A New York clean energy developer is suing Connecticut over its renewable energy subsidy program, claiming the state’s policy violates constitutional rules about regulating business across state lines.
The chief executive of Allco Finance Limited, Thomas Melone, is also asking the U.S. District Court in Connecticut for an injunction to halt the state’s plans to finance renewable energy or transmission wires together with Massachusetts and Rhode Island.
Melone, whose unsuccessful suit against Connecticut’s previous clean power deal is under appeal, argues that the state’s renewable energy credit policy violates the dormant Commerce Clause of the U.S. Constitution, which limits the regulation of interstate commerce to the federal government, not the states.
Sources of clean energy, like solar panels and wind turbines, produce electricity like any other power source. But in states like Connecticut, these facilities also produce renewable energy credits, which are sold to utilities and power companies to meet state clean energy requirements.
Connecticut law recognizes renewable energy credits from New England states, and in some cases nearby jurisdictions like New York and Canada. Melone, who owns solar facilities in Georgia and New York, argues that these limits are the type of interstate regulation that is restricted to the federal government.
“The dormant Commerce Clause prohibits a State from using its regulatory power to discriminate against out-of-state businesses,” Melone said in the lawsuit dated Sunday.
In addition to his Connecticut lawsuits, Melone has also filed actions relating to clean energy in California, Vermont and Massachusetts.
Legal experts say the challenge to Connecticut’s renewable incentives is unique for many reasons. While the dormant Commerce Clause has been cited in cases regarding clean energy policies, it has not been used against a state that limits its renewable energy to the region, rather than the individual state.
“It’s an issue that has been discussed in academic circles, but nobody had filed the challenge,” said Ari Peskoe, an energy fellow at Harvard Law School’s Environmental Policy Initiative, which tracks litigation. He said the case is also unique in that the plaintiff is a clean energy developer.
Peskoe said Connecticut has good arguments for its renewable subsidies, but if the case is heard on its merits, its effects could ripple through the country.
“A lot of states have a similar regional deliverability requirements, and a judgment that went for Allco in this case could be broadly applicable,” Peskoe said.
The other half of Melone’s lawsuit reprises his earlier arguments against Connecticut’s contracting for power from large-scale renewable projects. Here, he argues that the Federal Power Act states that Connecticut can only regulate wholesale power contracts when they are smaller than 80 megawatts.
Those smaller generation projects, known as qualifying facilities, are given special treatment under the Federal Power Act that Connecticut’s proclivity for larger projects ignores. In his lawsuit, Melone said, “This is the epitome of a conflict with federal law.”
That said, Connecticut likes its chances in court, according to Dennis Schain, a spokesman for the state Department of Energy and Environmental Protection, whose commissioner Robert Klee was named as a defendant in the case.
“The three state procurement is an innovative approach to meeting our renewable energy goals and securing clean power at the lowest possible price for our families and businesses,” Schain said in a written statement. “We believe the procurement is legally sound and will meet court challenges.”
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