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Quick legal appeal in the works for Illinois zero-emissions credit ruling


An immediate legal appeal was in the works Monday after a federal judge upheld Illinois' controversial zero-emissions credit program aimed at providing millions of dollars of taxpayer-funded subsidies to keep two money-losing Exelon nuclear plants from closing.

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At stake are similar efforts by nuclear generators in other states to seek legislative and/or administrative support to help its plants compete against cheaper gas and renewables in a low wholesale power price environment.

Chicago-based Exelon, the nation's largest nuclear generator, won the first round of the legal battle Friday when Judge Manish Shah of the US District Court for the Northern District of Illinois in Chicago dismissed a lawsuit filed late last year by a competitive power group that includes Calpine, Dynegy, NRG Energy and the Electric Power Supply Association.

They challenged Illinois' Future Energy Jobs Act, which the General Assembly passed last year, that included the ZEC program to support Exelon's Quad Cities and Clinton nuclear plants, totaling nearly 3,000 MW.

"We're disappointed by the decision and will immediately appeal to the 7th US Circuit Court of Appeals" in Chicago, David Gaier, spokesman for Houston-based NRG, said Monday in an interview. That appeal was expected to be filed by close-of-business Monday. "We'll ask that court to expedite the appeal," Gaier added. "We hope for a ruling as soon as possible."

Exelon already announced plans to shut both plants over the next two years, claiming they lost more than $800 million over the last six years.

But closing the plants would eliminate 4,200 direct and secondary jobs and as well as about $1.2 billion in economic activity within four years, the company said.

Shah, in his ruling, agreed with Exelon's arguments that Illinois had the legal right to enact the ZEC program, which recently took effect, and that the state law is not pre-empted by the Federal Power Act and does not violate the Commerce Clause of the US Constitution.

He essentially ruled that the ZEC program does not improperly interfere with wholesale power markets and, if it did, the Federal Energy Regulatory Commission has the authority to take the necessary steps to preserve "just and reasonable" wholesale markets.

FERC was invited to weigh into the Illinois legal dispute earlier this year, but declined because it lacked a quorum during the early months of the Trump administration. FERC officials could not be reached for comment Monday about Shah's decision.

In his ruling, Shah said ZECs are "similar" to renewable energy credits, which states have used for years to encourage the development of renewable energy. "States may influence, through regulation, which generators participate in FERC's market, even though the end result may affect the wholesale market," Shah wrote. "Plaintiffs do not dispute that REC programs, tax incentives, and carbon taxes, which are within the states' jurisdiction, are lawful."

Shah also shot down the plaintiffs' argument that the ZEC program invades FERC's field of exclusive jurisdiction because it provides nuclear plants with substantial out-of-market payments, thereby directly affecting the revenue that nuclear generators will be paid and effectively replacing the PJM auction clearing price.

The judge concluded the ZEC program "falls within Illinois' reserve authority over generation facilities." Illinois, he said, has sufficiently separated ZECs from wholesale transactions "such that the Federal Power Act does not pre-empt the state program under principles of held pre-emption."

Exelon, not surprisingly, called Shah's decision "good news for the environment and consumers" in a statement Monday.

Paul Patterson, a Glenrock Associates analyst, said Monday in an email that Shah's ruling "looks quite positive for those seeking nuclear subsidies."

--Bob Matyi,

--Edited by Valarie Jackson,