On January 29, Indeck Energy Services Inc. filed a lawsuit in Saratoga County, New York against New York State’s participation in and implementation of the Regional Greenhouse Gas Initiative (“RGGI”) program.  Indeck owns almost 20 electric power plants powered by various types of fuels, including a 128-MW combined cycle natural gas-fired power plant in Corinth, New York.

The RGGI is a carbon-trading system established by 10 Northeastern states to reduce carbon dioxide emissions from power plants by 10 percent over the next decade. In addition to New York, the states participating in RGGI are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Rhode Island, and Vermont. Under the plan, emissions are capped at current levels until 2014, when they will be reduced by 2.5% per year from 2015 through 2018. The number of available allowances will decrease as the overall cap is lowered. Unless utilities start emitting less, the price of carbon emissions will rise, encouraging plants to invest in cleaner technologies to avoid the higher cost of polluting. The first carbon auction was held this summer, (see August 1, 2008 edition of the WER) and power plants were required to begin complying with the carbon cap on January 1, 2009.

Indeck claims that RGGI provides no opportunity for power plants that entered into long-term contracts to recover the costs of compliance. The company signed a long-term contract with Consolidated Edison Company in 1989 to sell power at a fixed price, under terms required by the PSC. However, the contract did not contemplate the costs of complying with a cap on carbon emissions, and Indeck states that the New York PSC has refused to consider allowing the company to update the contract terms to allow for cost recovery.

Indeck is challenging the legal authority of the New York governor and several state agencies to implement the cap-and-trade program without legislation, noting that New York was the only state participating in RGGI that did not pass enabling legislation. Indeck also challenges the RGGI states’ constitutional authority to take part in the multi-state program without federal legislation. The lawsuit 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.

A company press release is available at: http://www.indeckenergy.com/news.php.