DSMDB-3086825

August 14, 2012

VIA ECF AND FEDERAL EXPRESS

Hon. Peter G. Sheridan, U.S.D.J.

United States District Court for the District of New Jersey

 Clarkson S. Fisher Building & U.S. Courthouse

402 E. State Street

Trenton, NJ 08608

Re: PPL EnergyPlus, LLC, et al. v. Solomon, et al.

Civil Action No. 3:11-745 (PGS-DEA) 

Dear Judge Sheridan:

Intervenor Defendant CPV Power Development, Inc. (“CPV”) hereby responds to 

Plaintiffs’ letter of August 7, 2012 seeking additional discovery before this Court rules on the 

pending motions for summary judgment. As explained in more detail below, CPV believes that:

• The cross motions on field preemption and the State Defendants’ 

jurisdictional motion are ripe for decision without further discovery;

• CPV’s prior agreement to certain “facts” that Plaintiffs rely upon in 

opposing CPV’s motion on conflict preemption, and the further 

concessions made below, make CPV’s conflict preemption claim ripe 

for decision; and

• CPV’s motion regarding the dormant Commerce Clause claim is ripe 

for decision now, but that it certainly will be ripe once the State 

provides non-privileged information confirming that it implemented the 

LCAPP Act’s neutral eligibility criteria in a non-discriminatory manner.

I. The Cross Motions on Field Preemption and the State’s Jurisdictional Motion Are 

Ripe for Decision Without Further Discovery.

The cross motions on field preemption present solely a legal question. FERC has 

exclusive jurisdiction over wholesale electric energy sales, but States have exclusive jurisdiction 

over construction of new generation. The question before this Court is whether the financial 

incentives provided for in the LCAPP Act to construct new generation are a permissible exercise 

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of the State’s authority over generation. That would be so if either (a) the SOCA is a “financial” 

instrument not subject to FERC jurisdiction, or (b) the FPA’s reserving to the States the right to 

incentivize financially new generation authorizes New Jersey to afford a price guaranty needed 

to build new generation. 

Similarly, the State Defendants’ jurisdictional claims do not rely on any facts not already 

before this Court and, as Plaintiffs’ concede, they have not sought discovery on those issues. It 

therefore should be decided without further discovery.

II. CPV’s Motion for Summary Judgment on Plaintiffs’ Conflict Preemption Claim Is 

Ripe for Decision.

CPV believes that no further discovery is needed for the Court to decide its pending

summary judgment motion on the conflict preemption claim because (a) there are no issues of 

material fact that are genuinely disputed, (b) the deadline for new discovery (of CPV or anyone 

else) expired long ago, and (c) to secure as speedy a disposition as possible, CPV will stipulate 

on this motion to facts that, in light of Plaintiffs’ request and combined with Defendants’ prior 

concessions, will make the conflict preemption claim ripe for decision. 

A. Additional discovery is unnecessary to dismiss Plaintiffs’ conflict 

preemption claim.

All parties agree that:

1. FERC has exclusive jurisdiction over wholesale market prices; 

2. CPV is obligated by the SOCA to bid in conformity with the PJM rules; 

3. The PJM Tariff establishes the legal standard for determining whether bids 

are appropriately market-based; and

4. In a series of Minimum Offer Price Rule Orders (“MOPR Orders”),1

FERC determined with express reference to the New Jersey LCAPP Act 

that prices resulting from auctions conducted in accordance with the PJM 

 

1 PJM Interconnection, L.L.C., 135 FERC ¶ 61,022 (“MOPR Order”), reh’g, 137 FERC ¶ 61,145 

(2011).

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rules would result in just and reasonable capacity prices, and therefore that 

the LCAPP Act was not in “tension” with its objectives.

Plaintiffs have never questioned whether CPV would bid in accordance with PJM rules. 

Indeed, their Opposition concedes: “The requirement that the selected LCAPP generators abide 

by PJM auction rules is irrelevant to Plaintiffs’ conflict claims.” Ps’ Opp. Br. at 42 [ECF

No. 124]. Discovery of the bids by CPV – or anyone else – are likewise “irrelevant.”

As a matter of law, it does not matter whether CPV’s bid into the recent PJM auctions 

caused the resulting auction prices to be lower than they would have been had CPV not 

participated. The Supreme Court has expressly ruled in connection with the analogous Natural 

Gas Act, 15 U.S.C. sec. 717 et seq., that conflict preemption does not exist when a State acting 

pursuant to its Congressionally-delegated authority directs private parties to operate in a manner 

that has “some effect” on prices in a FERC-jurisdictional market. Northwest Central Pipeline 

Co. v. State Corp. Comm’n of Kansas, 489 U.S. 493, 524 (1989). Indeed, even Schneidewind v. 

ANR Pipeline Co., 485 U.S. 293 (1988), to which Mr. Coffin twice directed the Court’s attention 

(Tr. 9, 82), states (at 308): “Of course, every state statute that has some indirect effect on rates 

and facilities * * *, is not pre-empted.” 

These legal principles render immaterial to conflict preemption, as a Rule 56 matter,

what and why CPV bid as it did. And consequently, CPV’s motion for summary judgment on 

conflict preemption is presently ripe for decision. 

B. Plaintiffs’ request for additional information is incredibly untimely.

Judge Arpert’s May 4, 2011 Pretrial Scheduling Order (entered after an in-court 

scheduling conference) required Plaintiffs to serve written discovery by or before July 18, 2011. 

CPV moved to intervene two months before that time, so Plaintiffs knew then that CPV would 

participate in the case. Judge Arpert entered an Amended Scheduling Order on September 15, 

2011 (after conducting a teleconference with counsel) that required deposition notices to be 

served by October 12, 2011. CPV’s formal motion to intervene had been granted two months 

before that deadline. Yet despite these deadlines, Plaintiffs sought no discovery from CPV – no

documents, no interrogatory answers, no deposition testimony. Enforcement of Judge Arpert’s 

orders would prevent Plaintiffs from serving new discovery now. It is true that the deadline for 

completing discovery – to which Plaintiffs’ letter is directed – has been extended several times. 

But the extensions were granted to enable Plaintiffs to complete timely-requested discovery of 

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the State, not to seek new discovery for CPV or anyone else. This fact is clearest from Judge 

Arpert’s letter order of February 28, 2012, which extends the time only for Plaintiffs to complete 

discovery of NJBPU agent Levitan & Associates.2

 

Moreover, late-in-the-day relief from the deadlines that Plaintiffs crafted would prejudice 

CPV. CPV invested time and effort to bring the motion for summary judgment in reliance on the 

way in which Plaintiffs had postured their case. The Complaint alleged that the LCAPP and 

SOCAs were preempted solely because of their content – a “facial” challenge. The Complaint 

made predictions of the effect that LCAPP and the SOCAs would have in the future. But the 

discovery that Plaintiffs noticed in accordance with the Scheduling Orders evinced no intent to 

present a “retrospective” attack based on May 2012 auction results because Plaintiffs sought no 

discovery about any the bidding intent of any PJM market participant, nor of bidding data from 

PJM itself. And CPV took at face value Plaintiffs’ statements to Judge Arpert that they wanted 

the most expeditious ruling possible to clarify any uncertainty before the May 2012 auctions. 

CPV submits that it would be unfair (and, for the reasons stated above and below, unnecessary) 

to re-start discovery as Plaintiffs request. 

C. To expedite consideration of its motion, CPV will make additional 

concessions of fact that remove the need for discovery of CPV.

CPV is serving with this letter two confidential, for attorneys eyes only documents that 

demonstrate conclusively the lawfulness of its capacity bid into the May 2012 auction.

3

 Some 

months ago, CPV asked the PJM’s Office of Interconnection to determine independently the 

capacity price that CPV’s New Jersey plant could bid.4

 That Office responded on April 20, 

 

2 It needs to be noted in this regard that Plaintiffs letter seems to portend a wide-ranging 

discovery program against all SOCA-supported generators, not just CPV. We say this because 

the “questions” that Plaintiffs seek to answer encompass all “generators that received the LCAPP 

Act’s price guarantee” – not just CPV. If that is what Plaintiffs seek, it is all the more reason to 

enforce Judge Arpert’s deadlines (to which Plaintiffs agreed). 

3 Per chambers instructions, CPV is providing to chambers and all parties of record these 

documents, marked “Confidential” and “Attorneys’ Eyes Only,” pursuant to the terms of the 

Discovery Confidentiality and Protective Order [ECF No. 72].

4 See PJM Tariff, Attachment DD § 5.14(h)(5) (permitting a new bidder to “obtain[] a 

determination from the Office of the Interconnection prior to the RPM Auction in which it seeks 

to submit the Sell Offer, that such Sell Offer is permissible because it is consistent with the 

(footnote cont’d)

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2012, stating the exact amount that CPV could permissibly bid. PJM’s confirming letter is the 

first attachment. CPV in fact bid exactly that amount. The second attachment – which is a 

“screen shot” of CPV’s entry into PJM’s computerized bid entry system – confirms that fact, 

because the bid amount in the screen shot is identical to the dollar amount stated in the PJM 

instruction letter.5

As to the three specific items on which Plaintiffs seek “discovery,” CPV responds as 

follows for purposes of the motion for summary judgment:

• “Whether the generators that received the LCAPP Act’s price guarantee 

would have bid into the PJM auction without it”?

CPV response: “CPV would not have bid into the May 2012 auction if 

it had not been a party to the SOCA.”

• “Whether the LCAPP Act’s price guarantee affected the LCAPP 

generators’ bidding strategies or bid prices”?

CPV response: “Yes, because the SOCA obligated CPV to bid at the 

‘lowest reasonable price,’ and PJM’s Office of Interconnection stated 

that the bid price it authorized would be ‘consistent with the 

competitive, cost-based, fixed, net cost of [CPV’s] new entry,’ CPV 

would not have bid any differently than it did.”

 

competitive, cost-based, fixed, net cost of new entry were the resource to rely solely on revenues 

from PJM-administered markets”).

5 Shortly after the May 2012 auction, but before the results were announced, the PJM 

Independent Market Monitor (“IMM”) filed a formal inquiry at FERC about the lawfulness of 

the prices that CPV Maryland bid into the PJM auction. (The IMM did not question the PJMapproved bid price of CPV’s New Jersey project.) Without knowing the subject bid prices – or 

even the bidders’ identities – the generator Plaintiffs made their own FERC filings. However, on 

May 17, 2012, with permission from FERC, the IMM withdrew its filing because, it stated, it had 

“determined that no harm to the markets will result as a consequence of [CPV’s bid].” Notice of 

Withdrawal of the Independent Market Monitor for PJM, EL12-63-000 (May 17, 2012). 

Plaintiffs’ thereafter voluntarily withdrew their own filings, too. Joint Notice of Withdrawal of 

Complaint, EL12-63-000 and EL12-66-000 (May 18, 2012).

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• “Whether the LCAPP Act’s price guarantee affected the market clearing 

price in the PJM capacity auction or will suppress PJM energy prices?”

CPV response: “As it has previously conceded,6 CPV does not dispute 

that the LCAPP Act affected or will affect PJM market clearing prices 

for capacity.” 

D. There is no need for expert reports or expert discovery at this point.

Plaintiffs’ letter seems to state (at 3) a desire to submit expert reports and pursue “expert 

discovery” at this time. But it also acknowledges that Plaintiffs will forego doing so if 

Defendants “are prepared to stipulate to the salient facts.” The motion-specific concessions 

above render expert reports and discovery unnecessary. It was clear at the hearing that Plaintiffs

want to show that the SOCA enables CPV to bid lower than it otherwise could (to “bid, say, at 

zero,” they said (Tr. 77)), and that bidding this way would depress auction prices. The 

concession stated in the third bullet point above gives Plaintiffs the ability to make their “price 

effect” argument in opposing CPV’s motion. 

Regarding the possibility that CPV could bid “$0” (i.e., as a “price taker”), CPV 

concedes that it – like Plaintiffs’ and all other incumbent generators that clear the PJM auction –

can do so in future auctions.

7

 But that has no legal bearing on conflict preemption. As the 

MOPR Order explains, Plaintiffs (and other generators) asked FERC expressly to prohibit any 

generator (like CPV) who receives a “State subsidy” from being permitted to bid as a price taker 

after it had cleared one PJM capacity auction. MOPR Order at PP 160, 171. FERC considered 

that request and rejected it. It stated: 

We decline to add this requirement because even if discriminatory 

subsidies are being received, if the resource is needed at the MOPR 

bid[, i.e., it clears one of the PJM capacity auctions at an offer 

price near its full cost of entry,] then it is a competitive resource 

and should be permitted to participate in the auction regardless of 

whether it also receives a subsidy.

 

6 CPV Reply Br. at 1-2 [ECF No. 132].

7 See, e.g., PJM Tariff, Attachment DD § 5.14(h)(4)(i) (excluding from the Minimum Offer Price 

Rule Sell Offers based on Generation Capacity Resources that already have cleared an RPM 

Auction).

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MOPR Order at P 177. That FERC refused to prohibit – indeed, expressly permitted – exactly 

the conduct that Plaintiffs claim could “conflict” with FERC’s objectives dooms Plaintiffs’ claim 

in this regard to failure.

Moreover, from a practical perspective, granting leave to move into the expert phase of 

this case will create enormous (and unnecessary) complications, delay and expense. If Plaintiffs 

seriously intend to “reconstruct” PJM auctions, they will need to know the bid prices and 

quantities of other generators not party to this case. Getting that information from PJM or from 

the other generators would be time-consuming and costly. Section 18.17.1 of the PJM Tariff 

expressly prohibits PJM from providing “any documents, data or other information” of PJM 

participants. But in any event, it will not matter. 

Other PJM generators could not assert such objections. But to get a full picture of the 

market, discovery of Plaintiffs and others would probably be necessary.

III. Plaintiffs’ Dormant Commerce Clause Claim Also Is Ripe for Decision Now, but 

Undoubtedly Will Be Ripe After the State Provides the Non-Privileged Requested 

Information.

Although CPV is the movant on the Commerce Clause claim, the only discovery 

Plaintiffs ask to complete is from the State’s agent Mr. Levitan. CPV believes, for the reasons it 

stated in its briefs and at argument, that there are no material issues of fact that are genuinely 

disputed that require further discovery – what LCAPP bidders offered, and the assessment that 

was made of them, is stated in Mr. Levitan’s report. Most significant, however, is that Plaintiffs 

did not deny in their brief that their responses to the LCAPP solicitation did not offer the State 

the new generation plant that it was seeking (in government contracting parlance, they were 

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“non-compliant”), and Plaintiffs conceded as much at the hearing. See Tr. 105-107. So in the 

interest of expedition, CPV would prefer that this aspect of CPV’s motion were decided as soon 

as possible. 

Respectfully submitted,

 s/ Joel B. Kleinman

Joel B. Kleinman

(202) 420-2221

kleinmanj@dicksteinshapiro.com

 s/ Sean J. Kirby

Sean J. Kirby

(212) 634-3023

skirby@sheppardmullin.com

cc: Hon. Douglas E. Arpert, U.S.M.J. (with attachments, via Federal Express); and

All Counsel of Record (via ECF and separately, with attachments, via Electronic Mail)

Attachments (2), marked “Confidential” and “Attorneys’ Eyes Only,” have been served on 

chambers and all counsel of record, subject to the terms of the Discovery Confidentiality and 

Protective Order [ECF No. 72].

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