Regional Greenhouse Gas Initiative (RGGI) litigation settled
The New York State Energy Research and Development Authority (NYSERDA), New York State Department of Environmental Conservation (DEC) and New York State Public Service Commission have announced a settlement of Indeck Energy’s challenge to the legality of the RGGI. Indeck and others contended that the RGGI system of auctioning emission allowances puts companies who are locked into long term contracts at a serious disadvantage and challenged New York’s authority to implement RGGI. This litigation and settlement highlight the kinds of issues likely to arise as companies face the prospect and costs of current and future regulatory programs focused on long-term reduction of greenhouse gas emissions.
On December 23rd, a consent decree, approved by all parties to the Indeck litigation, was lodged with the court in which the lawsuit was pending. The New York Attorney General’s Office will receive public comments on the decree until January 29, 2010. After consideration of the public comments, New York will decide whether to move for judicial entry of the consent decree.
Under the decree, Con Edison would pay the cost of additional allowances that Indeck and other parties would need through the end of their long term contracts. DEC “committed in the Consent Decree to maintain the LTC set-aside account under the DEC Rule at 1.5 million allowances annually through 2016.” In addition, the Public Service Commission “agreed to consider approval of a tariff amendment allowing Con Edison to pass through the costs of purchasing allowances [estimated at $2.6 million a year] to its ratepayers.” The settlement announcement suggests the pass through will ultimately be rate neutral because “NYSERDA has agreed in the Consent Decree to use a portion of the RGGI proceeds to fund energy efficiency programs in Con Edison’s rate territory, which such funds will be commensurate with the costs associated with Con Edison’s payment of allowance costs. . .”
New York's participation in RGGI to be reconsidered
New York Governor David Paterson plans to reconsider the rules that enable New York’s participation in the Regional Greenhouse Gas Initiative (RGGI), according to a recent report in the New York Times. Power plants have long contended that the RGGI system of auctioning emission allowances puts companies who are locked into long term contracts at a serious disadvantage. Such generators, argue representative groups such as the Independent Power Producers of New York (IPPNY), cannot recoup the extra costs associated with purchasing allowances. Similar concerns prompted Indeck Energy in January to file a lawsuit challenging New York’s authority to implement RGGI, and alleging that the regulations would essentially impose an unauthorized tax.
News of Paterson’s agreement to reexamine the rules has provoked a sharp response from environmental groups. Luis Martinez, energy attorney with the Natural Resources Defense Council, commented, “Reopening the rule for the Regional Greenhouse Gas Initiative to give power plant owners another bite at the apple is not only unnecessary to address their concerns, it takes us in the wrong direction. Governor Paterson should be fulfilling the needs of consumers, not making deals with industry behind closed doors.” IPPNY has disputed any suggestion that the decision to reopen the rules was the result of behind the scenes maneuvering, stating, “For several years, these concerns were communicated in IPPNY's comments to the Department of Environmental Conservation and to the press and public through multiple press releases during the RGGI rulemaking process. Both during the rulemaking process and after, IPPNY made those same concerns known to the Executive Branch in a manner that is available to every citizen and interest group in this state.”
Environmental groups have submitted Freedom of Information Act requests for Governor Paterson’s schedule and records of any communications with power generator groups and are calling on his administration to release the details of any agreement with energy producers.
New York RGGI Implementing Regulations:
Indeck Energy files lawsuit challenging New York's authority to implement RGGI
Indeck Energy has filed suit against several New York state agencies over their participation in the Regional Greenhouse Gas Initiative (RGGI), a carbon trading system between 10 Northeastern states designed to limit greenhouse gas emissions by power plants. Indeck Energy is the owner of Indeck-Corinth Generating Station, a combined-cycle natural gas plant in upstate New York. RGGI began its first compliance period on January 1, 2009. The Indeck lawsuit alleges that the agencies did not have authority from the New York legislature to implement the system. The complaint further alleges that the multi-state RGGI compact is unconstitutional without Congressional authorization. The complaint names Governor David Paterson, the New York State Department of Environmental Conservation, the New York State Energy Research and Development Authority, and the New York State Public Service Commission as defendants.
According to Indeck, regulations implemented pursuant to the RGGI would essentially impose an unauthorized tax on it. Under RGGI, power plants must buy permits or allowances to cover the amount of carbon they produce. Furthermore, Indeck alleges, it would not have a fair opportunity to recover its costs. Indeck contends that because the RGGI regulations target clean, low-emitting stations with onerous costs, the net result would be to actually increase emissions.
In a statement released to the press, Indeck’s President Gerald F. DeNotto claimed, “The regulations arbitrarily discriminate against a few electric generators that are bound by long-term fixed price contracts.” Furthermore, he contends that “New York’s version of RGGI levies a ‘RGGI tax’ on electric generators.” According to DeNotto, this leaves Indeck’s Corinth plant with “a heavy cost of the allowance tax, and no opportunity to recover it.” These claims echo statements made by DeNotto in public comment hearings regarding RGGI implementing regulations in 2007.
Environmental groups and the New York state agencies named in the complaint have begun to respond quickly to Indeck’s allegations. According to Peter Iwanowicz, director of the Office of Climate Change in New York’s Department of Environmental Conservation, Indeck’s claims are without merit. Iwanowicz claims that his department adopted the RGGI pursuant to authority the legislature had previously provided. As to the issue of the constitutionality of the multi-state compact, Iwanowicz denied that was an issue, noting that each state in the RGGI adopted separate regulations and maintained full sovereignty. State government watchdog group Environmental Advocates of New York (EANY) also issued two statements objecting to Indeck’s claims. Among other statements, EANY notes that the two-year public process to finalize RGGI regulations already resulted in a 1.5 million ton set aside for power plants in long term contracts.
