Challenge to N.Y. Nuclear Subsidies Will Go to Trial

A lawsuit challenging subsidies for New York’s nuclear plants will head to trial after the state’s  Supreme Court rejected motions to dismiss it.

The measure deals a small setback for Exelon Corp., whose subsidiaries own the R.E Ginna and Nine Mile Point nuclear plants in upstate New York. Defendants in the lawsuit also include Entergy Corp., which owns Indian Point 2 and 3, and the New York State Public Service Commission (PSC).

Exelon had successfully lobbied the state to approve the Clean Energy Standard in August 2016, a  program that requires all six New York investor-owned utilities and other energy suppliers to pay for the intrinsic value of carbon-free emissions from nuclear power plants by purchasing “Zero-Emission Credits” (ZECs) between 2017 and 2029.

The measure has drawn strong opposition. The lawsuit filed by several citizens’ groups—including  the Nuclear Information Research Service, Beyond Nuclear, New York Public Interest Research Group,  Indian Point Safe Energy Coalition, Promoting Health and Sustainable Energy, and Goshen Green Farms—charges that PSC failed to follow the law by giving up more than $7.6 billion in ratepayer funds over 12 years to the companies’ financially ailing nuclear plants.

Specifically, the groups argued that the PSC failed to follow requirements in the State Administrative Procedure Act, and that the PSC’s actions were arbitrary and capricious—both by misapplying the social cost of carbon metric as a legal basis to include nuclear reactors in the Clean Energy Standard, and by declaring the reactors “publicly necessary.” Other stated causes of action allege that the PSC violated pubic service law by setting rates that are “unjust, unreasonable, unjustly discriminatory, and unduly preferential.”

The state and nuclear plant owners sought to dismiss the lawsuit, arguing that some claims are untimely because they were filed outside of the four-month statute of limitations after the Clean Energy Standard became final and binding. Respondents also argued that petitioners lack sufficient standing to pursue some claims, because alleged economic injuries were outside a defined zone of interests.

On Monday, Judge Roger D. McDonough dismissed claims by 56 of the 61 petitioners on the basis that they were time-barred. However, he denied five of the six objections posed by the respondents, ruling that the lawsuit should be fully heard rather than preempted by the respondents’ objections. “The Court declines to entertain such discussions without the benefit of answers and the full administrative record,” he wrote.

The ruling notes that at least three of the nuclear plants—James A. Fitzpatrick, R.E. Ginna, and Nine Mile Point Unit 1 and Unit 2—have received an estimated $360 million in subsidies over the past nine months. McDonough ruled, however, that while Indian Point was eligible for ZECs amounting to about $2 billion, contentions concerning that plant were not ripe for adjudication as the plant has not yet received them.

The citizens’ groups hailed the decision as a major victory for the rule of law. Attorney John L. Parker of Rockland Environmental Group, who represented the petitioners, noted that the case isn’t about the need for clean energy in the state. “[A] Clean Energy Standard is a vitally important part of efforts to combat climate change,” he said. “The argument is about whether using billions of dollars of ratepayers’ money to bail out aging, uncompetitive nuclear plants is the way to do it.  Now the Court will get to hear those arguments in full.”

Robin Levy, a spokesperson for Exelon Corp., agreed that the “The Clean Energy Standard is positive for New Yorkers and the climate because it preserves the most cost-effective source of carbon abatement available.” However, she told POWER on January 24 that the company is “pleased that the state supreme court dismissed the substantive environmental claims against it and are confident that the court will ultimately uphold the CES upon the review of the full administrative record.”

New York’s Clean Energy Standard is being challenged in a separate case by several independent power producers—including Dynegy, Eastern Generation, NRG Energy, and Calpine Corp.—and, prominently, competitive power producer trade group the Electric Power Supply Association. The consortium has long argued that the state rules interfere with the Federal Energy Regulatory Commission’s jurisdiction over wholesale electric rates and unlawfully interfere with interstate commerce.

But in July 2017, U.S. District Judge Valerie Caproni in Manhattan dismissed those challenges against New York’s nuclear subsidies by the multiple plaintiffs, ruling that federal law does not preempt the state and its PSC from using a ZEC program. On August 24, the plaintiffs appealed the New York case to the Second Circuit. The appellate court is fully briefed and oral arguments in that case are scheduled to begin on March 12.


—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)