By Rich Heidorn Jr.

WASHINGTON — The Supreme Court’s recent rulings in three state-federal jurisdictional cases provide only limited guidance for how it might decide future turf disputes, a panel of attorneys agreed in a discussion at the Energy Bar Association’s Annual Meeting last week.

They disagreed, however, over whether the court should be praised for its diffidence.

The panel focused on the court’s April ruling in Hughes v. Talen and its January order in Electric Power Supply Association v. FERC, with mentions of the 2015 ruling in ONEOK v. Learjet.

The court backed FERC’s authority in both of the most recent cases — upholding its jurisdiction over demand response in EPSA and rejecting Maryland’s subsidy of a generator that could have undermined PJM’s FERC-regulated capacity auction.

‘Very Narrow Decision’

But FERC General Counsel Max Minzner isn’t letting the victories go to his head. The court’s ruling in Hughes v. Talen was “a very narrow decision,” Minzner said. (See Supreme Court Rejects MD Subsidy for CPV Plant.)

The court unanimously rejected Maryland’s contract-for-differences with a natural gas plant, saying it violated the Constitution’s Supremacy Clause, which establishes that federal law preempts contrary state law (14-614, 14-623).

Minzner said the ruling preserved “a wide range of tools for states to incentivize or affect generation” but found the Maryland program improper because it interfered with FERC’s jurisdiction over wholesale electric markets and could distort price signals in PJM’s annual capacity auctions.

“The court, I think, was clear that a significant number of traditional state activities that could in theory have an impact on the wholesale rate are likely to be preserved after Hughes,” Minzner said. “There was a long discussion at the end [of the opinion] about the range of things the states can do without running afoul of this specific problem.”

Connecticut Assistant Attorney General Clare E. Kindall, who co-authored an amicus brief in Hughes, said she was “relieved to hear that FERC’s general counsel thinks it’s a narrow ruling.”

“I believe that the Supreme Court did narrow the 4th Circuit’s original holding [against Maryland]. But I also think the Hughes case and this trio of cases is a full employment act for this group [lawyers] for the next 10 years, because I think there will be a lot of litigation over what exactly a state can and cannot do,” she said. “There is a role for FERC and there’s a role for the states. And this room will spend most of the next 10 years drawing those lines.”

Dentons partner Stuart A. Caplan, who moderated the discussion, echoed Kindall’s comments, complaining of “an unsatisfying lack of clarity in the decisions as to the basis of jurisdiction.”

No End to Litigation

Bancroft partner Erin E. Murphy, a member of Talen’s legal team, agreed that the rulings are “hardly going to put an end to litigation.”

“The court was trying to avoid drawing particularly bright lines or giving a whole lot of guidance. It really had to approach each of the cases as: ‘We’re going to decide precisely what’s before us and not say a whole lot more than that — which isn’t all that unusual for how the court operates, particularly when it’s dealing with an area like this that the court knows it’s not the body with the great expertise.”

Kindall lamented that the rulings did nothing to answer a policy question: “whether markets answer all questions.”

“The markets have done a tremendous good,” she said. “Connecticut is deregulated and [I] was a little offended by the idea that the only way to ensure reliable energy was to reregulate, which was one of the suggestions in Hughes. That struck us as a really wrong tack to take. … The question becomes, if you have a market failure, how do you address it? That will have to be a [discussion] between the federal agencies and state agencies.”

Not Identical

Minzner distinguished between the EPSA ruling, which he said was about the scope of the Federal Power Act, and the other two cases, which deal with “core Constitutional” questions about the meaning of the Supremacy and Commerce clauses.

“Those are related questions but I don’t think they’re identical,” he said.

Kindall said EPSA (14-840, 14-841) was decided less on principle than practicality — the potential loss of demand response from wholesale markets. (See Supreme Court Upholds FERC Jurisdiction over DR.)

“I think that was really what was guiding [the court] — and the fact that the states weighed in. They weren’t there saying protect their jurisdiction. … [They] said FERC absolutely should be able to do this as well [as the states]. You can sort of slice and dice all the legal analyses, but I think at the bottom that was what was really going on.”

“We did have a few states on our side too,” Murphy interjected, prompting laughter. But she said she agreed with Kindall’s analysis.

“When you look at the way the court was thinking about it … this is happening in FERC’s market, and how else can we make sure that this happens in FERC’s market if FERC can’t control it? Which is a little bit divorced from a starting principle of: ‘Is it wholesale or retail?’”

Field or Conflict Preemption?

Caplan said he believed the Hughes ruling was based on broad “field preemption” grounds — that it was an intrusion into exclusive federal jurisdiction — rather than the narrower “conflict preemption” — that it undermined FERC policy.

“It seemed that the court explicitly declined to consider what the effects on the wholesale market were, which would have been necessary if the courts were applying the conflict preemption,” he said.

Murphy and Minzner agreed that the ruling seemed to be based on field preemption.

Murphy also offered a defense of the court’s refusal to draw bright jurisdictional lines. “While I think it’s frustrating to people who practice to not have this clear guidance from them … I do think that [the court’s] reluctance to provide it is animated by their decision that it’s better to not give totally clear guidance than to mess it all up in an area that they don’t understand as well as all the people in this room do.”

“A refreshing breath of humility,” Caplan quipped.