Source: http://consideringthegrid.com/court-decisions-affirm-states-authority-to-incentivize-generation-development-and-retention
Timestamp: 2019-04-22 18:44:04+00:00

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In two recent federal court decisions, the Second Circuit Court of Appeals and the U.S. District Court for the Northern District of Illinois affirmed state authority to implement programs to incentivize generation development and retention. The two decisions are the latest in a line of federal court cases navigating the jurisdictional dividing line between state and federal energy regulators. In FERC v. Electric Power Supply Association, the Supreme Court held that the Federal Energy Regulatory Commission’s (FERC) demand response compensation rule did not intrude on states’ authority over retail markets. And in Hughes v. Talen Energy Marketing, the Supreme Court held that a Maryland program incentivizing the construction of new electric generation was preempted by the Federal Power Act (FPA) because it premised payments to the generator on the successful completion of sales into a FERC-jurisdictional wholesale capacity market.
Village of Old Mill Creek v. Star and Electric Power Supply Association v. Star. More recently, on Friday, July 14, 2017, the U.S. District Court for the Northern District of Illinois dismissed a pair of complaints challenging Illinois’ “Future Energy Jobs Act.” The statute created a new commodity—the “Zero Emission Credit” (ZEC)—intended to compensate qualifying nuclear facilities for the environmental attributes of their power production. In the two companion cases, Village of Old Mill Creek v. Star and Electric Power Supply Association v. Star, the plaintiffs challenged the Illinois ZEC program on grounds that it was preempted by the FPA and that the program burdened interstate commerce in violation of the dormant Commerce Clause.
The court likewise dismissed the plaintiffs’ dormant Commerce Clause challenges, holding that “[t]he statute is not facially discriminatory because it does not preclude out-of-state generators from submitting bids for ZECs,” nor did “the circumstances surrounding the enactment of the statute . . . warrant an inference of discrimination.” The court went on to find that “[t]he creation of the ZEC has created a new market, and while that market may affect the wholesale energy market, it is an incidental burden on the channels of interstate commerce in which plaintiffs participate.” Accordingly, the court found that “[t]he alleged harm to out-of-state power generators who will be competing in auctions against subsidized participants is not clearly excessive” when balanced against the states’ interests in environmental protection.
*The Members of the New York Public Service Commission, defendants in the S.D.N.Y. litigation, are represented by Spiegel & McDiarmid LLP attorneys Scott H. Strauss, Peter J. Hopkins, Jeffrey A. Schwarz, and Amber L. Martin.
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