Non-utility generators are pressing the Federal Energy Regulatory Commission (FERC) to overturn state actions in New York and Illinois that the generators claim distort FERC’s wholesale electricity markets. On January 9, the Electric Power Supply Association (EPSA) made two filings at FERC seeking expedited action to overturn nuclear subsidies that the Washington-based lobbying group for independent generators says distorts pricing in the New York Independent System Operator (NYISO) and PJM Interconnection markets.
On the same day, a group of independent generators including Calpine Corp., Dynegy Inc., and NRG Energy Inc. asked FERC to reject the Illinois plan to subsidize two Exelon nuclear plants, including Quad Cities, which bids into the PJM market. The Midwest generators originally filed at FERC in opposition to an Ohio bailout aimed at American Electric Power and FirstEnergy, but they amended their filing as the Ohio plan failed, while the Illinois legislature embraced subsidies for Exelon.
In a press release, EPSA President John Shelk described the “zero emissions credits” (ZECs) in both states as having “corrosive effects” on the wholesale markets. He added, “The profound adverse economic effects of ZECs and similar out of market payments on the viability and integrity of wholesale markets that millions of consumers depend on is not in dispute. That much is clear from the comments of independent market monitors, the ISOs/RTOs themselves, and those who are market participants every day.”
According to Shelk, “FERC itself has also spoken of the challenges posed by growing utilization of out of market payments, which in the case of ZECs to be implemented later this year, will pay a few power plants almost double the market price for electricity compared to their competitors.”
The Midwest suppliers argue that the Illinois subsidies “represent an existential threat” to the PJM forward capacity market because they, “by design, interfere with economic signals for entry and exit.” ZECs, they say, “undermine the level playing field that needs to exist among new entry of units into the market, existing generation and exit of old units from the market.”
Last August, under a deal brokered by Gov. Andrew Cuomo, New York utility regulators approved an order that would provide $500 million a year in subsidies paid by consumers to three upstate nuclear plants. The plants are unable to compete in NYISO wholesale power auctions. On August 1, as part of the state’s Clean Energy Standard, Cuomo also pledged that half of the state’s electricity would come from renewables by 2030. Environmental groups have been divided over the nuclear portion of the plan. Although the Natural Resources Defense Council, for example, has not “endorsed” the nuclear subsidies, it has supported ZECs in principle, as similar issues could be raised about renewable energy credits.
In December, Illinois followed New York in order to keep the Clinton and Quad Cities plants running. The Illinois subsidy amounts to about $235 million annually.
In its press release, EPSA said that its filings are “not asking FERC to weigh in on the separate and distinct question, already being litigated in federal court, of whether ZECs are preempted by the Federal Power Act.”
The non-utility generators may have a hard time convincing FERC to expedite the proceedings. The five-member commission has only three serving members, all Democrats. The incoming Trump administration is entitled to three seats (Colette Honorable’s term is up in June, which would be the likely third Republican seat) and to name the chairman to replace the current chairman, Norman Bay, who would become just another commissioner. Bay’s term expires in June 2018; Cheryl LaFleur’s ends in June 2019.
The commission may be reluctant to take up such an important and divisive issue as the state nuclear subsidies without a full complement of commissioners. The Trump team has said nothing about FERC, which is likely not a key focus.
—Kennedy Maize is a long-time energy journalist and frequent contributor to POWER.
This story was updated 1/12/17 with the correct byline at the top and a revision to the paragraph describing the complicated response of environmental groups to the issue of ZECs for nuclear plants.