LEGAL PERSPECTIVES ON
STATE NUCLEAR INITIATIVES
Ari Peskoe
Senior Fellow in Electricity Law
[email protected]
@aripeskoe
Why Did States Regulate Electric Utilities
in the Early 20th Century ?
• Capitalize on “Natural Monopoly”
efficiencies
• Protect consumers from monopoly prices
• Finance system expansion
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Why Did Congress Regulate Electric Utilities
in 1935?
Federal Power Act provides federal regulators
(FERC) with authority over “wholesale sales in
interstate commerce” because:
• States may not regulate interstate sales
• New Deal Era legislation brought industry
under federal regulation
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Did regulators play a role in selecting
generation fuels?
Historically this was not an area of focus:
• FPA reserves jurisdiction over “generation
facilities” to states
• Supreme Court, 1983: “Need for new power
facilities, their economic feasibility, and rates
and services, are areas that have been
characteristically governed by the States. ”
Crises of the 1970s!
Cause Regulators to Respond
• Oil crisis! (“peak” U.S. production, embargo)
•
•
•
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Nuclear crisis! (protests, delays, cost overruns)
Interest rate crisis! (increasing construction costs)
Natural gas crisis! (dwindling supply)
Environmental crisis! (creation of EPA)
Integrated Resource Planning
A planning and selection process for new energy
resources that evaluates the full range of
alternatives, including new generating capacity,
power purchases, energy conservation and
efficiency . . . 16 USC § 2602
How to Regulate Generation
After Industry Restructuring?
Vertically Integrated Utility
1900 – 1990s
Wires-Only Utility
Post-Restructuring
How to Regulate Generation
After Industry Restructuring?
Challenge: Plant revenue no longer regulated by
state commission.
Possible Solutions:
• Restrict new generators with environmental
regulations or siting rules
✓ e.g., emission performance standards
• Induce new generators with utility
procurement rules
X Problem: What’s the financial incentive?
Zero Emission Credits
Commerce
Clause
Dormant
Commerce
Clause
US Constitution, Article I, Section 8, § 3
[The Congress shall have the power]:
To regulate Commerce with foreign
Nations, and among the several States,
and with the Indian Tribes;
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Dormant
Commerce
Clause
Test
Dormant
Commerce
Clause
A state may not regulate interstate commerce by:
1) discriminating against out-of-state economic
interests;
2) regulating commerce that takes place wholly
outside of the State’s borders; or
3) unduly burdening interstate commerce
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Discrimination
Out-of-State
Do NY ZECsAgainst
Discriminate?
Economic Interests
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Discrimination
Out-of-State
Do NY ZECsAgainst
Discriminate?
Economic Interests
Yes, ZECs discriminate:
• NY PSC’s order awards ZECs to 3 in-state plants
• NY acted to protect jobs
No, ZECs do not discriminate:
• Claim fails for procedural reasons – plaintiffs
are not competitors; state agency is purchaser
• PSC order is even-handed but only in-state
plants meet qualifications
• ZECs motivated by environmental goal
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Preemption
Federal action preempts State law when:
1) Congress has explicitly preempted State law (Express);
2) A court determines Federal law occupies the field (Field); or
3) A court determines that Federal law conflicts with State law
(Conflict).
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Hughes v. Talen
Request for Proposals
SALE
RATE = PSC PRICE* – PJM PRICE
CONTRACTS FOR
DIFFERENCES
ORDER
R
E
T
A
I
L
R
E
T
A
I
L
* Set through RFP
Preemption
byCommerce
the FederalClause
Power Act
Dormant
Is NY’s Regulation of ZECs like Maryland’s
Regulation of the Contract for Differences?
Yes, ZECs are preempted:
• ZECs directly change the wholesale rate
• ZEC revenue distorts FERC-regulated markets
No, ZECs are not preempted:
• Unlike Hughes, nukes may sell ZECs regardless
of whether they “clear” NYISO auction
• ZECs’ effects on auction prices are irrelevant
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Alternative
State
Support Mechanisms
Dormant
Commerce
Clause
• Long-term contract requirement (CT)
• Tax credits/incentives
• Work with RTO/ISO and FERC
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