Governors' Wind Energy Coalition

A federal court’s recent decision upholding Connecticut’s program to promote the use of renewable sources of electricity actually “deals a major setback to fighting climate change,” a solar developer this week argued.

That’s because the court’s ruling validates a state’s “coercive” regulation of the electricity sector, Allco Renewable Energy Ltd. argued in a court filing. That could benefit not only wind and solar but coal, oil, nuclear “and other forms of environmentally destructive electricity generation,” the developer said.

Allco asked the 2nd U.S. Circuit Court of Appeals to reconsider its decision from last month.

The ruling “leaves the energy wholesale markets subject to the political whims of the states,” Allco said in a petition for rehearing filed yesterday.

Allco has sued several times over actions that the state Department of Energy and Environmental Protection has taken to put its renewable procurement program in place. The company owns a solar facility in Georgia that it says has been discriminated against by the program.

The solar developer’s current lawsuit challenged a 2015 request for proposals jointly issued by Connecticut, Massachusetts and Rhode Island regulators for renewable energy.

In the suit, Allco argued that the Federal Power Act gives the Federal Energy Regulatory Commission exclusive jurisdiction over wholesale sales of electricity and that state action is pre-empted except in limited cases.

The developer argued that the structure of the request for proposals amounted to an illegal regulation of the wholesale interstate energy market and that it violated the “dormant” Commerce Clause, which bars states from discriminating against interstate commerce.

In court filings, the company looked for support to the Supreme Court’s 2015 decision to knock down a Maryland program encouraging new natural gas generation.

But the 2nd Circuit found “important and telling distinctions” between the Connecticut and Maryland programs, including that Connecticut was not seeking to override market terms approved by FERC.

The Connecticut program’s “means and ends are well within the scope of what Congress and FERC have traditionally allowed the states to do in the realm of energy regulation,” Senior Judge Guido Calabresi, a Clinton appointee, wrote for the court (Greenwire, June 28).

In yesterday’s petition for rehearing, Allco argued the ruling creates a “massive loophole” in the Federal Power Act, which regulates federal authority over the electricity sector. The decision allows states to compel interstate wholesale contracts “at will” with specific forms of electricity, including coal and nuclear, Allco said.

Allco also argued that Connecticut’s program doesn’t fit within the Public Utilities Regulatory Policies Act, which allows states to foster electricity creation by certain facilities.

According to Allco’s argument, nothing would stop a coal-friendly state, for example, from using the ruling to design a program boosting coal-fired power plants.

“Such a loophole will allow states unlimited ability to compel wholesale transactions that support the political whims of a state. … One state might prefer coal plants, another gas plants, still others nuclear and other forms of electric generation,” Allco said.

Environmentalists, though, had filed an amicus brief in support of Connecticut in the litigation and cheered the 2nd Circuit ruling.

The decision “supports states’ efforts to reduce climate pollution and transition to cleaner energy resources,” said Environmental Defense Fund senior attorney Michael Panfil. “This decision will have profound benefits for the health of Connecticut families and for the state’s economy and environment.”