Federal Court Backs NY Power to Move to Lower CO2 Energy Mix

miles-farmer-450July 25, 2017 by Miles Farmer, Clean Energy Attorney

For the third time in less than a month, a federal court has affirmed states’ broad authority to advance their chosen energy supply mix. The U.S. District Court for the Southern District of New York dismissed a challenge from fossil fuel companies who objected to New York’s Zero Emissions Credit program to support nuclear generation because it will hurt their bottom lines. The case is important beyond the narrow context of New York’s nuclear program because it affirms the ability of states to take aggressive action to spur investments in renewable energy and truly clean technologies without violating the Constitution or federal energy laws.

New York’s Clean Energy Standard

This case concerned a controversial aspect of New York’s groundbreaking Clean Energy Standard, the state’s ambitious program to reduce greenhouse gas emissions from the electric sector while animating the state’s clean energy economy. The most important part of the Clean Energy Standard, a bold commitment and regulatory structure to achieve 50 percent renewables supply by 2030, went unchallenged. But fossil fuel companies objected to another aspect of the policy: its program to provide Zero Emissions Credits to nuclear power plants.

NRDC played a major role in the regulatory process that led to the Clean Energy Standard and strongly supported its adoption as a whole. We did not support the policy decision to include the nuclear support program in the Clean Energy Standard, and we continue to work to ensure that Clean Energy Standard funds to advance renewables will not be used for nuclear support. Nevertheless, we filed an amicus brief in support of New York’s motion to dismiss the fossil fuel companies’ lawsuit. While they focused on the state’s nuclear program, the fossil companies made broad arguments promoting a warped vision of the Federal Power Act (the law governing state and federal authority in this area), that threatens to impair states’ ability to advance truly clean energy in the future.

States are important leaders in the fight against climate change and other dangerous air pollutants, so it is important to nip these arguments in the bud before they take broader root. State authority to spur clean energy investments must be crystal clear. The court’s decision affirming New York’s authority is another important victory ensuring that this is the case.

The fossil fuel power plant owners’ challenge to NY’s program

The fossil fuel companies challenging New York’s nuclear program advanced the same basic arguments that they brought against a similar Illinois program. As explained in greater detail in my earlier blog discussing the Illinois decision, the fossil plant owners contended that New York’s nuclear support program intruded upon and conflicted with regulation by the Federal Energy Regulatory Commission (FERC), the federal agency responsible for overseeing regional electricity markets.

Plaintiffs in each case have relied heavily on the recent U.S. Supreme Court decision in Hughes v. Talen Energy Marketing, LLC (discussed here), a decision invalidating a Maryland program to incent new natural gas generation. Despite the Supreme Court’s very clear statement that the Maryland program was only impermissible because of a unique contractual arrangement that dictated the relevant companies’ behavior in federally supervised energy markets (an arrangement not present in other state policies), the case has become a rallying cry for opponents of state policies across the country who have inappropriately used it to suggest that many different state laws and regulations are not valid.

Judge Caproni’s decision joins other courts confirming states’ authority over energy policy

Fortunately, every single judge to address Hughes has now rejected attempts to broadly construe the case to invalidate other state energy laws. In addressing New York’s program, Judge Caproni, like the other judges that have addressed Hughes, confirmed that the case is narrow and states have broad power over energy policy. In so concluding, she repeatedly emphasized states’ ability to advance renewable energy, such as wind and solar power, through renewable portfolio standard programs that mandate a certain percentage of the supply mix come from renewable sources. Her decision confirming state authority is important precedent for new policies to support renewables, such as New York’s ongoing efforts to advance offshore wind energy development.

While the fight is not yet over (plaintiffs have appealed the Illinois district court decision and will almost certainly appeal the New York district court decision as well), we are confident that each judge’s decision will be affirmed on appeal. States should rest assured and continue to adopt and strengthen ambitious policies to advance renewables and other clean technologies.

The views expressed in this blog are those of the author, and do not necessarily represent the views of the Sustainable FERC Project or Natural Resources Defense Council.

Written by Miles Farmer