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API, NGSA file brief with US Supreme Court opposing state-level nuclear power subsidies

Highlights

EPSA also asked high court to review rulings

Observers put low odds on Supreme Court taking the case

New York — Trade groups American Petroleum Institute and Natural Gas Supply Association want the US Supreme Court to grant review of, and overturn lower court rulings that upheld nuclear subsidy programs in New York and Illinois.

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"Although states remain free to regulate generation facilities and retail sales of energy, they are precluded ... from countermanding or otherwise effectively adjusting wholesale rates that the [US] Federal Energy Regulatory Commission has deemed just and reasonable," the trade associations said in a brief dated Friday.

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 low wholesale power prices that have fallen recent years as a result of lower natural gas prices and other factors.

In the second half of 2018, the US Court of Appeals for the 7th Circuit in Chicago and US Court of Appeals for the 2nd Circuit in New York upheld the ZEC programs, finding they did not infringe on FERC's authority to regulate electricity sold in wholesale markets. In early January, API and NGSA's fellow trade group the Electric Power Supply Association filed petitions with the Supreme Court seeking review of the lower court rulings. The API and NGSA brief supports those petitions.

"New York may or may not have valid reasons for wishing to prop up these particular non-competitive electricity generators - but they cannot pursue those policy aims by substituting their judgment about the amount those generators should receive at [a wholesale level] for FERC's assessment of what is just and reasonable," the brief said.

LONG ODDS

However, observers say it is unlikely the high court will review the decisions.

"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 pre-emption," Gordon Coffee, an attorney with law firm Winston & Strawn, said in a January email.

"My view is that EPSA's jurisdictional theory confuses Congress' 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 January.

"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."

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

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com

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