The Changing Electric Utility Industry – The Litigation Risks Ahead April 28, 2015
Today’s Agenda • Energy Litigation Before the U.S. Supreme Court • Litigation Arising From a Changing Clean Energy Landscape • Distributed Generation Litigation Trends 2
Today’s Presenters Frank Lindh | Partner Cameron Prell | Counsel San Francisco, CA Washington, D.C. Richard Lehfeldt | Partner Peter Miller | Senior Counsel Washington, D.C. Washington, D.C. 3
ENERGY LITIGATION BEFORE THE UNITED STATES SUPREME COURT Today we will discuss three Supreme Court cases – one now decided, the other two still pending – involving questions of federal versus state jurisdiction in the energy industry Presenter: Frank Lindh 4
Oneok, Inc. v. Learjet, Inc. U.S. Supreme Court Case No. 13-271 (Opinion Issued April 24, 2015) Last Tuesday, the Court decided a case in which the question presented was whether state-law- based lawsuits against natural gas sellers were preempted by federal law. 5
Oneok, Inc. v. Learjet, Inc. (Continued) 1. Context: California Energy Crisis of 2000-2001 2. Genesis: State-law based lawsuits brought by large natural gas end-use customers against natural gas sellers engaged in both retail and wholesale sales 6
Oneok, Inc. v. Learjet, Inc. (Continued) 3. Alleged Misconduct: Sellers priced their retail sales by reference to market indices, then allegedly manipulated the indices by making false reports to the index publishers, among other alleged misconduct 7
Oneok, Inc. v. Learjet, Inc. (Continued) 4. Question Presented: Does federal regulation of sellers’ wholesale sales, including rules governing reporting to price index publishers, preempt state-law claims by their retail customers? 8
Oneok, Inc. v. Learjet, Inc. (Continued) 5. Holding: Lawsuits are not preempted and can proceed 6. Rationale: In the natural gas industry, the states are free to regulate and police retail sales, while federal authorities regulate only wholesale sales 9
Oneok, Inc. v. Learjet, Inc. (Continued) Preservation of state authority, and a collaborative relationship between state and federal authorities, characterize both the Natural Gas Act of 1937 and the Federal Power Act of 1935 10
NEXT UP: ANOTHER ENERGY PREEMPTION CASE Pending now are petitions in two companion cases – from New Jersey and Maryland – involving challenges to state authority over power plant construction and ratepayer funding for such projects. 11
New Jersey and Maryland Power Plant Incentive Programs */ New Jersey and Maryland enacted programs to fund new in-state power plants via rates paid by retail ratepayers */ Disclosure: Crowell & Moring LLP represents Competitive Power Ventures Inc., a party in both of the cases discussed herein. 12
New Jersey and Maryland Power Plant Incentive Programs (Continued) PAYMENT STRUCTURE Competing power plant developers made offers to construct new plants Winning bidder gets paid its offer price, using the device of a “contract for difference” Developer gets (or pays) any “difference” between its offer price and its revenues from sales in a regional capacity market 13
New Jersey and Maryland Power Plant Incentive Programs (Continued) LITIGATION Lower federal courts held the New Jersey and Maryland incentives preempted by federal rules governing a regional power plant capacity auction PPL Energy Plus, LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014), affirming 977 F.Supp.2d 372 (D.N.J. 2013); PPL Energy Plus, LLC v. Nazarian, 753 F.3d 467 (4 th Cir. 2014), affirming 974 F.Supp.2d 790 (D.Md. 2013) 14
Pending Petitions for Certiorari In The New Jersey and Maryland Cases On March 23, 2015, the Supreme Court invited the Solicitor General “to file briefs in these cases expressing the views of the United States .” Nazarian v. PPL Energy Plus, Supreme Court Case Nos. 14-614, et al. 15
New Jersey and Maryland Cases: What’s Next? The Solicitor General will file a brief expressing the U.S. Government’s views, presumably informed by the Court’s intervening decision in Oneok v. Learjet, supra . 16
New Jersey and Maryland Cases: Options for Disposition The Supreme Court will do one of three things: • Deny certiorari, thus ending the litigation; or • Grant the writs and agree to decide the cases next Term; or • Grant, summarily vacate, and remand to the lower courts for further consideration 17
A THIRD CASE, QUESTIONING THE REACH OF FEDERAL JURISDICTION Also pending at the Supreme Court is yet another energy case raising a jurisdictional question, this one concerning a direct challenge to the Federal Energy Regulatory Commission’s authority under the Federal Power Act 18
THE D.C. CIRCUIT’S “DEMAND RESPONSE” DECISION Last May, the D.C. Circuit struck down a demand response program adopted by the Federal Energy Regulatory Commission, holding that it exceeded the agency’s authority under the Federal Power Act. Electric Power Supply Ass’n v. FERC, D.C. Cir. Case No. 11-1486 (May 23, 2014) 19
HOW “DEMAND RESPONSE” WORKS Retail customers get paid to reduce their electric usage during peak demand periods For regional grid operators, demand response can be a substitute for operating “peaker” power plants Aggregators sign up batches of retail customers, and then sell demand response services to the grid operators 20
Demand Response Case Reaches the Supreme Court The Solicitor General, on behalf of the Federal Energy Regulatory Commission, and an aligned industry group have asked the Supreme Court to review the D.C. Circuit’s decision striking down the FERC demand response program. FERC v. Electric Power Supply Ass’n , Supreme Court Case Nos. 14-840, et al. (petitions for certiorari pending) 21
Demand Response Case: Supreme Court Action is Imminent The Court is expected to act on the petitions for certiorari in this case next Monday, May 4 22
LITIGATION ARISING FROM A CHANGING CLEAN ENERGY LANDSCAPE Presenter: Cameron Prell 23
Litigation Risks on the Horizon? States are Being Asked to Reduce Grid Carbon Intensity • In June 2014, EPA proposed a GHG emissions reduction rule for existing power plants that could have enormous impact on the design and implementation of state clean energy policies & regulations • We will highlight the compliance option constraints states face and discuss a handful of cases challenging state authority to mandate and incentivize clean energy 24
The Proposed Rule Sets Diverse State-by-State CO2 Emissions Standards 25
GHG Reduction “Building Blocks” 1. Increase efficiency at coal plants by upgrading equipment and modifying operations 2. Switch from coal-powered plants to less carbon-intensive sources, such as natural gas-fired plants 3. Expand investments in in-state renewable energy or nuclear generation 4. Increase energy efficiency in homes, buildings and industries to reduce power consumption 26
State Compliance Action Flexibilities States may devise their own plan to achieve compliance 1. They may directly regulate emissions from fossil power plants (EGUs) and/or take action that indirectly affects those EGUs’ emissions (such as through energy efficiency, policies that encourage more investment in zero-carbon power generation technologies, or changes to electric transmission infrastructure) 2. States may propose market-based mechanisms (such as state clean energy standard, feed-in tariffs, cap-and-trade programs; carbon tax) OR augment, modify or increase the stringency of existing programs ( e.g. Renewable Portfolio Standards) 3. States may join together for regional plans 4. States may use a “rate - based” approach ( i.e., CO2/MWh) or a “mass - based” approach ( i.e., a total amount of CO2 allowed to be emitted in the state, sometimes also called a CO2 budget or cap) 27
Proposed Rule Already Being Challenged 28
State Clean Energy Policies, By Themselves, Subject to Increased Scrutiny 29
Recommend
More recommend
