## Facts

- New York’s Public Service Commission adopted a 2016 Clean Energy Standard targeting 50% renewable electricity by 2030.
- The program included a Zero Emissions Credit (ZEC) component to reduce the risk of early retirement of certain nuclear plants that provide carbon-free electricity.
- A ZEC is a state-issued credit reflecting the zero-emission attribute of electricity generated by participating nuclear plants; qualifying plants receive one ZEC per megawatt-hour generated.
- The initial ZEC price was set using the federal “social cost of carbon,” and certain utilities/load-serving entities were required to buy ZECs in proportion to their load.
- Fossil-fuel generators and trade associations alleged the ZEC program reduced nuclear plants’ net operating costs, enabling lower bids into FERC-regulated wholesale auctions, depressing wholesale prices and harming competing generators.
- Plaintiffs sued in federal district court alleging Federal Power Act (FPA) preemption (field and conflict) and a dormant Commerce Clause violation; the district court dismissed under Rule 12(b)(6), and plaintiffs appealed.

## Issues

1. Whether the ZEC program is field preempted under the FPA because it intrudes on FERC’s exclusive jurisdiction over wholesale sales and wholesale rate setting.
2. Whether the ZEC program is conflict preempted because it frustrates FERC’s objectives for just and reasonable wholesale rates and market-based competition.
3. Whether plaintiffs had Article III standing to pursue a dormant Commerce Clause claim alleging discrimination against or undue burdens on interstate commerce.

## Decision

- The Second Circuit affirmed the Rule 12(b)(6) dismissal after de novo review.
- The ZEC program was not field preempted because it lacked an impermissible “tether” to clearing a FERC-regulated wholesale auction.
- The ZEC program was not conflict preempted because plaintiffs did not show clear harm to federal objectives or identify a direct contradiction with FERC policy.
- Plaintiffs lacked Article III standing to bring the dormant Commerce Clause claim because their alleged injury was not traceable to discriminatory treatment remediable under that doctrine and was not redressable on that theory.

## Legal Principles

- The FPA establishes a dual system: FERC has exclusive jurisdiction over wholesale sales and rates in interstate commerce, while states retain authority over generation resources and related public policies, including environmental measures.
- A state program is more likely to be field preempted when state payments are conditioned on a generator’s participation in, or success in, a FERC-regulated auction; incidental effects on wholesale prices are generally insufficient.
- State compensation for environmental attributes of electricity generation (analogous to renewable energy credits) may be permissible even if it foreseeably affects wholesale market outcomes.
- Conflict preemption requires a concrete showing that the state measure causes clear damage to federal objectives; generalized claims of market distortion, without a direct clash with FERC policy or orders, are insufficient.
- Article III standing requires injury traceable to the challenged feature and likely redressable by the requested relief; competitive harms from price effects alone do not establish standing to assert discrimination-based Commerce Clause theories.

## Conclusion

The Second Circuit held that New York’s ZEC program fell within state authority to support zero-emission generation and was neither field nor conflict preempted by the Federal Power Act, and it dismissed the dormant Commerce Clause challenge for lack of Article III standing.


Coalition for Competitive Elec. v. Zibelman, 906 F.3d 41 (2d Cir. 2018)