Federalism Electric Industry Restructuring And The Dormant Commerce Clause

Electricity deregulation in the United States has proceeded at both the wholesale level, under the jurisdiction of the federal government, and at the retail level, under the jurisdiction of the states. The federal government has proceeded quickly to develop a highly competitive wholesale market for sales of electricity in interstate wholesale commerce. Meanwhile, the few states who have experimented with deregulation have moved much more slowly, and most states have either scrapped their deregulation plans or never chose to deregulate at all. As a result, electricity markets nationally are governed by a patchwork of varying state and federal laws and policies, and companies seeking to build power plants to serve these new competitive wholesale markets for electricity must navigate this hodgepodge of requirements. One of the barriers to building new power plants is state siting laws, which require regulatory approval before new generating plants may be constructed within the state. In Tampa Electric Co. v. Garcia, the Florida Supreme Court issued a ruling in 2000 interpreting that state's siting law to restrict the construction of new power plants in the state to only those plants fully committed to supplying power to in-state uses. In practical effect, this interpretation of the statute prevents the construction of power plants intended to serve the interstate market. This ruling, and the actions of other states to similarly restrict the development of power plants intended to operate in the interstate market, raise concerns under the Commerce Clause of the United States Constitution, and specifically the negative, or dormant, Commerce Clause. With federal policy marching towards increased competition in electricity markets, while states back away from competition in their own local markets, the constitutional issues raised by Tampa Electric will require definitive resolution by the courts.