New York ZEC Challenges Move Forward at the State Level

On January 22, 2018, a New York state trial court largely rejected motions to dismiss various challenges to the state’s zero emission credit (“ZEC”) program established in 2016 by the New York Public Service Commission (“NYPSC”). The ZEC program, which is also being challenged in federal court, provides subsidies to financially struggling in-state nuclear energy generators. Although the court allowed five of the six claims against the program to proceed to trial, the court dismissed 56 of the 61 petitioners for failing to timely raise their challenges.

In August 2016, the NYPSC issued an order adopting a Clean Energy Standard (“CES”) encompassing various sustainable energy policies, including a ZEC program—which was the first such policy explicitly designed to assist financially “at-risk” nuclear energy generators.  Through the NYPSC’s ZEC program, a nuclear generator is eligible to sell ZECs for extra revenue based on certain “public necessity” factors, including: that the generator has a history of contributing to the clean energy resource mix consumed by in-state retail consumers; and that existing energy, capacity, and ancillary services revenues are “insufficient to provide adequate compensation to preserve the zero-emission environmental values or attributes historically provided by the facility.”  Under the program, eligible generators—currently the Fitzpatrick, Ginna, and Nine Mile Point nuclear facilities—enter into 12-year contracts with the New York State Energy Research and Development Authority (“NYSERDA”) and receive one ZEC for each MWh of production. (A fourth in-state nuclear facility, Indian Point, has not yet applied for ZEC payments.) New York load-serving entities must either contract with NYSERDA or with the nuclear generators directly to ultimately purchase the number of ZECs proportionate with their load share in the state.

The ZEC program was immediately challenged in state and federal court. As noted in the July 31, 2017 edition of the WER, the U.S. District Court of the Southern District of New York dismissed federal preemption and dormant commerce clause claims against the ZEC program. The district court’s dismissal is currently pending before the Second Circuit Court of Appeals.

At the state level, various individuals and environmental groups raised six state law-based challenges to the ZEC program. These claims included arguments that the NYPSC violated the state’s administrative procedure act; set unjust, unreasonable, and discriminatory rates; acted arbitrarily and capriciously; and that the ZEC program violated the State Environmental Quality Review Act (“SEQRA”).

The NYPSC commissioners and nuclear facilities impacted by the ZEC program (collectively, “Respondents”) moved to dismiss the claims on several grounds. First, Respondents argued that most of the petitioners’ claims were untimely because they were filed outside of the period for challenging the NYPSC’s order after it became final. Second, Respondents argued that petitioners lacked standing to bring their SEQRA claim because they did not allege individualized harm, but rather, broad environmental injuries, such as to waterways used for nuclear plant cooling, shared by the general public. Respondents also argued that any claims related to Indian Point were unripe, as that facility has not yet applied, or been approved, to receive ZEC payments.

The trial court agreed with Respondents’ standing, timing, and ripeness arguments, and as a result, dismissed all but five petitioners for failing to bring timely challenges, dismissed the petitioners’ SEQRA claim, and dismissed all claims related to Indian Point. The trial court rejected Respondents’ arguments regarding petitioners’ remaining claims, however, and instructed the parties to confer and present a briefing schedule in advance of a trial on the merits.

A copy of the court’s decision can be found here. The case is Hudson River Sloop Clearwater et al. vs. New York State Public Service Commission et al., New York Supreme Court case number 7242-16.

This post first appeared on the Washington Energy Report, hosted by Troutman Sanders LLP.

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