Appeals court: IL doesn’t usurp feds’ power by making coal, gas burners subsidize Illinois nuke plants

By Dan Churney | Sep 17, 2018

By Daniel Schwen [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons

A federal appellate court has affirmed a Chicago federal judge’s ruling that switched off suits by a group of electricity producers and Chicago-area power consumers, which sought to invalidate a state law requiring coal and gas burning electricity companies buy credits to prop up two failing Exelon nuclear plants, saying the law doesn’t infringe on federal regulatory prerogatives.

The Sept. 13 ruling was issued by Circuit Judge Frank Easterbrook, with agreement from Circuit Judge Diane Sykes and District Judge Michael Reagan. Easterbrook and Sykes sit on the U.S. Court of Appeals for the Seventh Circuit, based in Chicago; Reagan is with U.S. District Court for the Southern District of Illinois, but sat in on the appellate panel for this case.

The ruling favored the Illinois Power Agency in an action brought against it by power suppliers Dynegy, Eastern Generation, NRG Energy and Calpine, as well as the trade group Electric Power Supply Association. 

The ruling also went against a similar action by a number of electricity consumers, including: Ferrite International, of Wadsworth; Got It Maid Inc., of Highland Park; the Village of Old Mill Creek, in Lake County; and four individual consumers from Chicago, Riverside, Highland Park and Havel.

In February 2017 in Chicago federal court, plaintiffs sued to upset part of the state’s Future Energy Jobs Act. The act called for more use of renewable energy sources and, to this end, subsidized Exelon’s Clinton and Quad Cities nuclear plants, which state officials said they feared would close. The subsidies are in the form of so-called zero emission credits, which carbon-emitting electrical producers must buy from the plants for 10 years at a price set by the state.

Plaintiffs alleged the state law usurps the authority of the Federal Energy Regulatory Commission to regulate interstate electricity prices and hides behind “green energy” goals to rig the market in Exelon’s favor.

 On July 14, 2017, U.S. District Judge Manish Shah threw out the suits, finding consumers lacked standing and the power generators’ claims could not show any abuse of the state’s authority to regulate its electricity market or create new energy standards.

 The power companies appealed on their claim the act improperly overrides federal jurisdiction, but found no traction.

 “Congress has not been silent about  electricity. It provided that states may regulate local generation. Illinois has not engaged in any discrimination beyond what is required by the rule that a state must regulate within  its borders,” Judge Easterbrook wrote in the appellate decision.

 Easterbrook pointed out the payors and recipients of the subsidy are in Illinois, while the price effect of the act is felt wherever the  power is used. All power from inside and outside Illinois  goes for the same price in an interstate auction. The cross subsidy among producers may injure investors in carbon releasing plants, but only those plants in Illinois, for the “state’s regulatory power stops at the border,” Easterbrook said.

 The Federal Energy Regulatory Commission filed a friend-of-the-court brief, which said Illinois’ credit program does not interfere with interstate sales of electricity and is not preempted by federal law.

 A number of other parties filed friend-of-the-court briefs for and against the credits. Those parties included: Illinois Chamber of Commerce; Citizens Utility Board; Natural Resources Defense Council; Nuclear Energy Institute; American Wind Energy Association; and seven states, including California and New York.

 Plaintiffs have been represented by attorneys from the firms of Massey & Gail, of Washington, D.C. and Chicago, and Boies, Schiller & Flexner, of New York City and Fort Lauderdale, Fla.

 The Illinois Power Agency has been defended by the Illinois Attorney General’s Office.

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Organizations in this Story

American Wind Energy Association Boies, Schiller & Flexner, Llp Calpine Corporation Citizens Utility Board Dynegy Inc Electric Power Supply Association Exelon Corporation Federal Energy Regulatory Commission Illinois Chamber of Commerce Illinois Power Agency Massey & Gail Natural Resources Defense Council NRG Energy, Inc. Nuclear Energy Institute U.S. Court of Appeals for the Seventh Circuit U.S. District Court for the Northern District of Illinois Village of Old Mill Creek

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