A unanimous U.S. Supreme Court ruled Tuesday that Maryland officials overstepped their authority when they offered financial subsidies to encourage construction of a new power plant in the state.
The justices said the Maryland plan interferes with federal law governing wholesale electricity rates.
The ruling is a setback for Maryland and other states that want to ensure a reliable supply of electricity for customers at reasonable rates.
The case involves a 2012 decision by state regulators to order construction of natural gas power plant. Officials offered the winning bidder a financial incentive by requiring utilities to buy electricity from the plant for 20 years at a fixed price.
Lower courts sided with rival power suppliers who said the incentive interfered with pricing in wholesale markets, which are subject to federal regulation.
Writing for the high court, Justice Ruth Bader Ginsburg acknowledged that states have authority to encourage development of in-state power plants. But she said Maryland's program "impermissibly intruded on the wholesale electricity market." She said the power to set wholesale electricity prices lies exclusively with the Federal Energy Regulatory Commission.
Ginsburg noted that the court's opinion did not address whether states can take other measures to encourage development of new or more environmentally-friendly power plants. That could include tax incentives, land grants, direct subsidies or other actions that don't intrude on federal authority.