A federal appeals court in New York on Wednesday temporarily halted an effort by Connecticut to sign contracts for renewable electricity after a solar power developer complained that the process the state used to solicit renewables breached federal law.
The lawsuit is the latest in a string of challenges to state efforts supporting certain types of electricity generation.
Two weeks ago, NRG Energy Inc. and a group representing competitive power generators filed suit in federal court to block a key part of New York’s Clean Energy Standard, which subsidizes nuclear power plants (EnergyWire, Oct. 20).
In April, the Supreme Court unanimously struck down an effort by Maryland to promote new gas-fired generation, saying in the Hughes v. Talen Energy Marketing ruling that the state strayed into federal regulators’ exclusive jurisdiction over wholesale electricity markets (EnergyWire, April 20).
“This is the first case post-Hughes that a federal circuit court is going to have to deal with,” said Ari Peskoe, a senior fellow in electricity law at the Harvard Law School Environmental Policy Initiative. “It’ll be interesting to see how a federal appeals court understands” the Supreme Court ruling, he said.
Massachusetts, Connecticut and Rhode Island on Oct. 25 selected seven solar and wind projects totaling 460 megawatts in response to the three states’ New England Clean Energy Request for Proposals announced last year. The next step is to negotiate contracts by mid-January for the power from each project (EnergyWire, Oct. 27).
New York-based Allco Renewable Energy Ltd., which has developed 18 small solar projects around the United States, in March sued the Connecticut Department of Energy & Environmental Protection in U.S. District Court. Allco argued that a request for new renewable energy generation jointly issued by regulators in Connecticut, Massachusetts and Rhode Island in conjunction with utilities in those states violates the Public Utility Regulatory Policies Act (PURPA) and is pre-empted by the Federal Power Act because it “compels” utilities to enter into wholesale power purchases, the sole jurisdiction of federal regulators.
The district court, however, concluded that Allco lacked standing and dismissed its complaint.
On Tuesday, the 2nd U.S. Circuit Court of Appeals granted Allco’s request for an injunction pending appeal and scheduled oral argument for the week of Dec. 5.
The court’s order does not discuss the panel’s rationale. “We don’t know whether or not the court was motivated by Allco’s interpretation of Hughes or whether there was something else going on,” Peskoe said.
Peskoe pointed out that the 2nd Circuit’s ultimate decision in this case could inform the suit against New York’s Clean Energy Standard recently filed in the U.S. District Court for the Southern District of New York.
The small solar projects Allco operates are known as “qualifying facilities” under PURPA, a law Congress passed in response to the 1970s energy crisis, with the aim of encouraging conservation, more reliance on domestic energy sources and, in particular, developing renewable energy technologies.
Among its controversial provisions is a requirement that utilities sign contracts for power with small generators – usually renewables – of up to 20 years even if they do not need the power to meet demand for electricity from customers.
The Federal Energy Regulatory Commission held a technical conference on the law this summer, and Rep. John Shimkus (R-Ill.), a contender to lead the House Energy and Commerce Committee in the next session of Congress, anticipates that PURPA will be the subject of hearings and possible revisions.
Allco President Thomas Melone, in a statement, presented his case as part of a larger struggle companies like his experience with state regulators and electric utilities, accusing them of “undermining the federal rights of small renewable energy” developers.
PURPA “is our best weapon against climate change,” he said, citing a 1978 statement by Congress when the law was passed saying its purpose was to “accelerate the development of renewable and inexhaustible energy sources and convert the national economy to alternative fuel resources in order to protect this country from the problems that would otherwise occur.”
The purpose of Allco’s suit is to “open up markets broadly to qualifying facilities by overcoming both the reluctance of utilities to purchase from qualifying facilities, and the reluctance of state commissions to enforce the rights” of such projects under the Federal Power Act and PURPA, Melone said.
Joe Rosenthal, principal attorney in the Connecticut Office of Consumer Counsel, said “just about anything else that you do in Allco’s mind will run afoul of the Federal Power Act and will be impermissible state intervention. We disagree. We think there’s room to do these competitive [request for proposals].”
Connecticut and other states are under “significant pressure from other parts of the federal government to make sure that our power is cleaner,” he said.
“This kind of litigation puts states in quite a bind. What are we supposed to do? We’re trying to get cleaner, we’re trying to hold competitive processes, and then we’re getting bogged down with these PURPA claims. It certainly needs to be sorted out,” Rosenthal said.
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