The American Petroleum Institute and the Natural Gas Supply Association filed an amicus brief on Feb. 8 supporting a petition asking the US Supreme Court to overturn a federal appeals court’s finding that New York State’s Zero Emission Control (ZEC) program does not preempt federal authority by subsidizing certain forms of electric power generation.
“When a state subsidizes a favored generator (or type of generator) by guaranteeing an effective wholesale price that is different from the price approved by [the US Federal Energy Regulatory Commission], it distorts the wholesale market and undermines federal energy policy in an area exclusively within the purview of federal regulators,” attorneys for API and NGSA said in their joint filing.
“We hope our brief makes clear to the Supreme Court that FERC strongly disfavors market-distorting, out-of-market subsidies for certain types of generators, and that the effects of ZEC programs on wholesale markets are undeniable and should be preempted under the Federal Power Act,” API told OGJ in an Oct. 11 e-mail.
The Electric Power Supply Association and NRG Energy Inc. jointly sought US Supreme Court action after the US Second Circuit Court of Appeals ruled on Sept. 28, 2018, that three Exelon Corp. nuclear power plants qualified for subsidies to continue operating under the ZEC program because of their “verifiable historic contribution…to the clean energy resource mix” in the state and other criteria, ESPA and NRG said in their Jan. 7 petition to the high court.
Gas, when used to generate electic power, “offers substantial benefits over other fossil fuels, including lower greenhouse gas and other harmful air emissions, low cost, and a reliable and integrated nationwide delivery system,” API and NGSA’s filing said. State policies that distort wholesale power markets should not place suppliers, transporters, and buyers of low-cost gas to generate electricity placed at a disadvantage, it maintained.
Undermines federal policies
New York’s ZEC program undermines federal energy policy that fosters competition in the wholesale electricity markets and hurts consumers by distorting the market with subsidies for aging, uneconomic power plants and discourages the entry of new generation while discriminating against other fuels, NGSA Executive Vice-Pres. Patricia W. Jagtiani said on Feb. 11.
“Add to that the ZEC program’s destabilizing effect on FERC’s competitive market-based approach to electricity rates, an approach that has successfully encouraged efficiencies in production and sales,” she said. “In addition, ZEC subsidies for aging power plants distort the market signals that serve to incentivize new efficient generation to enter the market.
“Finally, from a legal perspective, the ZEC program clearly infringes on wholesale electricity markets that are under FERC’s exclusive jurisdiction under the Federal Power Act,” Jagtiani said.
