Second Circuit Upholds Constitutionality of NY’s Zero Emissions Credit Program

On September 27, the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s ruling that the “Zero Emissions Credit” (ZEC) program of the New York Public Service Commission is not unconstitutional. The case is Coalition for Competitive Electricity, et al. v. Zibelman, Chair of the New York Public Service Commission, et al.

In effect, the ZEC program provides subsidies to qualifying New York nuclear power plants as a way to reduce greenhouse gas emissions. The ZEC program is intended to prevent nuclear plants from being prematurely retired from generating power until suitable replacement facilities are operating.

However, the plaintiffs, a group of electrical power generators and associated trade groups, argued that these actions were preempted by the Federal Power Act (FPA) and the authority of the Federal Energy Regulatory Commission (FERC) to set just and reasonable rates for the wholesale provision of electrical power, and the dormant Commerce Clause.

In response, the Second Circuit noted that the FPA reposes exclusive jurisdiction to the states over the retail sale of electricity, which is “characteristically governed by the States,” and accordingly there was no federal preemption at issue.

Lastly, the Second Circuit concluded that the plaintiffs have not made a persuasive Commerce Clause argument that this state action would cause clear damage to federal interests, and in any event, they lack Article III standing to make this argument.