New York’s Zero Emission Credit For Upstate Nuclear Plants Upheld

Just over a year ago, I visited Albany, New York to attend a public hearing held by the New York Public Service Commission. I joined a number of friends – new, old and formerly just virtual – who were there to find out if the NYPSC would make the important decision to give upstate nuclear plants credit for their clean electricity production.

The good guys won that particular battle.

We celebrated the victory with sparkling grape juice; it looks a bit like champagne but does not violate laws against alcohol consumption in public parks.

Within days after the PSC decision was announced several competing power generators and their trade group filed a legal challenge to the program. The existence of that court case has likely played a role in the slow pace of additional state initiatives to enact similar programs to protect their operating nuclear plants.

Judge Valerie Caproni Hands Another Decisive Victory To Clean Nuclear Energy Generators

Nuclear plants in New York will continue to receive payments collected from all in-state load serving entities (LSE) in recognition of their clean energy contributions. Those payments, which might be as high as $8 billion over a ten year period, may also be as low as zero during years in which the average wholesale price of electricity rises to a level at which selling power becomes profitable for the qualifying plants.

In a decision filed July 25, Judge Valerie Caproni dismissed the motions filed by various electrical generators and trade groups of electrical generators that challenged the constitutionality of the New York Public Service Commission’s decision to create a Zero Emission Credit program.

Plaintiffs had claimed that the state program to pay nuclear generators for an “out of market” service of clean energy generation was preempted by federal authority under the Federal Power Act and that the program violated the dormant Commerce Clause that gives Congress the power to regulate trade among the states.

The defendants and the intervenors responded by stating that the plaintiffs had no standing and that even if they did, their challenges would fail under proper application of the law. Judge Caproni agreed with the defendants and dismissed the motions filed by the plaintiffs.

She explained her reasoning in a richly-detailed, carefully-referenced, 47-page ruling.

Key Factors Underlying Decision

Judge Caproni’s explanation of her deciision included the following key points:

• The plaintiffs had not fully exhausted remedies available to them through the Federal Energy Regulatory Commission (FERC).
• The Federal Power Act is a “paragon” of cooperative federalism that establishes reasonably clear boundaries between the rights and responsibilities of the federal government and the rights and responsibilities retained by states.
• The New York Public Service Commission – the defendants in this case – had properly remained within their purview and designed a system that avoided overstepping the limits of its authority.
• The ZEC system avoided the fatal flaw that resulted in the Supreme Court decision overturning a Maryland energy program. Unlike the Maryland program, New York’s ZEC did not tether the payment for clean energy production to the generator’s participation in the wholesale market.
• Though 100% of the output of the nuclear plants is sold into the wholesale market, Jusge Caproni described that as a business decision that is separate from the Clean Energy Standard (CES) order. New York does not intrude on federal jurisdiction over wholesale markets by requiring generators to participate in that market in order to qualify for the ZEC.
• “Plaintiffs’ argument commits the logical fallacy of concluding that state actions that affect the wholesale price in some way are the same as state actions that set the wholesale rate.” Providing compensation for clean energy production might keep generators in business and help keep total electricity supply higher than it would have been, but the fact that shifting the supply/demand balance has an effect on price is not even close to “establishing” the wholesale price.
• Plaintiffs arguments contain the fatal flaw of arguing that the ZEC payments are preempted by federal jurisdiction over wholesale markets while also accepting the fact that states already provide similar payments for renewable energy sources.
• Plaintiff’s complaint that the ZEC goes to only one supplier while RECs are available to many was judged to have no legal significance from a “preemption” perspective.
• Plaintiff’s complaint that the state incentives for zero emission electricity production interferes with the FERC’s regulatory goal of “maintaining competitive energy markets.” It’s worth quoting Judge Caproni’s words here.
  

  Accepting as true that one of FERC’s goals is to promote market efficiency through energy auctions, there is no conflict. The ZEC program does not run afoul of the goal of having an efficient energy market. Instead, by incentivizing clean energy production, it seeks to minimize the environmental damage that is done by generating electricity through the use of gas and fossil fuels.

• The application of the ZEC to only in-state plants did not violate the dormant commerce clause because it did not erect any barriers to out of state generators and did not harm any interests of the plaintiffs. In fact, Judge Caproni pointed out that the claimed damage to the plaintiffs would have been even greater if the ZEC had been made available to out of state nuclear plants.

The plaintiffs in the case may appeal, but it appears that Judge Caproni’s arguments eliminate most of their available avenues.

Combined with the recent decision from Judge Shah in Illinois, ZEC programs are on solid ground.

Now it remains a tough trench warfare battle in the states for clean energy advocates to overcome the financial resources and organizational strength of the American Petroleum Institute, the independent gas-burning power producers, the renewable energy lobbies and the coalitions of shale gas interests.

The courts have agreed that states have the right to help nuclear plants stay in business, but political action will determine if the elected/appointed officials choose to exercise that right.

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Note: A version of the above was originally published on Forbes.com. It is republished here with permission.