Village of Old Mill Creek v. Star

The federal district court for the Northern District of Illinois upheld a “zero emission credit” (ZEC) program allegedly intended to subsidize old nuclear power plants in Illinois. Illinois’s ZEC program was created by the Future Energy Jobs Act, which granted ZECs to qualifying facilities, which the Illinois court noted were “likely to be two nuclear power plants owned by Exelon in Illinois.” Plaintiffs challenging the program were electric generators and their trade groups in one case and utility customers in a second case. The plaintiffs unsuccessfully argued that the ZEC programs were unconstitutional because they were preempted and violated the dormant Commerce Clause, and the utility customers also made an equal protection claim. The court concluded that the plaintiffs largely lacked Article III standing for the preemption and dormant Commerce Clause claims but proceeded to address the merits. The court held that it did not have equity jurisdiction over the plaintiffs’ claims that the Federal Power Act (FPA)—which grants the Federal Energy Regulatory Commission (FERC) exclusive jurisdiction over the interstate wholesale electricity market—preempted the state programs. The court concluded that Congress intended to foreclose a private right of action, citing the FPA’s provisions for a detailed remedial scheme before FERC and the Public Utility Regulatory Policies Act’s addition to the FPA of a private cause of action for a narrow scope of challenges to state action. The court also found that the relief sought by the plaintiffs would require the court to apply “judicially unadministratable” standards. The court also held that the FPA preemption claims would, in any event, fail on the merits. The court—looking to the Supreme Court’s 2016 opinion in Hughes v. Talen Energy Marketing, LLC—said the states’ ZEC programs did not impermissibly “tether” ZEC payments to participation in the wholesale capacity auctions and did not directly affect wholesale rates. The ZEC program therefore avoided field preemption. The court also found that the plaintiffs did not state a plausible claim for conflict preemption because the ZEC program did not run afoul of FERC’s goal of competitive energy markets. The court held that the plaintiffs did not have Article III standing to make their dormant Commerce Clause claim, and also concluded that no dormant Commerce Clause claim was stated because Illinois’s statute did not preclude out-of-state generators from submitting bids for ZECs and was therefore not facially discriminatory, and there were no plausible allegations that the procurement process would be facially discriminatory. The Illinois court also concluded there was a substantial possibility that the implementation of the statute would be non-discriminatory in effect, rejected the argument that the statute had a discriminatory purpose, and said the state-created ZECs only indirectly burdened other generators’ ability to participate in the wholesale market. The Illinois court also dismissed the utility customer plaintiffs’ equal protection claim, finding that the ZEC program had rational basis grounded in the legislative goals of increasing reliance on zero-emission energy.

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In response to the motions to dismiss, the plaintiffs argued that their complaint stated claims of field and conflict preemption and of a dormant Commerce Clause violation. The plaintiffs also contended that FERC did not have primary jurisdiction over the conflict preemption claim, and that the court had equitable jurisdiction to consider the preemption claims. The plaintiffs also disputed the foundation of the defendants’ arguments—that the ZEC program and the statute that created it were environmental programs aimed at reducing carbon emissions.

The American Wind Energy Association filed a proposed brief on behalf of neither party, asserting that it had a substantial interest in the case “because state-conducted resource procurement efforts for renewable energy could be called into question by a verdict for the Plaintiffs that is not narrowly tailored to the facts at hand.”

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The state defendants and the owner of nuclear plants eligible for ZEC credits filed motions to dismiss the two lawsuits, arguing that the plaintiffs failed to state valid claims, that the plaintiffs lacked a cause of action for bringing their preemption claims, and that the plaintiffs lacked standing to bring their dormant Commerce Clause claims.

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