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Oil, Gas Industry Urge Supreme Court to Rule Against State Nuclear Subsidies

Trade associations representing the oil and gas industry are urging the U.S. Supreme Court to find that state subsidies used to prop up uneconomic nuclear power plants are unfair because they interfere with FERC's exclusive authority over wholesale rates in the energy market.

The American Petroleum Institute (API) and the Natural Gas Supply Association (NGSA) filed amicus briefs in the case Electric Power Supply Association (EPSA) et al. v. John B. Rhodes et al., No. 18-879. The issue at the center of the case is the zero-emission credit (ZEC) program offered by New York to nuclear generators.

API and NGSA argue that while states are allowed to regulate generation facilities and retail sales of energy, they are barred by the Constitution's Supremacy Clause "from countermanding or otherwise effectively adjusting" wholesale rates that the Federal Energy Regulatory Commission consider just and reasonable.

"By directly tethering the amount of the subsidy to the market wholesale rate, New York guarantees to three select generators (all owned by the same corporation) an effective wholesale price that is different from the wholesale price established through FERC-approved wholesale auctions," API and NGSA said.

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

Opponents of the nuclear power subsidies, including the oil and gas industry, have been on the losing side in court.

API and NGSA argued that the U.S. Court of Appeals for the Second Circuit erred last September when it upheld a district court ruling that New York's ZEC program is not preempted by the Federal Power Act. The act gives FERC primacy in regulating wholesale energy markets. The U.S. Court of Appeals for the Seventh Circuit made a similar ruling last September in a case that pitted EPSA against regulators in Illinois for its ZEC program.

In both the Illinois and New York cases, nuclear facilities owned by Exelon Corp. were the beneficiaries of the subsidies. Before winning the subsidies, Exelon warned officials in Illinois, New York and Pennsylvania that it might be forced to close nuclear plants without them.

EPSA, which represents independent natural gas-fired power generators, petitioned the Supreme Court to hear the New York case last month. It asked the high court to use the Second Circuit's decision in the New York case as the basis for review, and requested that it hold the Seventh Circuit's ruling in the Illinois case in abeyance until a final decision in the New York case is made.

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