New York is under fire, like Maryland and New Jersey before it, for allegedly advantaging an incumbent generator competing in Regional Transmission Organization markets with an out-of-market contract. Entergy has sued the New York Public Service Commission (the “Commission”) in federal court for keeping “the uneconomic Dunkirk generator in the market for a decade (through 2025), propped up by subsidies from a local utility and from a state agency.” 1 In 2012, NRG announced that Dunkirk was uneconomic and would be mothballed. In 2013, however, New York’s governor announced that National Grid would repower Dunkirk as a natural gas-fired plant. The Commission approved an agreement by National Grid to pay Dunkirk $20.4 million a year in return for Dunkirk’s commitment to participate in NYISO’s markets through 2025. Entergy argues that this arrangement will artificially suppress market prices, which will, over time, reduce supply and, then, ultimately cause prices to rise. Entergy argues that this arrangement interferes with FERC-approved markets in violation of the Constitution’s supremacy and commerce clauses.2
Entergy cites favorable precedent. Last year, the 3rd Circuit ruled that New Jersey’s program to provide generators with a 15-year contract at a predetermined rate violated the Constitution.3 The generators had to participate in PJM’s capacity auction, with the contract payment offsetting the difference between the PJM market price and the contract price. The 4th Circuit similarly ruled that Maryland’s 20-year “contract for differences” was constitutionally preempted because it would impede the PJM markets and “functionally set the rate that [the generator] receives for its sales in the PJM auction.”4 As explained by Entergy, the Dunkirk arrangement is surprisingly similar.
Reprinted with permission from the Friday Burrito, published by 2015 Foothill Services Nevada Inc.
1 Complaint at 1-2, Entergy Nuclear Fitzpatrick, LLC v. Zibelman, No. 5:15-CV-230 (N.D.N.Y. Feb. 27, 2015).
2 Id. at 2.
3 PPL EnergyPlus, LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014).
4 PPL EnergyPlus, LLC v. Nazarian, 753 F.3d 467, 476 (4th Cir. 2014).
