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Decided: June 2, 2014

The Fourth Circuit affirmed the district court’s holding that a program to subsidize the participation of a new power plant in the federal wholesale energy market is preempted by the Federal Power Act’s authorizing provisions, which grant exclusive authority over interstate rates to the Federal Energy Regulatory Commission.

The Court focused on two theories, which preempt the program by the Supremacy clause: field preemption and conflict preemption.  The doctrine of field preemption applies when Congress has legislated comprehensively to occupy an entire field of regulation, leaving no room for the States to supplement federal law.  Actual conflict between a challenged state enactment and relevant federal law is unnecessary to a finding of field preemption; instead, the Court emphasized the mere fact of intrusion.  The federal energy scheme thus leaves no room for direct state regulation of the prices of interstate wholesales of energy, or for state regulations, which would indirectly achieve the same result.  Thus, the Court found that the program in question was field preempted because the program functionally set the rate that the appellant receives for its sales.  Alternatively, conflict preemption applies “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.”  As with field preemption, the Court concluded that the impact of state regulation of production on matters within federal control, via the program, is so extensive and disruptive of the market that preemption is appropriate.

Full Opinion

Grace Faulkenberry