Clean Energy and the Price Preemption Ceiling

Abstract

Since the New Deal, federal preemption has precluded many state and local regulatory decisions that depart from wholesale electric prices determined under federal standards. Recent decisions treat prices that meet the federal standard as a preemption ceiling, which prohibits states from setting prices that exceed the wholesale price set in a competitive market. Both appellate courts and the Federal Energy Regulatory Commission (“FERC”) - the primary federal agency responsible for the electric power sector - have recently applied a price preemption ceiling to clean energy policies.

I argue in this Article that this price ceiling preemption approach hobbles the advancement of clean energy policy under both federal and state laws. State and local governments, along with regional institutions, have adopted a number of clean energy innovations, including feed-in tariffs for renewable power, novel approaches to transmission siting and cost allocation, and energy conservation policies. As subnational governments today consider how to encourage clean energy investments, they are increasingly bumping into limitations imposed by FERC and the courts under the Supremacy Clause of the U.S. Constitution.

Imposing a legal preemption ceiling on clean energy prices thwarts the ability of subnational governments to adopt policies that advance conservation and renewable energy goals. I argue that reassessing application of wholesale price ceiling preemption to regional, state and local clean energy innovations will allow courts and federal regulators to more effectively imagine the ability of federal energy laws to advance clean energy goals.