Generators: New York nuclear subsidies defy FERC jurisdiction, Supreme Court decision

Dive Brief:

Electric generators have filed a lawsuit challenging nuclear subsidies approved in August by the New York Public Service Commission, arguing they intrude on federal jurisdiction of wholesale markets.
Dynegy, NRG Energy, the Electric Power Supply Association and others filed in the Federal District Court in Manhattan, claiming a recent U.S. Supreme Court decision bars states from replacing wholesale prices with state-determined costs.
New York PSC Chair Audrey Zibelman has already responded to some critics wary of Zero Energy Credits (ZECs) utilities will be required to purchase, arguing the state's plan was "carefully designed" to not run afoul of the Federal Energy Regulatory Commission's jurisdiction.

Dive Insight:

New York's plan to save its struggling upstate nuclear fleet is running into challenges, the most recent being a federal lawsuit challenging the strategy's legality.

The lawsuit was filed in the Southern District of New York, by the Coalition for Competitive Electricity, Dynegy, Eastern Generation, the Electric Power Supply Association, NRG Energy, Roseton Generating and Selkirk Cogen Partners. A copy of the lawsuit can be found here.

"This is illegal," said Jonathan Schiller, a managing partner of Boies, Schiller & Flexner, attorneys for the plaintiffs. "It interferes with the Federal Energy Regulatory Commission’s jurisdiction in regulating wholesale electric rates, and also because the measure unlawfully interferes with interstate commerce."

Four units between the Fitzpatrick, Ginna and Nine Mile nuclear plants are expected to produce 27.6 million MWh of carbon-free generation annually, helping the state in its goal to cut greenhouse gas emissions 40% from 1990 levels by 2030. But cheap gas has forced the plants to consider premature closure, leading to the state's intervention.

In their lawsuit, generators say the U.S. Supreme Court has blocked arrangements that essentially set a floor price for state-incentivized generation.

Hughes v. Talen Energy Marketing focused on a Maryland program designed to support a new gas plant, with the contract stipulating a rate and directing the plant's developer to bid the capacity into the PJM market. The load serving entities in the state would make up the difference if the clearing price for PJM auctions was lower than the contract price.

In April the Supreme Court ruled 8-0 in FERC's favor, finding the incentive program had infringed on FERC's authority to regulate price formation in wholesale electricity markets.

New York regulators say they designed this plan differently, but the generators are not the first to point to the Hughes decision. Five lawmakers wrote to Zibelman last month to protest cost allocations among customers, and Castleton Commodities filed a challenge arguing the subsidies interfered with FERC jurisdiction.

Zibelman replied in September, telling the group there are "fundamental errors in your understanding of how our power system works." The credits were designed to value only the carbon-free attributes of the energy, and not the actual power.

Some groups have already responded as well, vowing to support New York's Clean Energy Standard. The IBEW Utility Labor Council of New York, Central and Northern New York Building and Construction Trades Council and the Rochester Building and Construction Trades Council, all issued a statement yesterday decrying the lawsuit.

“Today’s lawsuit filed by gas, oil and coal generators is wholly inconsistent with the values of the countless New Yorkers who want to achieve a clean energy future,” said Ted Skerpon, chairman of the IBEW Utility Labor Council of New York. “For the sake of all New Yorkers, we cannot let the CES fall."