A federal court has upheld the legality of New York’s zero-carbon emissions program for nuclear power plants, the second decision this month bolstering the rights of states to set their own energy policies without overstepping federal authority.
Thursday’s decision from the U.S. Court of Appeals for the 2nd Circuit found that New York’s Zero Emissions Credit (ZEC) program, meant to support financially struggling nuclear power plants and retain their carbon-free power, doesn’t interfere with federal jurisdiction over interstate energy markets.
A group of power generators including NRG and Dynergy challenged the ZEC program in 2016, arguing that the incentives distorted New York’s energy markets and unfairly disadvantaged the competition.
U.S. District Court Judge Valerie Caproni ruled against those charges last year, finding the ZEC program does not intrude on the Federal Energy Regulatory Commission’s jurisdiction over wholesale electricity markets and that it is constitutional for states to take action on climate change.
The plaintiffs appealed, but were denied by the 2nd Circuit decision. While the three-judge panel found that the ZEC program’s subsidies could increase electricity supply and lower prices, “that is (at best) an incidental effect resulting from New York’s regulation of producers,” according to the decision.
This is the second federal court ruling in as many weeks upholding state programs supporting nuclear power for their carbon-reduction heft. Earlier this month, the U.S. Court of Appeals for the 7th Circuit ruled that Illinios’ Zero-Emission Credit program does not interfere in FERC’s authority, as argued by the Electric Power Supply Association, a group of power plant owners.
The 7th Circuit found that the ZEC program doesn’t overstep federal authority because it doesn’t require participating nuclear plants to operate in interstate markets — a critical distinction for state subsidy programs that have successfully survived similar court challenges in recent years.
In the 2016 case Hughes v. Talen Energy Marketing, the Supreme Court ruled that a Maryland state subsidy program did violate FERC’s jurisdiction — but specifically because it would have offered subsidies for plants only if they participated in the capacity market operated by mid-Atlantic grid operator PJM. But the Supreme Court decision, which was cited by the 7th Circuit’s Illinois ZEC decision, also noted that state policies "untethered" to the wholesale power market should still be permitted under the Federal Power Act.
Both the New York and Illinois programs have been supported by environmental and renewable energy groups — even some that don’t support the idea of subsidizing nuclear power. That’s because the cases have been seen as important precedents for federal court treatment of a much broader set of state renewable energy and carbon reduction policies now under threat from the Trump administration.
Miles Farmer, attorney with the Natural Resources Defense Council, noted in a March blog post that “NRDC filed briefs defending the state’s authority, not because it supports the nuclear support program, but because the consequences of the case could be far broader, affecting the ability of states across the country to take aggressive action to spur investments in renewable energy and other clean technologies like energy storage. A decision from the panel upholding the district court’s order would send a clear message to states that they can utilize similar programs to support renewable energy resources to fight climate change.”
Other states are seeking to follow in New York and Illinois’ footsteps. In April, the New Jersey state legislature passed a law to provide a $300 million annual subsidy for the state’s remaining nuclear power plants, a move that utilities Public Service Enterprise Group and Exelon said is needed to keep them open. ClearView Energy Partners said it expects opponents to challenge the ZEC program in the U.S. District Court for New Jersey on grounds similar to lawsuits filed in other states.
The 7th Circuit decision highlighted that it does not address some of the state versus federal authority issues now being hashed out at the Federal Energy Regulatory Commission. Those include its August decision ordering PJM to remake its capacity markets in ways that could bar state-subsidized resources from competing. The 2-to-3 split decision was decried by Illinois and New York for its possible impact on their ZEC programs, as well as for renewable portfolio standard supports for wind and solar power.
Meanwhile, utility FirstEnergy, which has been pushing the Trump administration for emergency bailouts for its bankrupt coal and nuclear power plant division, has also said that it will be forced to close nuclear plants in Ohio and Pennsylvania unless it receives "state-level policy relief" — a reference to zero-emissions credit programs being contemplated by lawmakers in both states.
In other nuclear news, the last nuclear project still being actively built in the United States, the Vogtle Electric Generating Plant in Georgia, won a reprieve from being shut down this week, after utility Southern Company agreed to take on more costs and future tax credits from minority shareholders. The project has seen its budget grow from $14 billion to nearly $27 billion, and has received $5.6 billion of an $8.3 billion federal loan guarantee for the project, with the Trump administration promising another $3.7 billion if construction continues.