WASHINGTON — FERC Chairman Norman Bay said he expects the Supreme Court to take a nuanced view of federal-state jurisdictional issues when it hears oral arguments Wednesday in a dispute involving state subsidies for generation developers.

Bay said he considered the case as one of the court’s “FERC trilogy,” following its April 2015 ruling in ONEOK v. Learjet and its Jan. 25 ruling upholding the commission’s jurisdiction over wholesale demand response (FERC v. Electric Power Supply Association).

In the ONEOK case, the court found that state antitrust suits aimed at pipelines’ price manipulation do not improperly interfere with federal jurisdiction under the Natural Gas Act.

“The court ended up saying these state antitrust actions don’t have a direct aim of trying to interfere with the natural gas markets,” Bay explained. “Rather, they’re directed at many, many different kinds of markets. And so they said state jurisdiction there was not preemptive.”

In the EPSA case, the court ruled that FERC Order 745 did not violate state jurisdiction even if it affects the quantity or terms of retail sales. (See Legal Challenge Behind it, DR Seeks to Overcome Behavioral Resistance, Varying State Rules.)

The court announced its decision to hear the latest jurisdictional dispute in October. (See SCOTUS Agrees to Hear Md.-FERC Subsidy Case.)

The court will consider lower court rulings throwing out contracts in which generation developers won state-issued subsidies to build plants in New Jersey and Maryland. Competitive Power Ventures and state regulators have argued that the subsidies are legal. The courts ruled that the subsidies violated FERC jurisdiction over the wholesale electric market.

The two cases, Hughes v. Talen Energy, et al. (14-614) and CPV Maryland v. Talen Energy Marketing, et al. (14-623) were consolidated.

Based on its rulings in ONEOK and EPSA, Bay said, “I would expect the court to look to see what the aim of the state law is as well as the impact on the wholesale market” in its ruling.

“I think this is a sensible way of looking at things because the relationship between the wholesale and the retail markets is not one in which the two markets are hermetically sealed from one another,” he said.

CPP Ruling may not Come Until 2018

NARUC General Counsel Brad Ramsay said a Supreme Court ruling on the merits of the Clean Power Plan is unlikely before late 2017 and might not come before 2018.

The court granted a stay, preventing EPA from enforcing the rule, on Feb. 9.

The case is scheduled for oral arguments June 2 before a three-judge D.C. Circuit Court of Appeals panel, with a decision likely about three months later, Ramsay said.

The losing party will have 45 days to request rehearing by the entire 11-judge circuit. A rehearing ruling would come three to four months later.

The earliest the Supreme Court will decide whether to hear the final D.C. Circuit ruling is the end of 2016, Ramsay said. “I think it’s far more likely [in] the first quarter of 2017. It could easily go three, four months beyond that.”

If the court schedules briefing and oral arguments in the first part of 2017, the court could rule on the merits before the end of its term in June 2017.

“I think it’s more likely … to see the decision in the second half of the year, maybe even into 2018,” he said.

The Feb. 13 death of Justice Antonin Scalia, who sided with the majority in granting the stay, could change the timeline, however.

If Scalia’s seat is not filled before the case reaches the court, the timeline could be shorter, wrote The Washington Post’s Robert Barnes. “If the appeals court upholds the plan, would the four remaining conservatives feel it was worth accepting an appeal if it were clear that it would be impossible to get a fifth vote from one of the liberals?” he asked.

Ramsay said the court’s unusual decision to stay the rule absent a lower court ruling on the merits indicated that the court is likely to grant certiorari and that several of the judges have serious doubts about the legality of the rule.

The stay “doesn’t tell you what they’re going to do on the merits, but it’s the only hint we have,” he said.

NARUC’s Assistant General Counsel Jennifer Murphy gave an additional update following a conference call with EPA officials Tuesday.

Murphy said EPA officials acknowledged the September 2016 deadline for filing initial compliance plans “will slip although interestingly, Janet McCabe [acting assistant administrator for the Office of Air and Radiation] seemed to leave open that perhaps the compliance deadline of 2022 would not be slipping.”

AWEA: Wind Growth to Continue Regardless of CPP Fate

American Wind Energy Association officials said wind power will continue growing for the next five years under the extended production tax credit even if the Clean Power Plan is struck down.

The trade group cited a report by Bloomberg New Energy Finance finding that 8.6 GW of wind power was added in the U.S. in 2015, besting solar (7.3 GW) and natural gas (6 GW). About 9.4 GW of wind is under construction with another 4.9 GW in advanced stages of development.

“The pipeline’s busy. It’s full,” AWEA CEO Tom Kiernan said at a press conference at the NARUC meetings.

“The Clean Power Plan — I would say for the five-year PTC window — probably doesn’t [have an] effect,” said Chris Brown, president of turbine maker Vestas Americas and incoming AWEA board chair.

Without the PTC, Brown said, the loss of the CPP could have an impact on wind’s competitiveness, along with “many different drivers — whether it’s the price of gas, whether it’s the other alternative sources of energy. What would we assume in terms of how much more efficient we can get?

“Obviously it’s a better looking forecast with the CPP, but it’s not a bad forecast without it either.”

Although the levelized cost of wind energy has dropped by almost two-thirds over the past six years, Brown said there’s no reason the wind industry can’t continue to reduce costs by increasing tower heights and rotor sizes. He noted that onshore turbines are not yet as large as the 7-MW turbines used offshore.

“Our friends in the solar business aren’t stopping [their cost-reduction efforts], so I don’t think that’s going to allow us to sleep very easy at night.”

APPA, ISO-NE Spar on Capacity Markets

One of the livelier sessions at the winter meetings came Tuesday afternoon, when Sue Kelly, CEO of the American Public Power Association, sparred with ISO-NE CEO Gordon van Welie over mandatory capacity markets.

Kelly was on the offense, complaining that capacity markets originally intended to supplement other resource procurement strategies have become dominant in the eastern RTOs.

“We believe resource decisions are better made closer to the customer. And that means at the state level and, in our case, at the community level,” she said. She warned state regulators in attendance of an effort to include in the House energy bill a provision that would require other RTOs to adopt provisions similar to ISO-NE’s Pay-for-Performance and PJM’s Capacity Performance rules.

Under Capacity Performance, she said, “consumers are paying a lot more money for most of the same resources.” She said RTO officials must be precise in how they identify the attributes they are seeking to procure, using “a scalpel rather than a meat cleaver.”

Van Welie responded that ISO-NE’s Forward Capacity Auction 10 last month saw a drop in prices from FCA 9, the first year that incorporated Pay-for-Performance, which rewards generators that over-perform while punishing those that fail to deliver. “One doesn’t have to pay more for performance,” he said. “This illustrates that a competitive market is really powerful at producing cost efficiencies. I would argue that there’s a greater danger that long-term contracting will lock in obsolete technology.”

Kelly and van Welie found some common ground, however, when the discussion turned to the Clean Power Plan.

Kelly said, “Regardless of what you thought of the [capacity] markets up until now, the era we are now entering into, I think is fundamentally unsuited for the current capacity market construct.

“We’re going to be trying to balance a lot of policy factors, including fuel and resource diversity, the need for ramping capacity, environmental compliance, greenhouse gas emission reductions, minimizing the long-term cost to consumers, which we’ve always cared about, and coordination of the infrastructure we have in our industry, including transmission and generation with pipeline capacity and other subsidiary infrastructure in other industries that’s needed for us,” she said. “We feel like these markets do not support those goals and therefore need to be fundamentally re-looked at.”

Van Welie acknowledged a conflict between the policy objectives of ensuring reliability and moving to more renewable and low-carbon energy.

“The challenge facing all of us is how do we keep these two policy objectives in balance?” he said. “Markets are working for reliability but they are not designed to favor fuel diversity.”

Van Welie said the shifts are rendering the term “baseload” obsolete.

“The baseload of the past … was coal and nuclear. I think we’re moving very quickly into baseload being natural gas, nuclear, energy efficiency — which is off all the time — and in the future I think we’re going to see renewables being baseload. So to me, baseload is just whatever is most efficient at producing energy … certain technologies are going to have high capital costs and low operating costs and those are going to tend to be the baseload resources.”

— Rich Heidorn Jr.

Also heard at the winter meetings:

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