New York's new $7.6 billion climate plan to save its ailing nuclear power plants is going to court, which could present a major setback for the industry in its struggle to compete with other generators.
The lawsuit filed in the district court of Manhattan on Wednesday challenges the Empire State's creation of "zero emission credits," which provide an extra fee collected from ratepayers to support nuclear plants struggling economically against low natural gas prices.
The coalition of utility companies suing the state argues that it is illegal for the public utility commission "to raise electric rates" across the state "solely to save several New York nuclear plants that, allegedly, can no longer compete successfully in the federally regulated wholesale electric power market," the coalition and its allies said.
The credits essentially subsidize nuclear plants for having no emissions and being climate change-friendly, which New York values as a member of a regional cap-and-trade program to reduce greenhouse gas emissions. Many scientists blame the emissions from fossil fuels for causing the Earth's temperature to rise, resulting in more severe weather, drought and flooding.
But the coalition argues that the plan effectively ignores ratepayers who will see their electric bills rise because of the credits.
"This a bad deal for New Yorkers, who will see their electric bills go up across the state," said Jonathan Schiller, partner with Boies, Schiller & Flexner, representing the coalition and other utilities and groups as plaintiffs in the lawsuit. "This subsidy will cost New Yorkers as much as $7.6 billion in payments to a single company.
"This is illegal," Schiller said. "It interferes with the Federal Energy Regulatory Commission's jurisdiction in regulating wholesale electric rates and also because the measure unlawfully interferes with interstate commerce."
A key argument the group is making refers to Supreme Court precedent from the last year siding with the federal commission when it comes to states establishing power plant subsidies. The high court ruled that only the commission, which regulates the wholesale markets, has the power to do that because the states' subsidies would affect electricity being conveyed across state lines, which is the commission's jurisdiction and not the domain of the states.
Supporters of the state's clean energy standard, which the zero-emission credits support, say the lawsuit was filed by natural gas, oil and coal power plant owners, and "blatantly" places "specific business interests ahead of what is best for New York," said Gary Toth, vice chairman of the County of Oswego Industrial Development Agency.
"Ultimately, if upstate nuclear plants close, it is the generation facilities that burn coal, oil, and gas that will benefit from the electricity price spikes that would result," said Dave Young, president of the Rochester Building & Construction Trades Council.
Ted Skerpon, chairman of the IBEW Utility Labor Council of New York, said the lawsuit is "wholly inconsistent with the values of the countless New Yorkers who want to achieve a clean energy future."
The nuclear industry has made state policies a priority going into the new year and is working with the commission to establish a program that would provide pricing support for plants that have struggled from a market being dominated by natural gas-fired power plants and wind subsidies that have made it harder for nuclear to compete.
Nuclear power plant companies such as Exelon have threatened to shutter plants in the Midwest due to growing struggles in the electricity market.
The lawsuit filed Wednesday included Dynegy, NRG Energy, the Coalition for Competitive Electricity, the merchant utility trade group Electric Power Supply Association, Eastern Generation, LLC, Roseton Generating LLC, and Selkirk Cogen Partners.