Judge Julio M. Fuentes, writing for the Third Circuit panel, found that, by legislating the rates that LCAPP generators would receive for their capacity, New Jersey “entered into a field of regulation beyond its authority” because the FPA gives the Federal Energy Regulatory Commission (FERC) exclusive jurisdiction over interstate capacity markets and rates. FERC regulates capacity prices in the PJM Interconnection, L.L.C. (“PJM”) region, of which New Jersey is a part, through PJM’s Reliability Pricing Model. The LCAPP program, Judge Fuentes found, “attempts to regulate the same subject matter” and therefore cannot stand. Because the court focused on field preemption with respect to FERC regulation of interstate rates, it did not reach arguments regarding whether the District Court correctly determined that LCAPP posed an obstacle to PJM’s implementation of its capacity markets and therefore is conflict preempted.
Importantly, Judge Fuentes recognized “FERC’s authority over interstate rates does not carry with it exclusive control over any and every force that influences interstate rates,” and that states, by statute and tradition, “maintain an [important] regulatory role in the nation’s electric energy markets.” However, states like New Jersey will have to advance their energy policy goals, such as increasing electric generating capacity, by means other than capacity rate regulation that infringes on FERC’s exclusive jurisdiction.
