The Electric Power Suppliers Association on Jan. 7 filed a petition asking the U.S. Supreme Court to review appellate court rulings that upheld zero-emission credit programs designed to support financially struggling nuclear plants in New York and Illinois. The organization argues that the subsidy programs infringe on the Federal Energy Regulatory Commission’s jurisdiction over wholesale power markets. The petition notes that the programs are “functionally identical” to a similar program in Maryland that the Supreme Court rejected in 2016 finding that it was preempted by federal law.
Petitioners argue that the appellate courts reached an erroneous conclusion despite language in the 2016 opinion in Hughes v. Talen Energy Marketing LLC stating clearly that the Federal Power Act “bars states from guaranteeing levels of wholesale compensation in disregard of FERC-authorized wholesale auction rates.” In the view of the lower courts, the subsidy programs do not mandate clearing the wholesale auction as a condition to receive the credits, and were therefore saved from preemption, the petition said. The group questioned whether the law preempts subsidies that explicitly require a wholesale generator to sell in the auctions, or whether it also preempts subsidies that by design apply only to generators that sell their entire output via such auctions, thereby “achieving the same effect.”
Last September, the U.S. Court of Appeals for the Second Circuit upheld New York’s subsidy program adopted in August 2016, rejecting complaints that the program depresses energy and capacity prices in the wholesale power auction overseen by FERC. Petitioners argued that the subsidized nuclear plants receive zero emission credits – which compensated eligible plants for every megawatt-hour of carbon-free electricity – in addition to what they earn in the power markets. The court said that the credits, similar to renewable energy certificates, are independent of the purchase or sale of wholesale energy and are not conditioned on participation in the power auction.
In a similar vein, the U.S. Court of Appeals for the Seventh Circuit upheld subsidies in Illinois finding that states hold authority to enact measures to promote clean generation so long as it is “untethered to a generator’s wholesale market participation.” The court ruled that while the subsidies may indirectly affect prices set in the regional power auction by retaining generators that would otherwise shut, the program doesn’t control the suppliers’ participation in the interstate marketplace, which is forbidden.
New Jersey and Connecticut have enacted similar measures to value the fuel diversity and zero-carbon attributes of nuclear power. Last month, Dominion Energy Inc. won a 10-year contract in Connecticut’s solicitation for zero-carbon electricity. New Jersey regulators are moving forward with an application process for the state’s zero emission credit program.
Abundant and low-cost gas supplies, along with an increasing share of renewable energy, continue to pose stiff competition for coal and nuclear facilities.
