Amicus Brief of the Electricity Regulation Scholars in Village of Old Mill Creek v. Star (7th Cir. 2018)

Energy credit programs, first enacted in the 1990s, are premised on legislative determinations about the types of electric generation that will meet environmental goals and diversify the state’s energy supply. They are a derivative of regulatory planning, updated to reflect states’ utility restructuring laws that catalyzed the creation of today’s organized wholesale markets. Rather than requiring utilities to construct and maintain generation, which would be inconsistent with restructuring, energy credit programs direct utilities to acquire credits from specified types of facilities, such as wind or solar. Energy credit programs achieve the original twin aims of utility regulation — consumer protection and industry development. They provide consumers with the benefits of a cleaner and more diverse energy supply while isolating them from the risks of developing new generation projects. Many credit programs include cost containment mechanisms to further protect consumers. For industry, credits spur investment in new facilities and provide utilities with a cost-effective, flexible compliance mechanism. Illinois’ Zero Emission Credit (ZEC) program is wholly consistent with the electricity industry’s legal structure and with the historic goals of utility regulation. The ZEC program selects nuclear generators because they meet state environmental goals. The program places legal obligations on utilities, and not generators selling at wholesale, and it protects consumers by ensuring that they do not overpay for the legislatively determined environmental benefits of nuclear power. Appellants’ sweeping view of FERC’s rate regulation authority threatens to preempt state energy credit programs. Under appellants’ reading of the FPA, a state energy credit program is preempted because payments to generators for credits are made “in connection with” wholesale sales. Appellants’ novel reading of the FPA confuses Congress’s broad delegation of authority to FERC to set just and reasonable wholesale rates with imagined Congressional intent to usurp traditional state functions. It is inconsistent with precedent and would call into question long-standing FERC practice. In asking this Court to reinterpret FERC’s rate regulation authority, appellants seek to deny FERC the opportunity to harmonize its market regulation with state programs, as it has done in numerous proceedings. In doing so, appellants would weaken FERC’s authority and create new regulatory gaps. Energy credit programs would be beyond the reach of states, and FERC would be unable to reconcile state programs with wholesale power markets. The resulting “regulatory ‘no man’s land,’” FERC v. Electric Power Supply Association, 136 S.Ct. 760, 780 (2016) (citation omitted) would threaten traditional state efforts to pursue legitimate consumer protection and environmental goals without providing FERC any authority to achieve those ends. While eliminating energy credit programs, appellants’ proposed expansion of FERC’s exclusive field could also sweep environmental emission allowances and an array of financial products under FERC’s rate regulation jurisdiction. This Court should reject appellants’ reading of the FPA because it would unduly diminish state authority while “extend[ing] FERC’s power to some surprising places.” Id. at 774.