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Hughes v. Talen Energy Mktg., LLC - 136 S. Ct. 1288 (2016)


The Supremacy Clause makes the laws of the United States the supreme law of the land, anything in the United States Constitution or laws of any state to the contrary notwithstanding. U.S. Const. art. VI, cl. 2. Put simply, federal law preempts contrary state law. A court's inquiry into the scope of a federal statute’s preemptive effect is guided by the rule that the purpose of Congress is the ultimate touchstone in every pre-emption case. A state law is preempted where Congress has legislated comprehensively to occupy an entire field of regulation, leaving no room for the states to supplement federal law, as well as 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. 


The Federal Power Act (FPA), 16 U.S.C.S. § 791a et seq., vested in the Federal Energy Regulatory Commission (FERC) exclusive jurisdiction over wholesale sales of electricity in the interstate market. FERC’s regulatory scheme included an auction-based market mechanism to ensure wholesale rates that were just and reasonable. FERC’s scheme, in Maryland’s view, provided insufficient incentive for new electricity generation in the State. Maryland therefore enacted its own regulatory program. Maryland’s program provided subsidies, through state-mandated contracts, to a new generator, but conditioned receipt of those subsidies on the new generator selling capacity into a FERC-regulated wholesale auction. In a suit initiated by competitors of Maryland’s new electricity generator, the U.S. Court of Appeals for the Fourth Circuit held that Maryland’s scheme impermissibly intruded upon the wholesale electricity market, a domain Congress reserved to FERC alone.



Did Maryland’s scheme impermissibly intrude upon the wholesale electricity market - a domain Congress reserved to FERC alone?




On a grant of certiorari, the Supreme Court of the United States held that Maryland's program requiring load servicing entities to enter into a 20-year pricing contract at a rate set by an independent power generator sets an interstate wholesale rate, thus contravening the Federal Power Act's division of authority between state and federal regulators. The Court affirmed the judgment. The Court noted that it rejected Maryland’s program only because it disregards an interstate wholesale rate required by FERC; so long as a State does not condition payment of funds on capacity clearing the auction, the State’s program would not suffer from the fatal defect that renders Maryland’s program unacceptable.

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