERC’s role3 Cite as: 578 U. S. ____ (2016)

Opinion of the Court

has evolved accordingly.” EPSA , 577 U. S., at ___ (slip op., at 4). Until relatively rece ntly, 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, havederegulated their energy markets. In deregulated markets, 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, FERChas charged nonprofit entities, called Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), with managing certain segments of the electricity grid.Interstate wholesale transactions in deregulated markets typically occur through two mechanisms. The first isbilateral contracting: LSEs sign agreements with generators 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 numberof competitive wholesale auctions: for example, a “sameday auction” for immediate delivery of electricity to LSEs facing a sudden spike in demand; a “next-day auction” tosatisfy LSEs’ anticipated near-term demand; and a “capacity 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 the4 HUGHES v. TALEN ENERGY MARKETING, LLC

Opinion of the Court

electricity grid in all or parts of 13 mid-Atlantic and Midwestern States and the District of Columbia. The PJMcapacity auction functions as follows. PJM predicts electricity 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 rece ive the highest accepted rate, which is called the “clearing price.” 1 LSEs then mustpurchase from PJM, at the clearing price, enough electricity 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 genera tors to enter the market, increasing supply and thereby lo wering 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

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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 purchase capacity only from those thr ee 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 subregionsand makes adjustments to the clearing price to reflect operating conditions in those subregions. For inst ance, PJM may pay a higher rate in

or near areas where tran smission-line congestion limits the amount of electricity that can be imported from other areas. The elevated clearingprice might encourage a company to site a new power plant in a subregion where the need for local generati on is great rather than elsewhere in PJM’s grid.5 Cite as: 578 U. S. ____ (2016)

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 PJMprojected 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 th e 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 longterm bilateral contract with a generator to purchase 50 units of electricity 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 de mand, 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. Th at 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 generato r clears the auction at theMOPR price, PJM deems that generator an efficient entrant and exempts it from the MOPR going forward, allowing it to bid its capacity into the auction at any price itelects, including $0. Second, the New Entry Price Adjustment (NEPA) guarantees new generators, under certain circumstances, a stable capacity price for their firstthree years in the market. The NEPA’s guarantee eliminates, 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 suffi cient new in-state generation. Because Maryland sits in a particularly congested part of the PJM grid, importing electricity from otherparts of the grid into the State is often difficult. To address 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 newgeneration over existing generation, throwing the auction’s market-based price-setting mechanism out of balance. Ibid. See also PJM

, 128 FERC ¶61,789 (2009) (order on petition for rehearing) (“Both new entry and retention of existing efficien t capacity are necessary to ensure reliability and both should receive the same price so that the price signals are not skewed in favor of new7 Cite as: 578 U. S. ____ (2016)

Opinion of the Court

entry.”). Shortly after FERC rejected Maryland’s NEPA proposal, the Maryland Public Service Commission promulgated theGeneration Order at issue here. Under the order, Maryland solicited proposals from various companies for construction 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 co ntract (the parties refer to
this contract as a “contract fo r 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 exceed s the price guaranteed in the contract for differences, CPV pa ys 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

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4 New Jersey implemented a similar program around the same time. The duration of the pric e 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

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5 Two simplified examples illustrate how Maryland’s program interacts with the PJM capacity auction. First, consider a hypothetical situation where the clearing price fa lls 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, andCPV’s capacity clears the auction. CPV receives payments from Maryland 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 satisfytheir assigned shares of anticipated demand. Assume that PJM requires Maryland LSEs to purchase 40,000 units of capacity. Total capacity-auction expenses for Mary land LSEs would therefore include both the payment to CPV ($100,000) and the full cost of purchasingcapacity from PJM ($800,000), or $900,000. Absent Maryland’s program, the LSEs’ capacity-auction ex penses would have included only the total cost of capacity purchases from PJM, or $800,000.

Now assume instead that the clea ring 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 difference 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 LS Es 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. Abse nt Maryland’s program, the LSEswould have had to pay $1,600,000 to PJM without receiving any offsetting payments from CPV.9 Cite as: 578 U. S. ____ (2016)

Opinion of the Court

auction at $0 without first clearing at the MOPR price. Responding to a complaint filed by incumbent generatorsin the Maryland region who objected to Maryland’s program (and the similar New Jersey program), FERC eliminated 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 stateand local policies and objectives with regard to the development of new capacity resources, or unreasonably interfere with those objectives. We are forced to act, however,when subsidized entry supported by one state’s or locality’s policies has the effect of disrupting the competitive price signals that PJM’s [capac ity 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) (upholding FERC’s elimination of the state-supported generation exemption). In the first year CPV bid capacity from its new plant into the PJM capacity auction, that capacitycleared the auction at the MOPR rate, so CPV was thereafter eligible to function as a price taker.In addition to seeking the elimination of the statesupported generation exemptio n, incumbent generators—respondents here—brought suit in the District of Maryland against members of the Maryland Public Service
Commission in their official capacities. The incumbent generators sought a declarator y 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

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6 Because neither CPV nor Maryland has challenged whether plaintiffs 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’sprogram improperly sets the rate CPV receives for interstate wholesale capacity sales to PJM. PPL Energyplus,
LLC v. Nazarian , 974 F. Supp. 2d 790, 840 (Md. 2013). “While Maryland may retain tra ditional state authority to regulate the development, lo cation, 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 CPVreceives for its sales in the PJM auction,” “a FERCapproved market mechanism.” Id., at 476–477. “[B]y adopting terms and prices set by Maryland, not thosesanctioned by FERC,” the Fourth Circuit concluded, Maryland’s program “strikes at the heart of the agency’s statutory power.” Id., at 478. 8 The Fourth Circuit cautioned that it “need not express an op inion on other state efforts to encourage new generation, such as direct subsidies or

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7 Respondents also raised arguments under the Dormant CommerceClause and 42 U. S. C. §1983. The District Court rejected those arguments, 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).11 Cite as: 578 U. S. ____ (2016)

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’sprogram, the Fourth Circuit determined, “has the potential 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 theConstitution or Laws of any State to the Contrary notwithstanding.” 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) (brackets12 HUGHES v. TALEN ENERGY MARKETING, LLC

Opinion of the Court

and internal quotation marks omitted).We agree with the Fourth Circuit’s judgment that Maryland’s program sets an interstate wholesale rate, contravening 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. Doubt ing FERC’s judgment, Maryland—through the contract fo r differences—requires CPV to participate in the PJM capacity auction, but guaranteesCPV a rate distinct from the clearing price for its interstate 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)). 9That Maryland was attempting to encourage construction of new in-state generation does not save its program.States, of course, may regulate within the domain Congress assigned to them even when their laws incidentally

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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 conti nue, are therefore separate from
the rate CPV receives for its wholesal e sales of capacity to PJM. But because the payments are conditione d 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).13 Cite as: 578 U. S. ____ (2016)

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 particular state law turns on “the target at which the state law

aims ”). 10 But States may not seek to achieve ends, however legitimate, through regulatory means that intrude on FERC’s authority over interstate wholesale rates, as Maryland has done here. See ibid. (distinguishing between “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)). 11The problem we have identified with Maryland’s program 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 thereasonableness of a wholesale rate, and the State therefore 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

,

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10 Although Oneok, Inc. v. Learjet, Inc. , 575 U. S. ___ (2015), involved
the NGA rather than th e FPA, the relevant provisions of the two statutes are analogous. This Cour t has routinely relied on NGA cases in determining the scope of th e FPA, and vice versa. See, e.g., id., at 14–15 (discussing FPA cases while dete rmining the preemptive scope of the NGA).

11 Maryland’s program, Maryland and CPV assert, is consistent withfederal law because FERC has accommodated the program by eliminating the MOPR’s state-supported genera tion 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 d oes 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 observed 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’ desi re to give FERC plenary authority 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 recovering through retail sales a cost FERC mandated it incur—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 respond, is indistinguishable from traditional bilateralcontracts for capacity, which FERC has long accommodated 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 differences 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 ofCPV’s capacity sales to PJM. Notably, because the contract for differences does not contemplate the sale of capacity outside the auction, Maryland and CPV took the position, until the Fourth Circuit issued its decision, that
the rate in the contract for di fferences is not subject to FERC’s reasonableness review. See §824(b)(1) (FERC has jurisdiction over contracts for “ the sale of electric energy at15 Cite as: 578 U. S. ____ (2016)

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 ta x 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 fata l defect that renders Maryland’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 qu estion whether generators and LSEs may enter into long-term financ ial hedging contracts based on the auction clearing price. Such contracts, also frequently termed contractsfor differences, do not involve state action to the same degree as Maryland’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 Maryland’s program, we do not resolve whether, as the incumbent generators also assert, Maryland’s program is preempted because it counteracts FERC’s refusal to extend th e NEPA’s duration, or because it interferes with the capacity auction’s price signals._________________

_________________ 1 Cite as: 578 U. S. ____ (2016)

S OTOMAYOR

, 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]

J USTICE S OTOMAYOR , 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 authorize s 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

S OTOMAYOR

, 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; contra ry to; occupying the field; repugnance; difference; irreco ncilability; inconsistency; violation; curtailment; and interference. But none of these expressions provides an infallible constitutional test or an exclusive constitutional yard stick” (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. En suring “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 sa le of petitioner CPV Mary

-3 Cite as: 578 U. S. ____ (2016)

S OTOMAYOR

, J., concurring

land, LLC’s energy at wholesale. Ante , at 12. Maryland, however, has acted to guarant ee 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._________________

_________________ 1 Cite as: 578 U. S. ____ (2016)

Opinion of T HOMAS

, 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]

J USTICE T HOMAS , 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 ther efore cannot stand. Because the statute provides a sufficient basis for resolving these cases, I would not also rest to day’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 FPA2 HUGHES v. TALEN ENERGY MARKETING, LLC

Opinion of T HOMAS

, 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 “e xclusive 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 FERCendorsed market mechanism for determining wholesale capacity rates. Under Maryland’s program, CPV Mary

land, LLC, is entitled to rece ive, 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 statutealone, I would affirm based solely on the FPA. Accordingly, 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.