On May 29, 2018, the U.S. Department of Justice (“DOJ”) and FERC argued in a joint brief (“Joint Brief”) filed with the U.S. Court of Appeals for the Seventh Circuit (“Seventh Circuit”) that Illinois’ plan to provide credits to nuclear power plants does not interfere with FERC’s authority over wholesale electricity markets.  DOJ and FERC filed the Joint Brief in response to the Seventh Circuit’s request asking the agencies for their views on whether the Federal Power Act (“FPA”) preempts Illinois’ zero emission credits program (“Illinois ZEC Program”). In the proceeding at issue, the Seventh Circuit is reviewing an appeal brought by a coalition of independent power producers and Illinois energy consumers (“Petitioners”) regarding the U.S. District Court for the Northern District of Illinois (“District Court”) ruling that the Illinois ZEC Program as part of Illinois’ “Future Energy Jobs Act” was not preempted by the FPA.  Under the Illinois ZEC Program, electric distribution companies are required to pay subsidies to state-selected “zero emission facilities,” such as nuclear power plants, based on the amount of electricity generated by these qualifying facilities.  Petitioners to the Illinois ZEC Program argued that the program affected wholesale power prices and, therefore, was preempted by the FPA.  Given that FERC’s federal jurisdiction under the FPA was implicated by these arguments, the Seventh Circuit invited the U.S. government to weigh in.  Subsequently, the DOJ and FERC filed the Joint Brief to respond specifically to the preemption issue.

The DOJ and FERC argued in the Joint Brief that the District Court correctly ruled that the Illinois ZEC Program is not preempted by the FPA.  According to the Joint Brief, if the Illinois ZEC Program impermissibly impacted interstate wholesale rates, then the program would be preempted.  However, the DOJ and FERC argued that the Illinois ZEC Program does not require participation in FERC-jurisdictional wholesale markets and instead, the Illinois ZEC Program merely targets the zero-carbon emission attributes of nuclear plants within the state of Illinois, over which Illinois maintains exclusive jurisdiction.  The DOJ and FERC added that the ZECs are not payments for sales of energy or capacity at wholesale and therefore do not impede FERC’s jurisdiction over wholesale transactions.  Accordingly, the Joint Brief argued that the Illinois ZEC Program falls within the states’ reserved authority over generation facilities under the FPA.

A copy of the Joint Brief is available here.