United States: NY Federal Court Dismisses Case Against Subsidies For Nuclear Energy

On July 25, 2017, the U.S. District Court of the Southern District of New York dismissed a case brought by fossil fuel generators against New York's recently established zero emission credit program.

The original complaint targeted the New York Public Service Commission's (NYPSC) plan to distribute zero-emission credits to four nuclear power plants as part of the state's Clean Energy Standard (CES) introduced last year. These credits would award a fixed dollar amount for each megawatt-hour produced by zero-emission nuclear facilities. They would effectively provide billions in subsidies to nuclear energy providers like Exelon, which has expressed concerns over the impact of low wholesale energy prices and plateaued electricity demand on its plants' ability to maintain operations as the demand on nuclear power supply grows to meet the new standards. The cost of the CES's zero emission credits program would result in a $2 per month increase to the average New Yorker's electricity bill, and would go towards helping the state acquire half its energy supply from low-carbon sources by 2030.

However, a number of oil, coal, and gas generators lead by the Coalition for Competitive Energy challenged the program in federal court. They claim it circumvents the Federal Energy Regulatory Commission's (FERC) jurisdiction over wholesale power markets and interferes with interstate commerce. Environmentalists have also denounced the "nuclear bailout" for financing energy sources that are not completely carbon free due to the mining, processing, and waste management involved in producing nuclear energy. Nevertheless, the Nuclear Energy Institute maintains that nuclear energy will continue to play a vital role in the nation's transition to a low-carbon economy. The zero emissions credits also bear similarity to the renewable energy credits program adopted by New York as part of the Renewable Portfolio Standards initiative of the 1990s, which were intended to function as independent state power markets separated from wholesale markets and withstood a number of similar legal challenges. Likewise, the NYPSC designed zero emissions credits not around wholesale power markets, but rather the social cost of carbon.

The District Court ultimately ruled the zero emissions credits constitutional, setting the groundwork for longer-term viability of nuclear power suppliers in New York. The group of plaintiffs plans to appeal the ruling.

Similar nuclear subsidy programs have also recently been challenged and upheld in Illinois and Ohio, and existing programs in other states are paying close attention to the rulings. Massachusetts currently does not have a subsidy program in place, and its last nuclear plant in Plymouth run by Entergy – which provides 685 megawatts annually – is preparing to close in 2019.

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Thomas R. Burton III
 
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