Elec. Power Supply Ass'n v. Star

904 F.3d 518
CourtCourt of Appeals for the Seventh Circuit
DecidedSeptember 13, 2018
DocketNos. 17-2433 & 17-2445
StatusPublished
Cited by11 cases

This text of 904 F.3d 518 (Elec. Power Supply Ass'n v. Star) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Elec. Power Supply Ass'n v. Star, 904 F.3d 518 (7th Cir. 2018).

Opinion

Easterbrook, Circuit Judge.

*521Regional transmission organizations manage the interstate grid for electricity. See, e.g., Benton County Wind Farm LLC v. Duke Energy Indiana, Inc. , 843 F.3d 298 (7th Cir. 2016) ; MISO Transmission Owners v. FERC , 819 F.3d 329 (7th Cir. 2016). Midcontinent Independent System Operator (MISO) and PJM Interconnection handle the grid in and around the Midwest. Many large generators of electricity sell most if not all of their power through auctions conducted by regional organizations, which are regulated by the Federal Energy Regulatory Commission. States must not interfere with these auctions. Hughes v. Talen Energy Marketing, LLC , --- U.S. ----, 136 S.Ct. 1288, 194 L.Ed.2d 414 (2016).

Illinois has enacted legislation subsidizing some of the state's nuclear generation facilities, which the state fears will close. 20 ILCS 3855/1-75(d-5). These favored producers receive what the state calls "zero emission credits" or ZECs. (We call them credits.) Generators that use coal or gas to produce power must purchase these credits from the recipients at a price set by the state. The price of each credit is $16.50 per megawatt-hour, a number Illinois derived from a federal working group's calculation of the social cost of *522carbon emissions. (Coal and gas plants emit carbon dioxide; nuclear, wind, solar, and hydro plants don't.) The price per credit falls if a "market price index" exceeds $31.40 per megawatt-hour. Illinois derives this index from the annual average energy prices in the auction conducted by PJM and the prices in two of the state's regional energy markets. The adjustment is designed "to ensure that the procurement [of electricity] remains affordable to retail customers ... if electricity prices increase". 20 ILCS 3855/1-75(d-5)(1)(B).

Plaintiffs (an association representing electricity producers, plus several municipalities) contend that the price-adjustment aspect of the state's system leads to preemption by the Federal Power Act because it impinges on the FERC's regulatory authority. They concede that a state may take many steps that affect the price of power. It may levy a tax on carbon emissions. It may tax the assets and incomes of power producers. It may use tax revenues to subsidize some or all generators of power. It may create a cap-and-trade system under which every firm that emits carbon must buy credits in a market (firms that emit less carbon, or none, will be the sellers). As plaintiffs see matters, although such systems affect the price in the PJM and MISO auctions, they do not regulate that price. But the zero-emission-credit system, plaintiffs insist, indirectly regulates the auction by using average auction prices as a component in a formula that affects the cost of a credit. The district judge did not agree with this argument and granted summary judgment to the defendants. 2017 U.S. Dist. LEXIS 109368 (N.D. Ill. July 14, 2017).

The parties' briefs address a number of procedural questions. These include whether a claim of preemption may be presented directly under the Supremacy Clause of the Constitution and whether relief under the theory of Ex parte Young , 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), would be appropriate against the state defendants in light of remedies potentially available under the Federal Power Act. See Armstrong v. Exceptional Child Center , --- U.S. ----, 135 S.Ct. 1378, 191 L.Ed.2d 471 (2015) ; Verizon Maryland, Inc. v. Public Service Commission of Maryland , 535 U.S. 635, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002). But none of the procedural disputes concerns subject-matter jurisdiction, which rests on both 28 U.S.C. § 1331 (federal-question jurisdiction) and 16 U.S.C. § 825p (authorizing suits in equity to enforce the Federal Power Act). Because the district court's jurisdiction is secure, we can go straight to the merits-for, if we decide that federal law does not preempt the state statute, none of the procedural issues matters.

At oral argument we expressed concern that the Federal Energy Regulatory Commission had not decided whether Illinois has interfered with its authority over auctions for interstate power. After receiving submissions from the litigants addressing the possibility of invoking the doctrine of primary jurisdiction (another non-jurisdictional doctrine, despite its name) and waiting for the FERC to act on petitions pending before it, we decided to ask the agency to give us its views as an amicus curiae . The Commission and the United States then filed a joint brief concluding that Illinois' program does not interfere with interstate auctions and is not otherwise preempted. More briefs from the parties followed, and the appeals are at last ready for decision.

The Federal Power Act divides regulatory authority between states and the FERC. The Commission regulates the sale of electricity in interstate commerce (including auctions conducted by regional organizations), while states regulate local *523distribution plus the facilities used to generate power. 16 U.S.C.

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904 F.3d 518, Counsel Stack Legal Research, https://law.counselstack.com/opinion/elec-power-supply-assn-v-star-ca7-2018.