Facts
- Illinois enacted the Future Energy Jobs Act, which created a “zero emission credit” (ZEC) program to support electricity generated from zero-emission resources, with stated goals of environmental protection and preserving jobs at nuclear facilities.
- Exelon had announced plans to shut down two Illinois nuclear plants due to operating losses; the ZEC program was designed to provide financial support to qualifying nuclear facilities, likely including those plants.
- Under the statute, qualifying facilities earn ZECs by producing electricity without emissions. ZECs are issued in an amount tied to retail electricity delivered to Illinois customers (including a provision conferring ZECs equal to 16% of electricity delivered to retail customers during a calendar year).
- Illinois retail electric utilities were required to enter contracts to purchase all ZECs issued to qualifying facilities each year, and utilities could pass ZEC costs through to retail customers.
- The initial ZEC price was set using the “social cost of carbon,” with a statutory mechanism allowing adjustments tied to projected wholesale-market energy and capacity prices to help keep retail electricity affordable.
- Because ZEC payments increase revenue per megawatt-hour for qualifying nuclear generation, the program could allow subsidized plants to submit lower bids into FERC-regulated wholesale energy and capacity auctions than they otherwise would.
- Two federal suits were filed and addressed together: (1) delivery-services customers of Commonwealth Edison (including the Village of Old Mill Creek and other customers) and (2) a trade association for competitive power producers (Electric Power Supply Association) and several independent generators.
- Defendants included Illinois officials responsible for administering the program and Exelon. Defendants and Exelon moved to dismiss, and plaintiffs sought preliminary injunctive relief.
Issues
- Whether the plaintiffs had Article III standing for each of their claims challenging the ZEC program.
- Whether Illinois’s ZEC program is field-preempted or conflict-preempted by the Federal Power Act because it allegedly intrudes on FERC’s exclusive jurisdiction over wholesale electricity rates.
- Whether the ZEC program violates the dormant Commerce Clause by discriminating against or unduly burdening interstate commerce.
- Whether the ZEC program violates Equal Protection or substantive Due Process under rational-basis review.
- Whether plaintiffs were entitled to a preliminary injunction blocking implementation of the ZEC program.
Decision
- The court granted the motions to dismiss filed by the Illinois defendants and Exelon.
- The court dismissed the plaintiffs’ claims in part for lack of subject-matter jurisdiction (including on standing grounds as to particular claims and plaintiffs) and in part for failure to state a claim.
- The court denied the plaintiffs’ motions for a preliminary injunction.
- The court directed entry of final judgment and terminated the consolidated cases.
Legal Principles
- Federal courts may adjudicate only actual cases or controversies; each plaintiff must show an injury in fact that is fairly traceable to the challenged conduct and likely to be redressed by the requested relief, and standing must exist for each claim and form of relief.
- The Federal Power Act gives FERC exclusive authority over wholesale electricity sales and wholesale rates, but states retain authority over generation facilities and may support generation through measures that operate outside FERC’s rate-setting process, even if those measures have downstream effects on wholesale-market outcomes.
- A state program is more likely to be preempted when it conditions payments on participation in, and results within, a FERC-regulated auction at a state-required price (the “tether” problem discussed in Hughes v. Talen Energy Marketing, LLC). A credit earned by producing electricity (without conditioning payment on clearing a FERC auction) is less likely to be treated as state rate-setting.
- Referencing wholesale-market price projections as inputs to a state-created credit-price formula does not necessarily amount to setting wholesale rates; the preemption inquiry focuses on what the state program requires and how it operates.
- Under the dormant Commerce Clause, a court examines whether a state law discriminates against interstate commerce on its face, in purpose, or in practical effect; if it is nondiscriminatory, incidental burdens are assessed under Pike balancing, and a complaint must plausibly allege burdens clearly excessive relative to local benefits.
- Economic legislation challenged under Equal Protection or substantive Due Process is reviewed under rational-basis scrutiny; the law survives if any reasonably conceivable facts could support a legitimate governmental purpose.
- A preliminary injunction requires, among other things, a showing of likely success on the merits; where the complaint is dismissed and plaintiffs cannot show such likelihood, injunctive relief is denied.
Conclusion
The Northern District of Illinois dismissed consolidated challenges to Illinois’s ZEC program created by the Future Energy Jobs Act, concluding that some claims failed for lack of subject-matter jurisdiction (including standing deficiencies) and that the remaining claims did not plausibly show Federal Power Act preemption or violations of the dormant Commerce Clause, Equal Protection, or Due Process; as a result, the court denied preliminary injunctive relief and entered final judgment for defendants.