Court Upholds Illinois Nuclear Subsidies Law. Here's Why It's a Big Deal for Renewable Energy, Too.

A defeat in federal court likely would have been used to challenge state policies around the country that promote renewable energy, environmental law experts say.

Wind turbines tower over Exelon's nuclear power plant near Marseilles, Illinois. Credit: Scott Olson/Getty Images

Wind turbines accompany Exelon's nuclear power plant near Marseilles, Illinois. A state law helps support both nuclear and renewable energy. Credit: Scott Olson/Getty Images

A federal appeals court on Thursday upheld a 2016 Illinois law that provides subsidies to nuclear power plants and also supports clean energy programs in the state.

It's the latest of several federal rulings to uphold the right of states to regulate electricity prices within their borders, giving states latitude to subsidize certain energy sources.

"The decision is a big win for states' authority over energy policy. That's important because states have been the big driver for clean energy in the U.S.," said Miles Farmer, staff attorney for the climate and clean energy program at the Natural Resources Defense Council.

The ability of states to regulate electricity prices is at the heart of several state renewable energy programs that are considered critical to the nation's ability to cut greenhouse gas emissions to address climate change. A defeat in the Illinois case likely would have been used to challenge those renewable energy policies, such as support of offshore wind farms in the Northeast and a new California law requiring all electricity in the state be zero-carbon by 2045, environmental laws experts said.

 

A three-judge panel of the Seventh Circuit Court of Appeals in Chicago rejected the arguments of the Electric Power Supply Association, a trade group for power plant owners, which contended that the Illinois law was an illegal infringement on federal control of wholesale electricity pricing.

The trade group said on Twitter it is now looking for relief from a proposal before the Federal Energy Regulatory Commission that would change how the nation's largest power grid operator weighs state subsidies in deciding which power plants are offering power at the lowest cost.

Legal experts say the FERC proposal would help the companies, but the effects would be much less drastic than if Thursday's court decision had gone the other way. "The legal challenge really had the potential to undermine a lot of state clean energy programs," said Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program.

Illinois lawmakers passed the Future Energy Jobs Act in 2016, largely inspired by financial turmoil at the state's two nuclear plants owned by Exelon.

Under the law, customers of the state's utilities are required to pay a monthly charge that helps support the two nuclear plants. The charge (the equivalent of up to $16.50 per megawatt-hour last year) is based on a calculation of the social cost of emissions. Supporters of the law, which also includes provisions to pay for clean energy programs, say it will lead to a net savings for consumers because of financial benefits from clean energy programs and environmental benefits.

New York and New Jersey have similar laws that subsidize nuclear power and provide support to clean energy programs. The New York case was challenged on similar grounds to the one in Illinois. A federal district judge upheld the law, and the ruling is currently being appealed. The New Jersey law took effect this year and has not yet been challenged.

"We've now had a few cases endorsing broad state authority to choose their sources of electric generation," Peskoe said. He said that's not all positive, though, because it also implies that states have the power to subsidize dirty energy, although no state has a fossil fuel subsidy that uses a payment mechanism like the one at issue in these case.

The Illinois decision was written by Judge Frank Easterbrook, a conservative judge appointed by Ronald Reagan.

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