Generators Sue to Block Illinois Nuclear Subsidies

A group of power companies have filed a federal lawsuit against the State of Illinois, challenging a recently enacted law that creates subsidies for Exelon’s uneconomic nuclear power plants.

The plaintiffs in the lawsuit filed on February 14 in the Northern District of Illinois are the Electric Power Supply Association (EPSA), Dynegy, Eastern Generation, NRG Energy, and Calpine Corp.

The suit challenges the Future Energy Jobs Act, which was signed into law on December 7 by Illinois Gov. Bruce Rauner after two years of protracted and contentious negotiations. The law, which will take effect on June 1 of this year, will help Exelon subsidiary Commonwealth Edison keep its financially struggling Clinton and Quad Cities plants open.

According to the EPSA, the plaintiffs object to the law’s zero emissions credit (ZEC) program, which serves “to alter the revenue paid to certain uneconomic in-state nuclear generators through out-of-market payments estimated to be $235 million per year over ten years, paid by Illinois citizens and businesses to Exelon, the sole beneficiary of the ZEC program.”

The EPSA called the law a “massive corporate bailout” that is a bad deal for Illinois ratepayers. “This is also illegal because the State’s scheme interferes with the Federal Energy Regulatory Commission’s jurisdiction over wholesale electric rates, and unlawfully interferes with interstate commerce,” said Jonathan Schiller, a managing partner with Boies, Schiller & Flexner, a law firm representing the plaintiffs.

Schiller noted that in April 2016, the U.S. Supreme Court, in Hughes v. Talen Energy Marketing, unanimously struck down a similar program initiated in 2012 by Maryland to subsidize power plant construction. “The Hughes decision clearly stated subsidies tied to wholesale power market prices—such as ZECs—are plainly illegal,” he said. “The ZEC program is designed to allow Illinois to take actions that directly affect the wholesale electric market in an attempt to replace the federally regulated market prices with costs determined by the State instead. The credits are directly tied to the Illinois nuclear plants’ participation in interstate energy markets, and are unconstitutional as a result.”

Dynegy and NRG Energy in October 2016 also filed a similar suit in federal court in New York seeking to block an incentive program that would help three of that state’s nuclear power plants—R.E. Ginna in Ontario, Nine Mile Point in Oswego, and FitzPatrick in Scriba—remain economic over the next decade. The plaintiffs in that case also point to the Hughes decision for support.

 

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)