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Against the odds, power trade group asks US Supreme Court to review state ZEC decisions

Highlights

Main question is federal versus state power market jurisdiction

EPSA and NRG filed petitions for a writ of certiorari

Supreme Court unlikely to review the cases: experts

New York — Trade group Electric Power Supply Association has filed petitions with the US Supreme Court seeking review of lower court rulings that upheld New York and Illinois nuclear subsidy programs, a group official said Tuesday, but experts doubt high court review.

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"There is no greater issue today than the question of federal versus state jurisdiction over these out-of-market payments," John Shelk, EPSA's president and CEO, said in a phone call.

Shelk said the Supreme Court in 2016 ruled against a Maryland power market program, known as the Hughes case, because it crossed that jurisdictional boundary and the 2nd Circuit US Federal Appeals Court ruled New York's nuclear subsidy program came close to that line.

"So what did the [Supreme] court mean in Hughes," Shelk asked, likening the filing of petitions for certiorari to seek review from the instant replay booth when a close call occurs during a sporting event.

The state legislatures in New York and Illinois have enacted zero-emissions credit programs that provide funding collected from electric customer bills to nuclear power plants struggling to remain profitable amid historically lower wholesale power prices pulled down in recent years by lower natural gas prices and other factors.

In the second half of 2018, the 7th Circuit US Federal Appeals Court in Illinois and New York's 2ndcircuit upheld the state ZEC programs, finding they did not infringe on the Federal Energy Regulatory Commission's authority to regulate electricity sold in wholesale markets.

EPSA said in a statement that it "strongly disagrees" with the lower court rulings and their "narrow application of Hughes," so the trade association in conjunction with independent power producer NRG Energy filed the petitions for review late Monday to give the Supreme Court an opportunity to have the final say. EPSA recommended in the petitions that the Supreme Court use the 2nd Circuit case as the basis for review and hold the 7th Circuit petition on the Illinois program in abeyance, pending a decision on the 2nd Circuit case.

LONG ODDS

Analysts and electricity law experts said it is unlikely the high court will review the appeals court decisions.

"My view is that EPSA's jurisdictional theory confuses Congress's broad delegation of authority to FERC to set just and reasonable wholesale rates with imagined Congressional intent to usurp traditional state functions," Ari Peskoe, director of Harvard University's Electricity Law Initiative, said in an email.

"It is inconsistent with precedent and would call into question longstanding FERC practice," Peskoe said. "Given the generally long odds against SCOTUS review, I would bet on the Court rejecting the petition," he added.

"I would estimate that the petitioners have less than a 10% chance of certiorari being granted, given the absence of any disagreement between the two appellate courts over the legality of the ZEC programs and the US government's position on preemption," Gordon Coffee, attorney with law firm Winston & Strawn, said in an email.

Energy industry consulting firm Clearview Energy Partners in a client note also said Supreme Court review appears unlikely.

"We assign low odds to the prospect of the Supreme Court granting the petitions, given the unanimous agreement of the lower courts," as well as FERC's own position that it has sufficient jurisdiction to address the issues petitioners raised, the analysts said.

Nuclear subsidy legislation could soon come forward in Pennsylvania and Ohio, but these petitions are unlikely to impact those proceedings.

"Given those [long] odds, I would be surprised if the cert. petition had any significant impact on legislation in other states," Coffee said.

-- Jared Anderson, jared.anderson@spglobal.com

-- Edited by Jennifer Pedrick, newsdesk@spglobal.com