766 F.3d 241 (3rd Cir. 2014), 13-4330, PPL EnergyPlus, LLC v. Solomon

Docket Nº:13-4330, 13-4501
Citation:766 F.3d 241
Opinion Judge:FUENTES, Circuit Judge.
Party Name: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; CALPINE ENERGY SERVICES L.P.; CALPINE MID-ATLANTIC GENERATION, LLC; CALPINE NEW JERSEY GENERATION, LLC; CAL
Attorney:Richard F. Engel [Argued], Lisa J. Morelli, Jennifer S. Hsia, Office of Attorney General of New Jersey, Department of Law & Public Safety, Division of Law, Richard J. Hughes Justice Complex, Trenton, NJ; Alex Moreau, Office of Attorney General of New Jersey, Newark, NJ, Counsel for Appellants Lee...
Judge Panel:FUENTES and SHWARTZ, Circuit Judges, and ROSENTHAL, District Judge.
Case Date:September 11, 2014
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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766 F.3d 241 (3rd Cir. 2014)

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; CALPINE ENERGY SERVICES L.P.; CALPINE MID-ATLANTIC GENERATION, LLC; CALPINE NEW JERSEY GENERATION, LLC; CALPINE BETHLEHEM, LLC; CALPINE MID-MERIT, LLC; CALPINE VINELAND SOLAR, LLC; CALPINE MID-ATLANTIC MARKETING, LLC; CALPINE NEWARK, LLC; EXELON GENERATION COMPANY, LLC; GENON ENERGY, INC.; NAEA OCEAN PEAKING POWER, LLC; PSEG POWER, LLC; ATLANTIC CITY ELECTRIC COMPANY; PUBLIC SERVICE ELECTRIC & GAS COMPANY

v.

LEE A. SOLOMON, in his official capacity as President of the New Jersey Board of Public Utilities; JEANNE M. FOX, in her official capacity as Commissioner of the New Jersey Board of Public Utilities; JOSEPH L. FIORDALISO, in his official capacity as Commission of the New Jersey Board of Public Utilities; NICHOLAS V. ASSELTA, in his official capacity as Commissioner of the New Jersey Board of Public Utilities; CPV POWER Development, Inc.; Appellant, *HESS NEWARK, LLC, Intervenor in USCA *(Pursuant to Courts order entered Novenmber 14, 2013); 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; CALPINE ENERGY SERVICES L.P.; CALPINE MID-ATLANTIC GENERATION, LLC; CALPINE NEW JERSEY GENERATION, LLC; CALPINE BETHLEHEM, LLC; CALPINE MID-MERIT, LLC; CALPINE VINELAND SOLAR, LLC; CALPINE MID-ATLANTIC MARKETING, LLC; CALPINE NEWARK, LLC; EXELON GENERATION COMPANY, LLC; GENON ENERGY, INC.; NAEA OCEAN PEAKING POWER, LLC; PSEG POWER, LLC; ATLANTIC CITY ELECTRIC COMPANY; PUBLIC SERVICE ELECTRIC & GAS COMPANY

v.

LEE A. SOLOMON, in his official capacity as President of the New Jersey Board of Public Utilities; JEANNE M. FOX, in her official capacity as Commissioner of the New Jersey Board of Public Utilities; JOSEPH L. FIORDALISO, in his official capacity as Commission of the New Jersey Board of Public Utilities; NICHOLAS V.

ASSELTA, in his official capacity as Commissioner of the New Jersey Board of Public Utilities; CPV POWER DEVELOPMENT INC.; HESS NEWARK, LLC. LEE A. SOLOMON, JEANNE M. FOX, JOSEPH FIORDALISO, NICHOLAS ASSELTA, Appellants

Nos. 13-4330, 13-4501

United States Court of Appeals, Third Circuit

September 11, 2014

Argued March 27, 2014

Petition for certiorari filed at, 11/26/2014

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[Copyrighted Material Omitted]

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On Appeal from the United States District Court for the District of New Jersey. (D.C. No.3-11-cv-00745). District Judge: Honorable Peter G. Sheridan.

Richard F. Engel [Argued], Lisa J. Morelli, Jennifer S. Hsia, Office of Attorney General of New Jersey, Department of Law & Public Safety, Division of Law, Richard J. Hughes Justice Complex, Trenton, NJ; Alex Moreau, Office of Attorney General of New Jersey, Newark, NJ, Counsel for Appellants Lee A. Solomon, Jeanne M. Fox, Joseph Fiordaliso, and Nicholas V. Asselta in No. 13-4501.

Larry F. Eisenstat, Clifton S. Elgarten [Argued], Richard Lehfeldt, Jennifer N. Waters, Crowell & Moring LLP, Washington, DC, Counsel for Intervenor-Appellant CPV Power Development.

Justin N. Kattan, Richard M. Zuckerman [Argued], Dentons US, New York, NY; Brian J. Molloy, Wilentz, Goldman & Spitzer, Woodbridge, NJ, Counsel for Intervenor Hess Newark LLC.

Paul D. Clement [Argued], Erin E. Murphy, Candice Wong, Bancroft PLLC, Washington, DC, Counsel for Appellees.

Philip J. Passanante, Pepco Holdings, Inc./Atlantic City Electric Co., Newark, DE, Counsel for Atlantic City Electric Co.

David Musselman, Essential Power, LLC, Princeton, NJ, Counsel for Essential Power, LLC.

Robert C. Brady, William P. Deni, Jr., Lawrence S. Lustberg, Justin T. Quinn, Gibbons, Newark, NJ, Counsel for Calpine Energy Services.

Sarah G. Novosel, Calpine Corporation, Washington, DC, Counsel for the Calpine Companies.

Darryl M. Bradford, Verónica Gómez, Exelon Corporation, Chicago, IL; David W. DeBruin, Matthew E. Price, Jenner & Block LLP, Washington, DC, Counsel for Exelon Generation Co., LLC.

Jesse A. Dillon, PPL Services Corp., Allentown, PA; David L. Meyer, Morrison & Foerster, Washington, DC, Counsel for the PPL Companies.

Tamara Linde, Vaughn L. McKoy, PSEG Services Corp., Newark, NJ; Shannen W. Coffin, Steptoe & Johnson LLP, Washington, DC, Counsel for PSEG Power, LLC and Public Service Electric & Gas Co.

John P. Coyle, Duncan & Allen, Washington, DC; Pamela M. Silberstein, National Rural Electric Cooperative Association, Arlington, VA, Counsel for Amici Appellants National Rural Electric Cooperative Association and American Public Power Association.

Delia D. Patterson, American Public Power Association, Washington, DC, Counsel for Amicus Appellant American Public Power Association.

Susanna Chu, Kaye Scholer, Washington, DC, Counsel for Amici Curiae Vermont Public Service Board, Vermont Department of Public Service, Rhode Island Public Utilities Commission, New England Conference of Public Utilities Commissioners Inc., Maine Public Utilities Commission, Connecticut Public Utilities Regulatory Authority, Connecticut Officer of Consumer Counsel, Connecticut Department of Energy and Environmental Protection, California Public Utilities Commission, and Attorney General of Connecticut.

Clare E. Kindall [Argued], Office of Attorney General, New Britain, CT, Counsel to Amicus Connecticut Public Utilities Regulatory Authority.

Jeffrey A. Lamken, Martin Totaro, MoloLamken, The Watergate, Washington, DC, Counsel to Amicus Curiae NRG Energy Inc.

Eugene Grace, American Wind Energy Association, Washington, DC, Counsel to Amicus Appellant American Wind Energy Association.

Ashley C. Parrish, David G. Tewksbury, King & Spalding, Washington, DC, Counsel to Amici Curiae Electric Power Supply Association & Edison Electric Institute.

Stefanie A. Brand, Office of Public Defender, Division of the Ratepayer Advocate, Trenton, NJ, Counsel to New Jersey Division of Rate Counsel.

Karis A. Gong, John L. Shepherd, Jr., Skadden, Arps, Slate, Meagher & Flom, Washington, DC, Counsel to Amicus Curiae PJM Power Providers Group.

Adam D. Chandler, U.S. Department of Justice, Appellate Section, Washington, DC; Robert H. Solomon [Argued], Federal Energy Regulatory Commission, Washington, DC, Counsel to Amici Curiae Federal Energy Regulatory Commission and the United States of America.

James P. Melia, Aspassia V. Staevska, Kenneth R. Stark, Pennsylvania Public Utilities Commission, Harrisburg, PA, Counsel to Amicus Appellee Pennsylvania Public Utility Commission.

FUENTES and SHWARTZ, Circuit Judges, and ROSENTHAL, District Judge. [*]

OPINION

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OPINION OF THE COURT

FUENTES, Circuit Judge.

Dissatisfied with the stock and reliability of power-generating facilities in New Jersey,

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the state adopted the Long Term Capacity Pilot Program Act. The Act--known as LCAPP--instructed New Jersey's Board of Public Utilities to promote the construction of new power-generating facilities in the state. Rather than pay for the construction of these plants directly, the Board of Public Utilities crafted a set of contracts, called Standard Offer Capacity Agreements, that assured new electric energy generators fifteen years of revenue from local utilities and, ultimately, New Jersey ratepayers. LCAPP guaranteed revenue to new generators by fixing the rates those generators would receive for supplying electrical capacity, that is, the ability to make energy when called upon.

The federal government, however, has exclusive control over interstate rates for wholesales of electric capacity. So when New Jersey arranged for LCAPP generators to receive preferential capacity rates, the state entered into a field of regulation beyond its authority. Accordingly, federal law preempts, and thereby invalidates, LCAPP and the related Standard Offer Capacity Agreements. We, therefore, affirm the District Court's judgment.

Although we affirm, we address our opinion to the field of interstate rates, and not to electric energy markets generally. Moreover, because we determine that LCAPP has been field preempted, we do not reach the conflict preemption and dormant Commerce Clause arguments raised by the parties.

I. Background of the Case

This case concerns New Jersey's authority to arrange for the construction of new electric generators through a scheme focused on capacity prices. New Jersey's legislation, and its reasons for pursuing it, make sense only in the broader context of the regional energy market. Our analysis begins there.

A. Regulatory framework

Electric energy generation and transmission occur in a complex regulatory environment populated with multiple private and public actors operating under the supervision of both state and federal agencies. The Federal Power Act embodies Congress's attempt " to reconcile the claims of federal and of local authorities and to apportion federal and state jurisdiction over the industry." Conn. Light & Power Co. v. Fed. Power Comm'n, 324 U.S. 515, 531, 65 S.Ct. 749, 89 L.Ed. 1150 (1945).

1. Both the federal government and the states regulate aspects of the electric energy system.

With the Federal Power Act, Congress placed " the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce" under federal control. 16 U.S.C. § 824(a). Through the Act, Congress exercised its Commerce Clause prerogative to regulate matters of interstate commerce that the states could not. Cf. Public Utils. Comm'n v. Attleboro Steam & Elec. Co.., 273 U.S. 83, 89-90, 47 S.Ct. 294, 71 L.Ed. 549 (1927) (holding that the regulation of wholesale energy...

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