Court Opinion

ID: 2676704
Source: CourtListenerOpinion
Date Created: 2014-06-02 19:00:41.204395+00
Date Added: 2024-06-11T13:10:54.718853
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 13-2419

PPL ENERGYPLUS, LLC; PPL BRUNNER ISLAND, LLC; PPL HOLTWOOD,
LLC; PPL MARTINS CREEK, LLC; PPL MONTOUR, LLC; PPL
SUSQUEHANNA, LLC; LOWER MOUNT BETHEL ENERGY, LLC; PPL NEW
JERSEY SOLAR, LLC; PPL NEW JERSEY BIOGAS, LLC; PPL
RENEWABLE ENERGY, LLC; PSEG POWER LLC; ESSENTIAL POWER,
LLC,

                Plaintiffs - Appellees,

          v.

DOUGLAS R.M. NAZARIAN; HAROLD WILLIAMS; LAWRENCE BRENNER;
KELLY SPEAKES-BACKMAN; KEVIN HUGHES,

                Defendants – Appellants,

          and

CPV MARYLAND, LLC,

                Defendant.

-------------------------

AMERICAN PUBLIC POWER ASSOCIATION; NATIONAL RURAL ELECTRIC
COOPERATIVE ASSOCIATION; NRG ENERGY INC.; MARYLAND OFFICE OF
PEOPLE'S COUNSEL; CONNECTICUT PUBLIC UTILITIES REGULATORY
AUTHORITY;     CONNECTICUT    DEPARTMENT   OF    ENERGY    AND
ENVIRONMENTAL PROTECTION; GEORGE JEPSEN, Attorney General
for the State of Connecticut; CONNECTICUT OFFICE OF CONSUMER
COUNSEL;   NEW   ENGLAND   CONFERENCE   OF  PUBLIC   UTILITIES
COMMISSIONERS, INC.; MAINE PUBLIC UTILITIES COMMISSION;
RHODE ISLAND PUBLIC UTILITIES COMMISSION; VERMONT PUBLIC
SERVICE BOARD; VERMONT DEPARTMENT OF PUBLIC SERVICE;
CALIFORNIA PUBLIC UTILITIES COMMISSION; PUBLIC SERVICE
COMMISSION OF THE STATE OF NEW YORK (NYPSC); PUBLIC SERVICE
COMMISSION OF THE DISTRICT OF COLUMBIA; DELAWARE PUBLIC
SERVICE COMMISSION; NEW JERSEY BOARD OF PUBLIC UTILITIES;
NEW JERSEY DIVISION OF RATE COUNSEL; MARYLAND ENERGY
ADMINISTRATION; AMERICAN WIND ENERGY ASSOCIATION; THE MID-
ATLANTIC RENEWABLE ENERGY COALITION,

                Amici Supporting Appellants,

PJM   POWER   PROVIDERS   GROUP;   ELECTRIC    POWER   SUPPLY
ASSOCIATION; EDISON ELECTRIC INSTITUTE,

                Amici Supporting Appellees.

                              No. 13-2424

PPL ENERGYPLUS, LLC; PPL BRUNNER ISLAND, LLC; PPL HOLTWOOD,
LLC; PPL MARTINS CREEK, LLC; PPL MONTOUR, LLC; PPL
SUSQUEHANNA, LLC; LOWER MOUNT BETHEL ENERGY, LLC; PPL NEW
JERSEY SOLAR, LLC; PPL NEW JERSEY BIOGAS, LLC; PPL
RENEWABLE ENERGY, LLC; PSEG POWER LLC; ESSENTIAL POWER,
LLC,

                Plaintiffs - Appellees,

          v.

CPV MARYLAND, LLC,

                Defendant – Appellant,

          and

DOUGLAS R.M. NAZARIAN; HAROLD WILLIAMS; LAWRENCE BRENNER;
KELLY SPEAKES-BACKMAN; KEVIN HUGHES,

                Defendants.

-------------------------

AMERICAN PUBLIC POWER ASSOCIATION; NATIONAL RURAL ELECTRIC
COOPERATIVE ASSOCIATION; NRG ENERGY INC.; MARYLAND OFFICE OF
PEOPLE'S COUNSEL; CONNECTICUT PUBLIC UTILITIES REGULATORY
AUTHORITY;     CONNECTICUT    DEPARTMENT   OF    ENERGY    AND
ENVIRONMENTAL PROTECTION; GEORGE JEPSEN, Attorney General
for the State of Connecticut; CONNECTICUT OFFICE OF CONSUMER
COUNSEL;   NEW   ENGLAND   CONFERENCE   OF  PUBLIC   UTILITIES

                                   2
COMMISSIONERS, INC.; MAINE PUBLIC UTILITIES COMMISSION;
RHODE ISLAND PUBLIC UTILITIES COMMISSION; VERMONT PUBLIC
SERVICE BOARD; VERMONT DEPARTMENT OF PUBLIC SERVICE;
CALIFORNIA PUBLIC UTILITIES COMMISSION; PUBLIC SERVICE
COMMISSION OF THE STATE OF NEW YORK (NYPSC); PUBLIC SERVICE
COMMISSION OF THE DISTRICT OF COLUMBIA; DELAWARE PUBLIC
SERVICE COMMISSION; NEW JERSEY BOARD OF PUBLIC UTILITIES;
NEW JERSEY DIVISION OF RATE COUNSEL; MARYLAND ENERGY
ADMINISTRATION; AMERICAN WIND ENERGY ASSOCIATION; THE MID-
ATLANTIC RENEWABLE ENERGY COALITION,

                Amici Supporting Appellant,

PJM   POWER   PROVIDERS   GROUP;   ELECTRIC   POWER     SUPPLY
ASSOCIATION; EDISON ELECTRIC INSTITUTE,

                Amici Supporting Appellees.

Appeals from the United States District Court for the District
of Maryland, at Baltimore.   Marvin J. Garbis, Senior District
Judge. (1:12-cv-01286-MJG)

Argued:   May 13, 2014                    Decided:    June 2, 2014

Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.

Affirmed by published opinion.       Judge Wilkinson     wrote   the
opinion, in which Judge Keenan and Judge Diaz joined.

ARGUED: Scott H. Strauss, SPIEGEL & MCDIARMID, LLP, Washington,
D.C.; Clifton Scott Elgarten, CROWELL & MORING LLP, Washington,
D.C., for Appellants.      Paul D. Clement, BANCROFT, PLLC,
Washington, D.C., for Appellees.    ON BRIEF: H. Robert Erwin,
Ransom E. Davis, Baltimore, Maryland; Peter J. Hopkins, Jeffrey
A. Schwarz, SPIEGEL & MCDIARMID LLP, Washington, D.C., for
Appellants Douglas R.M. Nazarian, Harold Williams, Lawrence
Brenner, Kelly Speakes-Backman, and Kevin Hughes.      Larry F.
Eisenstat, Richard Lehfeldt, Jennifer N. Waters, CROWELL &
MORING LLP, Washington, D.C., for Appellant CPV Maryland, LLC.
Erin E. Murphy, Candice Chiu, BANCROFT PLLC, Washington, D.C.,
for Amici.    Jesse A. Dillon, PPL SERVICES CORP., Allentown,

                                 3
Pennsylvania;   David  L.  Meyer,    MORRISON   &   FOERSTER    LLP,
Washington, D.C., for Appellees PPL EnergyPlus, LLC, PPL Brunner
Island, LLC, PPL Holtwood, LLC, PPL Martins Creek, LLC, PPL
Montour, LLC, PPL Susquehanna, LLC, Lower Mount Bethel Energy,
LLC, PPL New Jersey Solar, LLC, PPL New Jersey Biogas, LLC, and
PPL Renewable Energy, LLC.       Tamara Linde, Vice President-
Regulatory, Vaughn L. McKoy, General State Regulatory Counsel,
PSEG SERVICES CORP., Newark, New Jersey; Shannen W. Coffin,
STEPTOE & JOHNSON LLP, Washington, D.C., for Appellee PSEG
Power, LLC.   David Musselman, ESSENTIAL POWER, LLC, Princeton,
New Jersey, for Appellee Essential Power, LLC. Susan N. Kelly,
Senior Vice President of Policy Analysis and General Counsel,
Delia D. Patterson, Assistant General Counsel, AMERICAN PUBLIC
POWER ASSOCIATION, Washington, D.C.; Jay A. Morrison, Vice
President, Regulatory Issues, Pamela M. Silberstein, Associate
Director,   Power   Supply  Issues,    NATIONAL   RURAL     ELECTRIC
COOPERATIVE ASSOCIATION, Arlington, Virginia, for Amici American
Public Power Association and National Rural Electric Cooperative
Association.    Abraham Silverman, Cortney Madea, NRG ENERGY,
INC., Princeton, New Jersey; Jeffrey A. Lamken, Martin V.
Totaro, Washington, D.C., Kaitlin R. O'Donnell, MOLOLAMKEN LLP,
New York, New York, for Amicus NRG Energy Inc.             Paula M.
Carmody, William F. Fields, MARYLAND OFFICE OF PEOPLE'S COUNSEL,
Baltimore, Maryland, for Amicus Maryland Office of People's
Counsel. Randall L. Speck, Jeffrey A. Fuisz, Kimberly B. Frank,
Susanna Y. Chu, KAYE SCHOLER LLP, Washington, D.C., for Amici.
Clare E. Kindall, Assistant Attorney General, OFFICE OF THE
ATTORNEY   GENERAL,   New  Britain,    Connecticut,    for    Amicus
Connecticut Public Utilities Regulatory Authority.       Robert D.
Snook, Assistant Attorney General, OFFICE OF THE ATTORNEY
GENERAL, New Britain, Connecticut, for Amicus Connecticut
Department of Energy and Environmental Protection.          John S.
Wright, Assistant Attorney General, Michael C. Wertheimer,
Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL, New
Britain, Connecticut, for Amicus George Jepsen, Attorney General
for the State of Connecticut.      Elin Swanson Katz, Joseph A.
Rosenthal, CONNECTICUT OFFICE OF CONSUMER COUNSEL, New Britain,
Connecticut, for Amicus Connecticut Office of Consumer Counsel.
Sarah Hofmann, Executive Director, NEW ENGLAND CONFERENCE OF
PUBLIC UTILITIES COMMISSIONERS, INC., Montpelier, Vermont, for
Amicus New England Conference of Public Utilities Commissioners,
Inc.   Lisa Fink, STATE OF MAINE PUBLIC UTILITIES COMMISSION,
Augusta, Maine, for Amicus Maine Public Utilities Commission.
Amy K. D'Alessandro, RHODE ISLAND PUBLIC UTILITIES COMMISSION,
Warwick, Rhode Island, for Amicus Rhode Island Public Utilities
Commission.    June Tierney, General Counsel, VERMONT PUBLIC
SERVICE BOARD, Montpelier, Vermont, for Amicus Vermont Public

                                 4
Service Board.      Edward McNamara, Regional Policy Director,
VERMONT DEPARTMENT OF PUBLIC SERVICE, Montpelier, Vermont, for
Amicus Vermont Department of Public Service.          Frank Lindh,
Candace Morey, CALIFORNIA PUBLIC UTILITIES COMMISSION, San
Francisco, California, for Amicus California Public Utilities
Commission.     Kimberly A. Harriman, Acting General Counsel,
Jonathan D. Feinberg, Solicitor, Alan Michaels, Assistant
Counsel, PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK,
Albany, New York, for Amicus Public Service Commission of the
State of New York.     Richard A. Beverly, Richard S. Herskovitz,
PUBLIC   SERVICE   COMMISSION   OF   THE   DISTRICT  OF   COLUMBIA,
Washington, D.C., for Amicus Public Service Commission of the
District of Columbia.        Kathleen Makowski, Deputy Attorney
General, DELAWARE PUBLIC SERVICE COMMISSION, Dover, Delaware,
for Amicus Delaware Public Service Commission.            John Jay
Hoffman, Acting Attorney General, Richard F. Engel, Deputy
Attorney General, Lisa J. Morelli, Deputy Attorney General, Alex
Moreau, Deputy Attorney General, Jennifer S. Hsia, Deputy
Attorney General, NEW JERSEY DEPARTMENT OF LAW AND PUBLIC
SAFETY, Trenton, New Jersey, for Amicus New Jersey Board of
Public Utilities.      Stefanie A. Brand, Director, NEW JERSEY
DIVISION OF RATE COUNSEL, Trenton, New Jersey, for Amicus New
Jersey Division of Rate Counsel.      Douglas F. Gansler, Attorney
General, Brent A. Bolea, Assistant Attorney General, Steven M.
Talson,    Assistant     Attorney    General,    MARYLAND    ENERGY
ADMINISTRATION, Annapolis, Maryland, for Amicus Maryland Energy
Administration.    Gene Grace, AMERICAN WIND ENERGY ASSOCIATION,
Washington, D.C., for Amici American Wind Energy Association and
The Mid-Atlantic Renewable Energy Coalition.      Glen Thomas, PJM
POWER PROVIDERS GROUP, King of Prussia, Pennsylvania; John Lee
Shepherd, Jr., Karis Anne Gong, SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP, Washington, D.C., for Amicus PJM Power Providers
Group. David G. Tewksbury, Stephanie S. Lim, Ashley C. Parrish,
KING & SPALDING LLP, Washington, D.C., for Amicus The Electric
Power Supply Association.      Edward H. Comer, Vice President,
General Counsel and Corporate Secretary, Henri D. Bartholomot,
Associate General Counsel, Regulatory and Litigation, EDISON
ELECTRIC INSTITUTE, Washington, D.C., for Amicus Edison Electric
Institute.

                                5
WILKINSON, Circuit Judge:

      At     issue          is    a      Maryland        program           to    subsidize        the

participation          of    a    new    power    plant        in    the    federal      wholesale

energy market. Appellees are energy firms that compete with this

new plant in interstate commerce. They contend that the Maryland

scheme is preempted under the Federal Power Act’s authorizing

provisions,        which         grant    exclusive        authority            over    interstate

rates to the Federal Energy Regulatory Commission. The district

court agreed. For the reasons that follow, we affirm.

                                                  I.

                                                  A.

      For    much       of       the     20th    century,        the       energy      market     was

dominated         by    vertically            integrated            firms       that     produced,

transmitted, and delivered power to end-use customers. New York

v. FERC, 535 U.S. 1, 5 (2002); PPL EnergyPlus, LLC v. Nazarian,

974 F. Supp. 2d 790, 798 (D. Md. 2013) (opinion below). These

firms were subject to extensive local regulation, though state

power   in   this       respect         was     limited    by       the    strictures        of   the

dormant Commerce Clause. See Pub. Utils. Comm’n v. Attleboro

Steam & Elec. Co., 273 U.S. 83, 89 (1927).

      The Federal Power Act (FPA), passed in 1935, was designed

in   part    to    fill      the        regulatory       gap    created         by     the   dormant

Commerce Clause and cover the then-nascent field of interstate

electricity        sales.         It     vests     the    Federal           Energy      Regulatory

                                                  6
Commission       (FERC)     with       authority     over       the   “transmission      of

electric      energy      in    interstate         commerce”      and     the    “sale   of

electric energy at wholesale in interstate commerce.” 16 U.S.C.

§   824(b)(1).         Federal       regulation          has     become        increasingly

prominent     as    the     energy      market     has    shifted     away      from   local

monopolies to a system of interstate competition. See New York,
535 U.S. at 7.

       Rather      than     ensuring      the      reasonableness         of     interstate

transactions by directly setting rates, FERC has chosen instead

to achieve its regulatory aims indirectly by protecting “the

integrity of the interstate energy markets.” N.J. Bd. of Pub.

Utils. v. FERC, 744 F.3d 74, 81 (3d Cir. 2014). To this end,

FERC    has     authorized       the     creation        of    “regional       transmission

organizations”         to      oversee       certain      multistate       markets.      PJM

Interconnection, LLC (PJM), superintended by FERC, administers a

large regional market that (as relevant here) includes Maryland

and the District of Columbia.

       PJM operates both energy and capacity markets. The energy

market is essentially a real-time market that enables PJM to buy

and sell electricity to distributors for delivery within the

next hour or 24 hours.

       The    capacity      market      is    a    forward-looking         market,     which

gives buyers the option to purchase electricity in the future.

In the capacity market, PJM sets a quota based on how much

                                               7
capacity it predicts will be needed three years hence and then

relies on a Reliability Pricing Model (RPM) to determine the

appropriate price per unit. Auction participants bid to sell

capacity     for    a    single    year,   three    years      in   the     future.      PJM

stacks the bids from lowest to highest and, starting at the

bottom, accepts bids until it has acquired sufficient capacity

to satisfy its quota.

      The highest-priced bid that PJM must accept to meet this

quota establishes the market-clearing price. Every generator who

bids at or below this level “clears” the market and is paid the

clearing price, regardless of the price at which it actually

bid. Existing generators are permitted to bid at zero as “price-

takers,” meaning they agree to sell at whatever the clearing

price turns out to be.

      Both    the       capacity    and    energy   markets         are    designed      to

efficiently allocate supply and demand, a function which has the

collateral     benefit      of     incentivizing        the    construction         of   new

power plants when necessary. Clearing prices occasionally differ

based on geographical subdivisions designed by FERC to stimulate

new construction by signaling that certain regions are prone to

supply shortages. Such price signals are not the sole mechanism

for   incentivizing        generation,      however.      PJM’s     new     entry    price

adjustment (NEPA) guarantees certain new producers a fixed price

for   three    years       to    “support .     .   .    the    new       entrant    until

                                            8
sufficient      load       growth    [i.e.,        increased     demand]       would    be

expected to” do so. PJM Interconnection, LLC, 128 FERC ¶ 61,157,

at ¶ 101 (2009).

       In 2006, FERC instituted a requirement (the minimum offer

price       rule,     or     MOPR)     that        new     generators     in     certain

circumstances bid at or above a specified price, fixed according

to the agency’s estimation of a generic energy project’s cost.

This rule was designed to prevent the manipulation of clearing

prices      through    the   exercise    of       buyer    market    power.     The    MOPR

originally exempted certain state-supported generators, however,

and permitted them to bid at zero.

       Following a complaint lodged by several competitors, FERC

eliminated the exemption for state-sanctioned plants. The new

rule    required      such    plants    to        bid    initially   at   the    agency-

specified minimum price unless they could demonstrate that their

actual costs were lower than this default price. FERC held that

this adjustment was necessary to protect the integrity of its

markets against below-cost bids by subsidized plants that might

artificially suppress clearing prices. See PJM Interconnection,

LLC, 137 FERC ¶ 61,145, at ¶ 96 (2011).

       As    these    features      suggest,       the    federal    markets    are    the

product of a finely-wrought scheme that attempts to achieve a

variety of different aims. FERC rules encourage the construction

of new plants and sustain existing ones. They seek to preclude

                                              9
state distortion of wholesale prices while preserving general

state authority over generation sources. They satisfy short-term

demand and ensure sufficient long-term supply. In short, the

federal    scheme     is    carefully       calibrated     to    protect       a    host   of

competing interests. It represents a comprehensive program of

regulation that is quite sensitive to external tampering.

                                            B.

      In    1999,      Maryland       decided       to     abandon       the        vertical

integration       model     and     throw    in    its     lot    with    the        federal

interstate       markets.        Deregulation       was      accomplished           by     the

Electric Customer Choice and Competition Act, Md. Code Ann.,

Pub. Utils. § 7–501, et seq., which divested utilities of their

generation       resources,       effectively       compelling        Maryland        energy

firms to participate in the federal wholesale markets. See PPL

EnergyPlus, LLC, 974 F. Supp. 2d at 815. The state believed that

these markets would ultimately produce more efficient and cost-

effective       service    than    traditional       monopolies,       thus        providing

state residents the benefit of lower prices. See In the Matter

of   Baltimore       Gas   and    Electric       Company’s      Proposal,      Order       No.

81423,     at   36   (Md.    Pub.    Serv.       Comm’n,   May    2007).       Maryland’s

decision    to    participate       in   the     federal     scheme    and     enjoy       its

benefits was necessarily accompanied by a relinquishment of the

regulatory autonomy the state had formerly enjoyed with respect

to traditional utility monopolies.

                                            10
     Maryland soon became concerned, though, that the RPM was

failing   to    adequately       incentivize      new     generation.      PPL

EnergyPlus, LLC, 974 F. Supp. 2d at 795. To solve this perceived

problem, the Maryland Public Service Commission (MPSC) solicited

proposals for the construction of a new power plant. The plant

was to be located in the “SWMAAC zone,” an area comprising part

of Maryland and all of D.C., which the state believed was at

heightened risk for reliability problems. In order to attract

offers, the MPSC offered the successful bidder a fixed, twenty-

year revenue stream secured by contracts for differences (CfDs)

that the state would compel one or more of its local electric

distribution   companies    (EDCs)    to    enter.     Maryland’s   plan   was

ultimately formalized in the Generation Order, issued by MPSC in

2012.

     Intervenor-appellant        Commercial    Power    Ventures    Maryland,

LLC (CPV) submitted the winning bid and was awarded the promised

CfDs. The CfDs required CPV to build a plant and sell its energy

and capacity on the federal interstate wholesale markets. If CPV

successfully   cleared     the    market,   it   would    be   eligible    for

payments from the EDCs amounting to the difference between CPV’s

revenue requirements per unit of energy and capacity sold (set

forth in its winning bid) and its actual sales receipts. These

costs would in turn be passed on to the EDCs’ retail ratepayers.

If CPV’s receipts exceeded its approved revenue requirements, it

                                     11
would be obligated to pay the difference to the EDCs. The CfDs

did not require CPV to actually sell any energy or capacity to

the EDCs.

     Plaintiffs-appellees          are         existing     power     plants      in

competition with CPV who allege that the Generation Order is

unconstitutional     and     has   resulted      in   the   suppression     of   PJM

prices, a reduction in their revenue from the PJM market, and a

distortion of the price signals that market participants rely on

in determining whether to construct new capacity. After a six-

day bench trial, the district court found the Generation Order

field   preempted.    It   reasoned      that     the     CfD   payments   had   the

effect of setting the ultimate price that CPV receives for its

sales in the PJM auction, thus intruding on FERC’s exclusive

authority to set interstate wholesale rates. It did not reach

appellees’ conflict preemption claim and rejected their dormant

Commerce Clause claim. This appeal followed.

                                      II.

     Plaintiffs      argue     that      the     Generation      Order     and   the

resulting CfDs are preempted by federal law under the Supremacy

Clause. U.S. Const. art. VI, cl. 2. They ground this contention

                                         12
in    two   alternative      theories:      field       preemption    and    conflict

preemption. We address each in turn. 1

                                           A.

      Preemption of all varieties is ultimately a question of

congressional intent. Nw. Cent. Pipeline Corp. v. State Corp.

Comm’n, 489 U.S. 493, 509 (1989). Here, the district court found

the    Generation      Order    invalid     under       the   doctrine      of   field

preemption,      which       applies   when        “Congress     has        legislated

comprehensively to occupy an entire field of regulation, leaving

no room for the States to supplement federal law.” Id. Actual

conflict     between     a   challenged         state    enactment    and    relevant

federal law is unnecessary to a finding of field preemption;

instead,    it   is    the   mere   fact    of    intrusion    that    offends     the

Supremacy Clause. See N. Natural Gas Co. v. State Corp. Comm’n,

372 U.S. 84, 97-98 (1963). “If Congress evidences an intent to

occupy a given field, any state law falling within that field is

pre-empted.” Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248

(1984).

      1
       As a threshold matter, appellants assert that we lack
jurisdiction under the filed rate doctrine. See Appellants’ Br.
at 9. This claim is meritless, however, given that a judgment in
plaintiffs’   favor  would   require  this   court  neither  “to
invalidate a filed rate nor to assume a rate would be charged
other than the rate adopted by the federal agency in question.”
Pub. Util. Dist. No. 1 v. IDACORP Inc., 379 F.3d 641, 650 (9th
Cir. 2004) (internal quotation marks omitted).

                                           13
     Statutory   text   and     structure   provide   the   most    reliable

guideposts in this inquiry. See Medtronic, Inc. v. Lohr, 518
U.S. 470, 486 (1996) (“Congress’ intent, of course, primarily is

discerned from the language of the pre-emption statute and the

statutory framework surrounding it.”) (internal quotation marks

omitted). The FPA’s “declaration of policy” states:

     It is declared that the business of transmitting and
     selling electric energy for ultimate distribution to
     the public is affected with a public interest, and
     that   Federal  regulation   of   matters  relating  to
     generation to the extent provided in this subchapter
     and subchapter III of this chapter and of that part of
     such business which consists of the transmission of
     electric energy in interstate commerce and the sale of
     such energy at wholesale in interstate commerce is
     necessary   in  the public     interest,  such  Federal
     regulation, however, to extend only to those matters
     which are not subject to regulation by the States.

16 U.S.C. § 824(a); see also id. at § 824(b).

     The breadth of this grant of authority is confirmed by the

FPA’s similarly capacious substantive and remedial provisions.

For example, 16 U.S.C. § 824d(a) states that:

     All rates and charges made, demanded, or received by
     any public utility for or in connection with the
     transmission or sale of electric energy subject to the
     jurisdiction of the Commission, and all rules and
     regulations affecting or pertaining to such rates or
     charges shall be just and reasonable, and any such
     rate or charge that is not just and reasonable is
     hereby declared to be unlawful.

     A wealth of case law confirms FERC’s exclusive power to

regulate   wholesale    sales    of   energy   in   interstate     commerce,

including the justness and reasonableness of the rates charged.

                                      14
“The [FPA] long has been recognized as a comprehensive scheme of

federal regulation of all wholesales of [energy] in interstate

commerce,” Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300

(1988)       (internal      quotation    marks       omitted),        and   “FERC’s

jurisdiction       over    interstate    wholesale     rates     is    exclusive,”

Appalachian Power Co. v. Pub. Serv. Comm’n, 812 F.2d 898, 902

(4th       Cir.   1987);    see   also   New    England   Power       Co.   v.   New

Hampshire, 455 U.S. 331, 340 (1982). 2 In this area, “if FERC has

jurisdiction over a subject, the States cannot have jurisdiction

over the same subject.” Miss. Power & Light Co. v. Mississippi

ex rel. Moore, 487 U.S. 354, 377 (1988) (Scalia, J., concurring

in the judgment).

       Indeed,     the     Supreme   Court     has   expressly    rejected       the

proposition that the “scope of [FERC’s] jurisdiction . . . is to

be determined by a case-by-case analysis of the impact of state

regulation upon the national interest.” Nantahala Power & Light

Co. v. Thornburg, 476 U.S. 953, 966 (1986) (quoting FPC v. S.

Cal. Edison Co., 376 U.S. 205, 215 (1964)) (internal quotation

marks omitted). Instead, “Congress meant to draw a bright line

       2
       Schneidewind dealt with the Natural Gas Act rather than
the FPA. However, because “the relevant provisions of the two
statutes are in all material respects substantially identical,”
the Supreme Court has adopted an “established practice of citing
interchangeably decisions interpreting the pertinent sections of
the two statutes.” Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578
n.7 (1981) (internal quotation marks omitted).

                                         15
easily       ascertained,             between         state          and       federal

jurisdiction . . . . This was done in the [FPA] by making [FERC]

jurisdiction plenary and extending it to all wholesale sales in

interstate     commerce       except      those      which    Congress      has   made

explicitly subject to regulation by the States.” Id. (quoting S.

Cal. Edison Co., 376 U.S. at 215-16) (internal quotation marks

omitted).

      The federal scheme thus “leaves no room either for direct

state    regulation     of    the    prices     of    interstate      wholesales     of

[energy],    or   for      state     regulations       which     would      indirectly

achieve the same result.” N. Natural Gas Co., 372 U.S. at 91

(citation omitted). “Even where state regulation operates within

its   own   field,    it     may    not    intrude     indirectly      on    areas   of

exclusive federal authority.” Pub. Utils. Comm’n v. FERC, 900
F.2d 269, 274 n.2 (D.C. Cir. 1990) (internal quotation marks

omitted). As a result, states are barred from relying on mere

formal    distinctions       in    “an    attempt”    to     evade   preemption      and

“regulate     matters        within       FERC’s      exclusive       jurisdiction.”

Schneidewind, 485 U.S. at 308.

                                           B.

        Applying these principles, we conclude that the Generation

Order is field preempted because it functionally sets the rate

that CPV receives for its sales in the PJM auction.

                                           16
       The CfD payments, which are conditioned on CPV clearing the

federal market, plainly qualify as compensation for interstate

sales    at   wholesale,     not    simply        for   CPV’s     construction       of   a

plant. Furthermore, the Order ensures -- through a system of

rebates and subsidies calculated on the basis of the PJM market

rate -- that CPV receives a fixed sum for every unit of capacity

and energy that it clears (up to a certain ceiling). The scheme

thus effectively supplants the rate generated by the auction

with an alternative rate preferred by the state. See Appalachian

Power Co., 812 F.2d at 904 (holding that the agreement at issue

did     not   “set    a    rate    per      se,”    but    that     it    nevertheless

“sufficiently resemble[d] a filed rate to come within the realm

of exclusive federal jurisdiction”). The Order thus compromises

the    integrity     of   the     federal    scheme       and    intrudes      on   FERC’s

jurisdiction.

       Maryland and CPV argue that the Generation Order does not

actually set a rate because it does not directly affect the

terms    of   any    transaction     in     the    federal      market.     Relevantly,

appellants contend, the Order does not fix the rate that PJM

pays to CPV for its sales in the auction; instead, it merely

fixes the rate that CPV receives for such sales. On the basis of

this     asymmetry,       appellants      contend       that      the    CfD    payments

represent     a   separate      supply-side        subsidy      implemented     entirely

outside the federal market.

                                            17
      We cannot accept this argument. The case of Mississippi

Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354

(1988),      is    illustrative.         There,      FERC      ordered      a    utility   to

purchase      a    specified       percentage        of    a   particular        generator’s

output.      Id.    at    363.     The      utility       petitioned     Mississippi       to

approve      an    increase      in   its    retail       rates   to   cover       the   costs

imposed by the order, but the state insisted that it retained

the authority to determine whether the purchases were prudent

before acceding to the request. Id. at 365-67. The Supreme Court

rejected this argument, ruling that the state was required to

treat     the      utility’s       FERC-mandated           payments      as      “reasonably

incurred      operating       expenses       for   the     purpose     of       setting”   the

utility’s retail rates. Id. at 370; see also Nantahala Power &

Light Co., 476 U.S. 953 (rejecting a similar state effort to bar

a utility from passing FERC-mandated wholesale rates through to

consumers). Mississippi’s prudence review was preempted because

it denied full effect to the rates set by FERC, even though it

did not seek to tamper with the actual terms of an interstate

transaction.

      As the district court recognized, see PPL EnergyPlus, LLC,

974     F.   Supp.       2d   at      831,     the    principles         articulated        in

Mississippi Power & Light Co. apply with equal force to this

dispute. If states are required to give full effect to FERC-

mandated wholesale rates on the demand side of the equation, it

                                              18
stands to reason that they are also required to do so on the

supply    side.     Here,     the   contract        price     guaranteed    by     the

Generation    Order       supersedes       the    PJM    rates     that   CPV    would

otherwise    earn    --     rates   established         through    a   FERC-approved

market mechanism. The Order ensures that CPV receives a fixed

price for every unit of energy and capacity it sells in the PJM

auction, regardless of the market price. The fact that it does

not formally upset the terms of a federal transaction is no

defense, since the functional results are precisely the same. As

in the above-mentioned cases, Maryland has “eroded the effect of

the   FERC     determination         and        undermined       FERC’s    exclusive

jurisdiction.” Appalachian Power Co., 812 F.2d at 904.

      Our conclusion that the Generation Order “seeks to regulate

a field that the [FPA] has occupied also is supported by the

imminent possibility of collision between” the state and federal

regimes. Schneidewind, 485 U.S. at 310. While the potential for

collision between the two schemes is discussed in detail in Part

D, a high probability of conflict tends to suggest that Congress

intended federal authority in a particular field to be uniform

and exclusive. See id. Even if “collision between the state and

federal     regulation”       in    this     case       is   not   “an    inevitable

consequence,” it is sufficiently likely to warrant invalidating

the Maryland program “in order to assure the effectuation of the

                                           19
comprehensive            federal   regulation          ordained    by     Congress.”          N.

Natural Gas Co., 372 U.S. at 92.

                                                C.

       Appellants         argue    that   this        court    should    apply    a        robust

version       of    the    presumption      against        preemption      to     save       the

Maryland scheme. See, e.g., Intervenor-Appellant’s Br. at 14. As

its name suggests, this presumption militates against findings

of federal preemption, especially in areas of traditional state

authority. See Rice v. Santa Fe Elevator Corp., 331 U.S. 218,

230 (1947). However, the presumption “is not triggered when the

State regulates in an area where there has been a history of

significant federal presence.” United States v. Locke, 529 U.S.
89,     108    (2000).       The   presumption          “is     almost    certainly          not

applicable         here     because       the        federal    government       has        long

regulated wholesale electricity rates.” IDACORP Inc., 379 F.3d

at 648 n.7. Nevertheless, even were we to apply the presumption,

we would find it overcome by the text and structure of the FPA,

which unambiguously apportions control over wholesale rates to

FERC.

       Appellants emphasize the FPA’s decree that FERC “shall not

have    jurisdiction,         except      as     specifically       provided          in    this

subchapter and subchapter III of this chapter, over facilities

used     for       the    generation       of        electric    energy.”        16    U.S.C.

§ 824(b)(1). They contend that the Generation Order falls on the

                                                20
state side of the jurisdictional line, since it is designed to

ensure that Maryland enjoys an adequate supply of generation

capacity.

        Although      states    plainly       retain      substantial      latitude     in

directly regulating generation facilities, they may not exercise

this authority in a way that impinges on FERC’s exclusive power

to specify wholesale rates. As the Supreme Court noted in a

similar context:

        [T]he problem of this case is not as to the existence
        or even the scope of a State’s power to [regulate
        generation facilities]; the problem is only whether
        the Constitution sanctions the particular means chosen
        by [the state] to exercise the conceded power if those
        means threaten effectuation of the federal regulatory
        scheme.

N. Natural Gas Co., 372 U.S. at 93. Here, Maryland has chosen to

incentivize      generation         by    setting   interstate       wholesale    rates.

This    particular       choice      of    means    is    impermissible.        Wholesale

energy prices “fixed by FERC must be given binding effect by

state      authorities”         even        “in     areas       subject     to        state

jurisdiction.” California ex rel. Lockyer v. Dynegy, Inc., 375
F.3d 831,    851     (9th       Cir.    2004)       (internal    quotation        marks

omitted).

       Nonetheless, it is important to note the limited scope of

our    holding,       which    is    addressed      to    the   specific    program     at

issue. We need not express an opinion on other state efforts to

encourage       new    generation,         such    as    direct     subsidies    or    tax

                                             21
rebates, that may or may not differ in important ways from the

Maryland       initiative.     It   goes    without       saying       that    not       “every

state statute that has some indirect effect” on wholesale rates

is preempted, Schneidewind, 485 U.S. at 308, for “there can be

little if any regulation of production that might not have at

least an incremental effect on the costs of purchasers in some

market,” Nw. Cent. Pipeline Corp., 489 U.S. at 514. In this

case, however, the effect of the Generation Order on matters

within    FERC’s    exclusive       jurisdiction        is     neither       indirect          nor

incidental.       Rather,     the   Order       strikes       at     the    heart        of    the

agency’s       statutory    power   to     establish         rates    for     the    sale       of

electric energy in interstate commerce, see 16 U.S.C. § 824e(a),

by     adopting    terms      and   prices      set     by     Maryland,           not     those

sanctioned by FERC.

                                           D.

       Appellants’      position     is    further      complicated           by    the       fact

that the principles of field and conflict preemption in this

case     are    mutually      reinforcing.        As    relevant           here,     conflict

preemption        applies     “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. Nat’l Foreign Trade Council,

530 U.S. 363,   373     (2000)      (internal         quotation            marks       and

alterations omitted). “What is a sufficient obstacle is a matter

                                           22
of judgment, to be informed by examining the federal statute as

a whole and identifying its purpose and intended effects.” Id.

“A   state      law     may    pose    an     obstacle        to    federal      purposes     by

interfering        with        the    accomplishment           of     Congress’s         actual

objectives, or by interfering with the methods that Congress

selected     for      meeting        those    legislative          goals.”       College     Loan

Corp. v. SLM Corp., 396 F.3d 588, 596 (4th Cir. 2005) (emphasis

omitted).

      In a system of “interlocking” jurisdiction, such as that

created    by     the    FPA,    “[i]t       is     inevitable       that    jurisdictional

tensions will arise” -- even if each sovereign formally remains

within the confines of its “assigned sphere.” Nw. Cent. Pipeline

Corp., 489 U.S. at 506, 515 & n.12 (internal quotation marks and

alteration omitted). “Thus, conflict-pre-emption analysis must

be   applied      sensitively         in     this    area,     so    as     to    prevent    the

diminution of the role Congress reserved to the States while at

the same time preserving the federal role.” Id. at 515. Here,

“the impact of state regulation of production on matters within

federal    control        is    so    extensive         and   disruptive         of”   the    PJM

markets that preemption is appropriate. Id. at 517-18.

      As     an    initial       matter,          the    Generation         Order      has   the

potential to seriously distort the PJM auction’s price signals,

thus “interfer[ing] with the method by which the federal statute

was designed to reach its goals.” IDACORP Inc., 379 F.3d at 650.

                                               23
PJM’s    price      signals     are    intended      to    promote    a     variety    of

objectives, including incentivizing new generation sources. See

PJM Interconnection, LLC, 132 FERC ¶ 61,173, at 61,870 (2010);

see also PPL EnergyPlus, LLC, 974 F. Supp. 2d at 813. Market

participants necessarily rely on these signals in determining

whether to construct new capacity or expand existing resources.

The signals appear to be serving their purpose; according to

FERC, the evidence “suggests that RPM has in fact succeeded in

securing      sufficient      capacity      to    meet    reliability     requirements

for     the   PJM    region.”        PJM    Interconnection,         LLC,    137      FERC

¶ 61,145, at ¶ 3 (2011).

      Maryland’s initiative disrupts this scheme by substituting

the state’s preferred incentive structure for that approved by

FERC. See PPL EnergyPlus, LLC v. Hanna, No. 11-745, 2013 WL
5603896,      at    *36    (D.N.J.         Oct.    11,    2013)    (describing        the

distorting       impact    of    a    similar      New    Jersey     program    on    the

business decisions of private participants in the PJM auction).

Two features of the Order render its likely effect on federal

markets particularly problematic. First, as noted, the CfDs are

structured to actually set the price received at wholesale. They

therefore directly conflict with the auction rates approved by

FERC. Second, the duration of the subsidy -- twenty years -- is

substantial.

                                             24
       The   Order     is   preempted     for       the   further      reason    that   it

conflicts       with   NEPA,    which    represents        an   exception       to    PJM’s

otherwise       steadfast      commitment      to    a    uniform      market    clearing

price. In order to stimulate plant construction, NEPA carves out

a   three-year      period     during    which      certain     new     generators      are

eligible to receive a fixed price for the capacity they sell in

the    PJM      markets.     See   PJM    Interconnection,             LLC,     128   FERC

¶ 61,157, at ¶ 92 (2009). CPV petitioned FERC to extend the NEPA

period to ten years on the grounds that the three-year period

was insufficient to achieve its objective. Id. at ¶ 93. FERC

rejected     CPV’s     request,    stating       that      “[b]oth      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 entry.” Id. at

¶ 102.

       The Generation Order represents an effort by the state to

directly override this explicit policy choice. As a functional

matter, the CfDs extend the NEPA period for CPV to twenty years,

a duration vastly exceeding the current NEPA term and double the

term     that    CPV   unsuccessfully          requested        FERC    to    institute.

Maryland has sought to achieve through the backdoor of its own

regulatory process what it could not achieve through the front

door of FERC proceedings. Circumventing and displacing federal

rules in this fashion is not permissible.

                                          25
     Appellants assert that no conflict is present because FERC

explicitly accommodated -- via the MOPR -- the participation of

subsidized       plants     in     its      auction.       See,    e.g.,     Intervenor-

Appellant’s Reply Br. at 23. The fact that FERC was forced to

mitigate    the    Generation        Order’s       distorting      effects       using   the

MOPR, however, tends to confirm rather than refute the existence

of a conflict. Furthermore, FERC’s own comments on the subject

belie     appellants’       claim     that        the   agency     has     affirmatively

approved the Generation Order. See PJM Interconnection, LLC, 137

FERC at ¶ 3 (“Our intent is not to pass judgment on state and

local policies and objectives with regard to the development of

new capacity resources . . . .”).

     As    was    the     case    with    our     field    preemption      holding,      our

conflict       preemption        ruling    is     narrow    and     focused      upon    the

program before us. Obviously, not every state regulation that

incidentally       affects        federal       markets    is     preempted.      Such   an

outcome “would thoroughly undermine precisely the division of

the regulatory field that Congress went to so much trouble to

establish . . . , and would render Congress’ specific grant of

power     to     the      States      to        regulate        production       virtually

meaningless.” Nw. Cent. Pipeline Corp., 489 U.S. at 515. The

Generation       Order,    however,        is     simply    a    bridge    too    far.    It

                                             26
presents a direct and transparent impediment to the functioning

of the PJM markets, and is therefore preempted. 3

                                    III.

     For the foregoing reasons, we hold the Generation Order

preempted   under   federal   law   and    affirm   the   judgment    of   the

district court.

                                                                     AFFIRMED

     3
       Our conclusion that the Generation Order is preempted
renders it unnecessary for us to reach plaintiffs’ dormant
Commerce Clause arguments, which were rejected by the district
court. See Schneidewind, 485 U.S. at 311 (“Because we have
concluded that Act 144 is pre-empted by the NGA, we need not
decide whether, absent federal occupation of the field, Act 144
violates the Commerce Clause.”).

                                     27