11/03/2017 - Electricity Law Initiative

Peskoe Co-authors Brief in Support of State Authority Over Electric Generation

by Ari Peskoe

Ari Peskoe, Senior Fellow at the Policy Initiative, and Professor Jim Rossi of Vanderbilt University Law School, filed an amicus brief on behalf of nearly 20 energy law professors in the Seventh Circuit case about Illinois’ Zero Emission Credits (ZECs) for nuclear power. The brief argues that Illinois’ ZEC program is consistent with long-standing principles of state utility regulation and that the program’s opponents are advancing a jurisdictional theory that would upset the balance between state and federal authorities.

Illinois requires utilities to purchase ZECs from specified nuclear generators to maintain the emission-free nuclear power that serves Illinois ratepayers. ZEC prices are set at the social cost of carbon, and can be adjusted downward if rates increase in federally regulated energy and capacity markets.

Competing generators in the interstate market for electric power argue that state’s program is preempted by the Federal Power Act (FPA), the statute that provides the Federal Energy Regulatory Commission (FERC) with authority to ensure that wholesale electric rates are “just and reasonable.” They argue that ZECs are payments above and beyond the price that nuclear generators are paid for energy, and that state’s ZEC program therefore interferes with FERC’s duty to regulate wholesale energy prices.

The amicus brief aims to inform the court about the history and purpose of state electric utility regulation and put the ZEC program in historical context. The brief argues that the ZEC program is identical in structure to state Renewable Portfolio Standard (RPS) laws which require utilities to show that a specified percentage of the energy they sell is derived from renewable resources. In asking the court to expand the scope of FERC’s exclusive jurisdiction under the FPA, the generators threaten these state programs and their important environmental and consumer protection goals.

Moreover, the generators’ read of the FPA is inconsistent with how courts have interpreted the statute and how FERC has implemented it. FERC has repeatedly sought to accommodate, rather than frustrate or preempt, state RPS programs. The generators would upend FERC’s long-standing efforts to harmonize its regulatory mandate with state policies that advance legitimate goals.