The Electric Power Supply Association and several electricity generators – Dynegy, Eastern Generation, NRG, and Calpine – filed with the U.S. District Court 9 (Case No. 17-cv-01164 ) on March 31 for a preliminary injunction “to halt the multibillion-dollar illegal subsidy” for Exelon’s Illinois-based nuclear plants on the grounds that it is unconstitutional while raising electric bills for consumers.
The suit challenges Public Act 99-0906 (The Future Energy Jobs Act), signed into law by Illinois Governor Bruce Rauner (R) in December 2016 and scheduled to be effective after June 1. Under the terms of the legislation, electricity rates would be increased by more than $200 million a year over the next decade to keep the money-losing Clinton and Quad Cities nuclear plants running.
In particular, the suit takes issue with the Zero Emissions Credit (ZEC) established under the bill, which EPSA maintained in a formal statement on April 3, “forces Illinois consumers to pay Exelon hundreds of millions of dollars a year to keep uneconomic nuclear power plants operating.”
Specifically, under the plan, the Illinois Power Agency would procure ten-year contracts for Zero Emission Credits in a quantity equal to 16 percent of the energy delivered by utilities in 2014. Selection of the credits would be based on “public interest criteria.” The price paid for the credits would be based on the “Social Cost of Carbon,” with adjustments as described in the law.
“State subsidies tied to the price of the wholesale electricity market are not allowed under federal law,” said Jonathan Schiller, lead legal counsel on the case, of Boies Schiller Flexner.
“The Future Energy Jobs Act creates exactly this type of illegal subsidy,” Schiller noted. “At Exelon’s request, the General Assembly passed this law – which forces ratepayers to bankroll expensive and uneconomic nuclear plants, while simultaneously undermining the competitive market.”
Co-counsel Leonard Gail of Massey & Gail in Chicago added, “At a time when Illinois families and businesses are struggling, this law forces them to begin subsidizing Exelon, a Fortune 100 company with billions in annual revenue. Without the court granting the injunction, the state’s energy market and consumers will be irreparably harmed.”
The Exelon subsidy is scheduled to begin June 1. “In addition to harming consumers and the markets that were designed to protect them, the nuclear bailout will put other generators, their communities, and employees at risk by replacing cost-effective plants with high-priced, retirement-aged plants,” said Dean Ellis, SVP for Regulatory Affairs at Dynegy. “Our employees have worked diligently for years to do exactly what was asked of them; be the best, most-efficient and lowest cost operator. Yet now they are at risk of losing their jobs because of this illegal action.”
On March 16, the federally mandated Independent Market Monitor for the PJM Interconnection, one of Illinois’ two independent market operators, asked to join the broader case to represent the public interest. The market monitor is opposed to the subsidy program and separately chose to take legal action.
In requesting to join the case, the market monitor wrote, “The ZEC Subsidies Program is not designed to serve the public interest. These subsidies were requested by the owners of specific uneconomic generating units in order to improve the profitability of specific generating units. These subsidies were not requested to accomplish broader social goals.”
The Supreme Court struck down a similar subsidy program in Hughes v. Talen in April 2016.