PPL Energyplus, LLC v. Hanna

• Decision Date: 11 October 2013
• Docket Number: Civil Action No. 11–745.
• Citation: 977 F.Supp.2d 372
• Parties: PPL ENERGYPLUS, LLC, et al., Plaintiffs, v. Robert M. HANNA, in his official capacity as President of the New Jersey Board of Public Utilities, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

977 F.Supp.2d 372

PPL ENERGYPLUS, LLC, et al., Plaintiffs,

v.Robert M. HANNA, in his official capacity as President of the New Jersey Board of Public Utilities, et al., Defendants.

Civil Action No. 11–745.

United States District Court, D. New Jersey.

Oct. 11, 2013.

Preempted

N.J.S.A. 48:3–98.2, 48:3–98.3, 48:3–98.4

David John Fioccola, Morrison & Foerster LLP, New York, NY, Lawrence S. Lustberg, Robert C. Brady, William P. Deni, Jr., Gibbons, PC, Philip Joseph Passanante, Pepco Holdings, Inc., Newark, NJ, for Plaintiffs.

Alex Moreau, Brian O. Lipman, Office of the NJ Attorney General, Jennifer S. Hsia, Brian Weeks, New Jersey Office of the Attorney General, Newark, NJ, Richard Francis Engel, Department of Law & Public Safety Division of Law, Lisa J. Morelli, State of New Jersey, Trenton, NJ, Brian J. Molloy, Wilentz Goldman & Spitzer, PA, Woodbridge, NJ, Stephen R. Kern, McNees Wallace & Nurick LLC, Harrisburg, PA, Sean J. Kirby, Sheppard Mullin Richter & Hampton LLP, New York, NY, Arleigh P. Helfer, Schnader Harrison Segal & Lewis LLP, Philadelphia, PA, David R. King, Herrick, Feinstein LLP, Princeton, NJ, Richard P. Maggi, McDermott & McGee, Esqs., Millburn, NJ, Dwayne Franklin Stanley, Husch Blackwell, LLP, St. Louis, MO, for Defendants.

MEMORANDUM

SHERIDAN, District Judge.

This non-jury case was tried before the Court over thirteen separate days in April and May, 2013. After trial, the parties submitted proposed findings of fact and conclusions of law as well as briefs, and thereafter, summations were heard. The Court, having considered the parties' submissions and having deliberated over the facts and the law, submits this memorandum as its decision.

In broad terms, the issue before the Court is whether the New Jersey Long–Term Capacity Pilot Project Act, P.L. 2001, c. 9, approved Jan. 28, 2011, codified at N.J.S.A. §§ 48:3–51, 48:3–98.2–.4 (“LCAPP” or “Act”), should be declared unconstitutional as violating the Supremacy Clause, and whether the New Jersey Board of Public Utilities (“NJBPU”, “BPU”, or as referred to herein as the “Board”) should be enjoined from engaging in activities in furtherance of the Act because the LCAPP is preempted by the Federal Power Act, 16 U.S.C. § 824 et seq.. That is, whether actions by the State of New Jersey taken pursuant to the LCAPP intrude upon and interfere with the authority delegated to the Federal Energy Regulatory Commission (as referred to herein, “FERC” or “Commission”) by the Federal Power Act.

Before proceeding to the substance of this case, the Court provides two cautionary observations regarding writing style and organization and a general reservation as to the presentation and scope of the findings within this decision. First, on writing style. The electric energy industry has its own jargon which makes great use of acronyms. With so many acronyms being used, the testimony and briefs become like alphabet soup where all the letters swirl around and may confuse the reader. As such, a list of acronyms which have been substantially agreed upon by the parties is attached as Rider A. The Court minimizes use of these acronyms in this decision. By way of reservation, the first part of the trial reviewed the extensive history of how the electric energy industry has developed into its present state. This opinion includes an overview of the relevant background for the purpose of providing sufficient information to decide the issues, however, it does not purport to be a historical work. And lastly on organization, there are many non-controversial facts presented within the Court's overview of the relevant background, and a new term may present itself without prior introduction. In this case, the term will be explained later in the Court's decision. After sifting through a confluence of facts, the Court has gleaned a set of manageable facts with which to evaluate the preemption issue. The decision is subdivided into several sections: (A) an identification of the parties to the action; (B) an identification of important non-parties; (C) an identification of witnesses who testified at trial; (D) a description of some basic facts regarding electricity; (E) background information on the electric energy industry; (F) a description of the “Reliability Price Model” (“RPM”) process; (G) a description of the LCAPP statute; (H) an explanation of the impacts of the LCAPP; (I) a description of the credibility of witness; (J) analysis; and (K) a conclusion.

A. PARTIES TO THE ACTION

1. Defendants

New Jersey Board of Public Utilities. The defendants are Robert M. Hanna ¹, Jeanne M. Fox, Joseph L. Fiordaliso, and Nicholas Asselta, all of whom are current or former commissioners of the New Jersey Board of Public Utilities ². Each is named in his official capacity against whom declaratory and injunctive relief is sought. Since each currently serves or formerly served as a commissioner on the Board, this opinion collectively refers to them as the “Board.” The Board has broad statutory authority over the activities of public utilities within the State of New Jersey. See In re Centex Homes, LLC, 411 N.J.Super. 244, 254, 985 A.2d 649 (App.Div.2009). Specifically, Title 48 of the New Jersey Statutes provides that the Board has “general supervision and regulation of and jurisdiction and control over all public utilities.” N.J.S.A. § 48:2–13(a). As part of that authority, the BPU is authorized to require any public utility operating within the State to furnish safe, adequate, and proper service to consumer ratepayers at “just and reasonable” rates. N.J.S.A. § 48:2–21.

CPV Power Development, Inc. CPV Power Development, Inc. (“CPV”) is an Intervenor/Defendant. CPV is a Delaware corporation that, through its subsidiaries, is engaged in the development, ownership, and management of natural gas-fired facilities in North America (T. 1587, 10–24). CPV owns and manages a natural gas-fired generation facility in Riverside County, California, and has taken steps to develop other natural gas-fired facilities, includingprojects in Maryland, New York and New Jersey. CPV began to develop its Shore Project in New Jersey prior to implementation of the LCAPP Act. (T. 1588, 6 through T. 1589, 17). Most importantly for purposes of this case, CPV was named an eligible generator under the LCAPP by the Board and cleared the RPM Auction on its 2012 bid (T. 1588, 15–22).

2. Plaintiffs

The Plaintiffs are a group of wholesale, retail, and marketing companies who produce and sell energy and are located within the PJM market ³. Several Plaintiffs are identified below.

Plaintiff Calpine Corporation is an electric generation and marketing corporation with a number of subsidiaries. It is a publicly traded, independent power producer based in Houston, Texas which operates ninety-one (91) power plants throughout the United States and Canada. The Calpine generation companies are physically located in the PJM market and participate in the PJM wholesale energy and capacity markets.

Plaintiff Exelon Generation Company, LLC is a Pennsylvania corporation headquartered in Kennett Square, Pennsylvania. Exelon Generation is a wholly-owned subsidiary of Exelon Corporation. Exelon Generation's business consists of owning and operating electric generating facilities, wholesale power marketing operations, and competitive retail supply operations. Exelon Generation sells energy and capacity in the PJM interstate market and competes in PJM's wholesale capacity auctions.

The PPL Parties are a group of related companies principally located in Allentown, Pennsylvania which are market and generation subsidiaries of PPL Corporation. They are physically located in the PJM market and participate in the PJM wholesale energy and capacity markets. Together they control or own about 19,000 megawatts of generating capacity in the United States, some of which is located within the PJM market.

Plaintiff PSEG Power, LLC is a Delaware limited liability company, headquartered in Newark, New Jersey. PSEG Power is a wholly-owned subsidiary of Public Service Enterprise Group, Inc., PSEG Power owns approximately 11,850 megawatts of generating capacity within the PJM area, approximately 9,950 megawatts of which is located in New Jersey. PSEG Power sells energy and capacity at wholesale in interstate commerce, including in PJM's capacity and energy markets.

Plaintiff Public Service Electric and Gas Company (“PSE & G”), a subsidiary of Public Service Enterprise Group, is located in New Jersey and is one of the largest combined electric and gas companies in the United States. It is also New Jersey's oldest and largest publicly owned utility. PSE & G currently serves nearly three quarters of New Jersey's population from Bergen to Gloucester Counties.

Plaintiff Atlantic City Electric Company, based in New Jersey, is a subsidiary of Pepco Holdings, Inc., which provides electric service to approximately 547,000 customers in southern New Jersey. Pepco Holdings, Inc. is one of the largest energy delivery companies in the Mid–Atlantic region, serving about 1.9 million customers in Delaware, the District of Columbia, Maryland and New Jersey.

B. OTHER IMPORTANT NON–PARTIES

The Federal Energy Regulatory Commission (“Commission” or “FERC”) and PJM Interconnection, LLC (“PJM”) are two entities that are key players in the sale and delivery of energy. The Commission and PJM are not parties to this action, but are discussed throughout this memorandum.

Pursuant to the Federal Power Act, 16 U.S.C. § 824 et seq., the Commission has federal statutory authority to regulate the transmission of electric energy in interstate commerce and the sale of electric energy at wholesale in interstate commerce. (Stipulated Facts ¶ 5). In this case, the scope of the Commission's jurisdiction in regulating the sale of electric capacity in the wholesale market, and whether such jurisdiction is exclusive or concurrent with the Board's jurisdiction, is at issue. The applicable federal ...