Consolidated Edison Co. of New York’s (ConEd) push to recoup about $250 million in replacement power costs the utility incurred after shutting down its Indian Point nuclear power plant a couple of years ago vaulted a key legal hurdle last Monday after the U.S. Supreme Court declined to hear a lower court’s ruling finding that the company had a right to recover such costs.

ConEd on Feb. 15, 2000 was forced to shutdown its Indian Point 2 nuclear facility, which is located in Westchester County, NY. The outage was caused by a defective generator at the facility. In order to cover electricity demand while Indian Point 2 was offline, ConEd was forced to buy electricity from other sources. Pursuant to a fuel adjustment clause, the utility increased its rates to incorporate the cost of buying replacement electricity and other costs tied to the outage.

But ConEd’s moves to recover replacement power costs resulting from the Indian Point 2 outage didn’t sit well with several prominent New York State politicians, including Gov. George Pataki. The governor in August 2000 signed into law a bill that prohibited ConEd from passing on to ratepayers the cost of replacement power in the wake of the Indian Point 2 shutdown. The New York Public Service Commission (PSC) has estimated that ConEd would have been able to pass on to its customers approximately $250 million in increased costs that the law required it to internalize.

While the ink was still drying from Pataki’s signature, ConEd filed a lawsuit in a New York district court seeking a declaratory judgement and permanent injunction barring enforcement of the statute on various constitutional grounds and on Aug. 17, 2000 moved for a preliminary injunction. The New York district court subsequently granted ConEd’s request for a permanent injunction and denied as moot the company’s motion for a preliminary injunction.

Among other things, the district court agreed with ConEd that the statute violated the Equal Protection Clause, finding that the law was not rationally related to the state’s legitimate interest in deterring negligence at nuclear power plants. The district court also held that the law constituted an impermissible “bill of attainder” because the statute named ConEd and was the product of a legislative intent to punish the utility.

In June 2002, the U.S. Court of Appeals for the Second Circuit affirmed the district court’s ruling, agreeing that the law is an unconstitutional bill of attainder.

The state of New York then appealed the case to the U.S. Supreme Court. According to a report on Dow Jones Newswires, the state argued in its petition filed at the high court that the bill of attainder clause in the U.S. Constitution doesn’t cover corporations.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.