Respondents Brief — Electric Power Supply Association, et al., Petitioners v. Anthony M. Star, et al.

No. 18-868

IN THE

Supreme Court of the United States

_________

ELECTRIC POWER SUPPLY ASSOCIATION, NRG

ENERGY, INC., and CALPINE CORP.,

Petitioners,

v.

ANTHONY STAR, in his official capacity as Director of

the Illinois Power Agency, and BRIEN J. SHEAHAN,

JOHN R. ROSALES, SADZI MARTHA OLIVA, and D.

ETHAN KIMBREL, in their official capacities as

Commissioners of the Illinois Commerce Commission,

and EXELON GENERATION COMPANY, LLC,

Respondents.

________

On Petition for a Writ of Certiorari

to the United States Court of Appeals for the

Seventh Circuit

________

BRIEF IN OPPOSITION

________

MATTHEW E. PRICE

Counsel of Record

IAN HEATH GERSHENGORN

DAVID W. DEBRUIN

ZACHARY C. SCHAUF

JENNER & BLOCK LLP

1099 New York Ave., NW

Suite 900

Washington, DC 20001

(202) 639-6000

mprice@jenner.com

i

CORPORATE DISCLOSURE STATEMENT

Pursuant to this Court’s Rule 29.6, Respondent

states as follows:

Exelon Generation Company, LLC, is not a public

company. Its indirect parent, Exelon Corporation, is a

publicly held company. Exelon Corporation has no

parent corporation and no publicly held corporation

owns 10% or more of its stock.

ii

TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT .............. i

TABLE OF AUTHORITIES ......................................... iv

INTRODUCTION ............................................................. 1

STATEMENT OF THE CASE ....................................... 4

A.

The FPA’s Cooperative

Federalism. .................................................. 4

B.

The ZEC Program...................................... 6

C.

Proceedings Below. .................................... 9

REASONS FOR DENYING THE PETITION ......... 14

I.

There Is No Split Of Authority Or

Disagreement Among Sovereigns. .................... 15

II.

No Crisis Justifies A Grant. ................................ 21

III.

This Case Is Rife With Vehicle Problems. ....... 25

A.

This Case Does Not Present

Petitioners’ Question Presented. ........... 25

B.

The Court Cannot Reach

Petitioners’ Question Presented

Without Addressing Threshold

Justiciability Barriers No Circuit

Court Has Considered. ............................ 27

iii

IV.

The Decision Below Is Correct........................... 31

CONCLUSION ................................................................ 37

iv

TABLE OF AUTHORITIES

CASES

Allco Finance Ltd. v. Klee, 861 F.3d 82 (2d Cir.

2017), cert. denied, 138 S. Ct. 926 (2018) .............. 16

Armstrong v. Exceptional Child Center, Inc.,

135 S. Ct. 1378 (2015).............................. 4, 28, 29, 30

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................ 27

City of Arlington v. FCC, 569 U.S. 290 (2013) ......... 35

Coalition For Competitive Electricity v.

Zibelman, 272 F. Supp. 3d 554 (S.D.N.Y.

2017) ........................................................ 17, 18, 28, 29

Coalition For Competitive Electricity v.

Zibelman, 906 F.3d 41 (2d Cir. 2018),

petition for cert. filed, 87 U.S.L.W. 3295

(U.S. Jan. 7, 2019) (No. 18-879) .................... passim

Connecticut Department Public Utility

Control v. FERC, 569 F.3d 477 (D.C. Cir.

2009) ............................................................................ 5

Connecticut Light & Power Co. v. FPC, 324

U.S. 515 (1945) ......................................................... 34

Cutter v. Wilkinson, 544 U.S. 709 (2005)................... 28

Douglas v. Independent Living Center of

Southern California, Inc., 565 U.S. 606

(2012) ........................................................................ 29

FERC v. Electric Power Supply Ass’n, 136 S.

Ct. 760 (2016) ................................................... 3, 6, 31

v

Hillsborough County v. Automated Medical

Laboratories, Inc., 471 U.S. 707 (1985) ................ 35

Hughes v. Talen Energy Marketing, 136 S. Ct.

1288 (2016) ...................................................... passim

National Meat Ass’n v. Harris, 565 U.S. 452

(2012) ........................................................................ 35

New York State Department of Social Services

v. Dublino, 413 U.S. 405 (1973) ............................. 23

Northern Natural Gas Co. v. State

Corporation Commission of Kansas, 372

U.S. 84 (1963) ..................................................... 35, 36

Northwest Central Pipeline Corp. v. State

Corporation Commission of Kansas, 489

U.S. 493 (1989) ..................................................4-5, 36

Safe Streets Alliance v. Hickenlooper, 859 F.3d

865 (10th Cir. 2017) ................................................. 29

Utah Power & Light Co. v. Pfost, 286 U.S. 165

(1932) .................................................................. 33, 34

Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627

(2013) ........................................................................ 35

STATUTES

16 U.S.C. § 824(b)(1) ....................................................... 5

16 U.S.C. § 824d(a).......................................................... 5

16 U.S.C. § 825l(b) ........................................................ 30

20 ILCS 3855/1-10 ........................................................... 7

20 ILCS 3855/1-75(d-5)(1)(B) ........................................ 9

20 ILCS 3855/1-75(d-5)(1)(B)(i) .................................... 8

vi

20 ILCS 3855/1-75(d-5)(1)(C) ........................................ 8

N.J.S.A. §§ 48:3-87.3 to 48:3-87.7 ................................ 24

LEGISLATIVE MATERIALS

S. Rep. No. 74-621 (1935) ............................................. 34

SB2814, Public Act 099-0906, 99th Gen.

Assemb. (Ill. 2016) ...................................... 6, 7, 8, 33

ADMINISTRATIVE R ULINGS

California Public Utilities Communication,

133 FERC ¶61,059 (2010) ........................................ 5

Calpine Corp. v. PJM Interconnection, LLC,

163 FERC ¶61,236 (2018) .................... 12, 14, 22, 24

Transmission Planning & Cost Allocation by

Transmission Owning & Operating Public

Utilities, 139 FERC ¶61,132 (2012) ....................... 5

Utilization of Electric Storage, 158 FERC

¶61,051 (2017) ............................................................ 5

WSPP Inc., 139 FERC ¶61,061 (2012) ........................ 6

OTHER AUTHORITIES

28 C.F.R. § 0.20 ............................................................. 10

Connecticut Department of Energy &

Environmental Protection, Notice of

Request for Proposals from Private

Developers for Zero Carbon Energy (July

31, 2018), https://bit.ly/2Q7kj0y ............................ 24

vii

Illinois Power Agency, Zero Emission

Standard Procurement Plan (July 31,

2017), https://www.illinois.gov/sites/ipa/D

ocuments/2018ProcurementPlan/Zero-Em

ission-Standard-Procurement-Plan-ICC-Fi

ling.pdf ...................................................................... 26

Motion to Amend, and Amendment To,

Complaint, and Request for Expedited

Action on Amended Complaint, Calpine

Corp. v. PJM Interconnection, L.L.C.,

Docket No. EL16-49-000 (FERC Jan. 9,

2017) .................................................................... 13, 14

Pennsylvania General Assembly Nuclear

Energy Caucus, Bicameral Nuclear

Energy Caucus Report: 2017-2018 Session

(Nov. 29, 2018) ......................................................... 24

Request for Expedited Action, IPPNY, Inc. v.

NYISO, Inc., Docket EL13-62-002 (FERC

Jan. 9, 2017)........................................................ 13, 14

Transcript of Oral Argument, Hughes v. Talen

Energy Marketing, 136 S. Ct. 1288 (2016)

(No. 14-614) ............................................................. 21

1

INTRODUCTION

Petitioners ask this Court to review a concededly

splitless preemption case in which the United States, the

Federal Energy Regulatory Commission (“FERC”), the

States, and all eight judges to have considered the

question agree: there is no preemption.

The case concerns the Federal Power Act’s

(“FPA’s”) scheme of cooperative federalism. States

regulate “facilities used for the generation of electric

energy,” while FERC regulates wholesale electricity

sales. 16 U.S.C. § 824(b)(1). For decades, States have

used their authority to support generators with

characteristics they deem socially beneficial.

In Hughes v. Talen Energy Marketing, 136 S. Ct.

1288 (2016), this Court took care not to disturb that

longstanding state authority while invalidating a

Maryland subsidy program that tried to set prices for

wholesale sales. Hughes held that the FPA preempted

Maryland’s program because it “condition[ed] payment

of funds on capacity clearing the [wholesale] auction”

regulated by FERC. Id. at 1299; id. at 1297 n.9. By

conditioning payment on successful sales in the FERCregulated auction, Maryland illegally replaced FERC’s

rate with the State’s. But Hughes cautioned that, absent

the “fatal defect” of “condition[ing] payment of funds on

capacity clearing the [wholesale] action,” “[n]othing in

this opinion should be read to foreclose” States from

“other measures … to encourage … clean generation.”

Id. at 1299. “States, of course, may regulate within the

domain Congress assigned to them even when their laws

incidentally affect areas within FERC’s domain.” Id. at

1298.

2

After Hughes, Petitioners sued to invalidate ZeroEmissions Credit (“ZEC”) programs in Illinois and New

York. They acknowledged that these programs lack

Hughes’ “fatal defect”: They do not condition payment

on generators’ sales in FERC’s auctions. Instead, like

renewable-energy credit programs that have existed for

decades with FERC’s approval, ZEC programs pay for

production—providing generators credits for each

megawatt-hour of clean electricity they produce.

Nonetheless, Petitioners urged the courts to

disregard the limits Hughes placed on its “limited”

holding. 136 S. Ct. at 1299. They argued that Hughes

also condemns state programs lacking Hughes’ “fatal

defect,” if the participating generators happen in fact to

sell in wholesale auctions (as Petitioners claimed was

true in Illinois and New York). Two district courts

dismissed those claims, and unanimous circuit panels

affirmed.

No further review is warranted. Petitioners concede

there is no split. In the three years since Hughes, only

the Seventh and Second Circuits have applied that

decision, and each has interpreted Hughes and the FPA

in the same way.

Each affected sovereign also agrees. In the Seventh

Circuit, FERC and the United States jointly filed an

amicus brief that rejected Petitioners’ theories, urged

the same reading of Hughes the courts below adopted,

and implored against resorting “to the extraordinary

and blunt remedy of preemption.” Br. for the United

States and the Federal Energy Regulatory Commission

at 20, 2018 WL 2746229 (“U.S. Br.”). Also urging the

same result was a coalition of seven States as amici.

3

Petitioners cry that ZEC programs will destroy

FERC’s markets, but that is belied by FERC’s own

words. FERC and the United States told the court that

FERC “has the means and the authority to confront”

any “effects” on its markets from ZEC programs, and

that “the Federal Power Act does not preempt” such

state programs. Id. at 8, 27. Nor are such effects

anything new. For decades, state programs have

affected FERC’s markets; as this Court has recognized,

state and federal domains “are not hermetically sealed

from each other.” FERC v. Elec. Power Supply Ass’n,

136 S. Ct. 760, 776 (2016); see U.S. Br. 22-27 (detailing

FERC precedent permitting “state programs that

support clean power in a variety of ways, such as credits

and purchase obligations,” notwithstanding their effects

on FERC’s markets).

Here, moreover, FERC is considering market rule

changes to “accommodate” these programs while

addressing Petitioners’ concerns about their indirect

effects on wholesale rates. If Petitioners are dissatisfied

with FERC’s resolution, they can seek judicial review of

FERC’s decision. Judicial intervention now would

disrupt FERC’s effort to use the scalpel of regulation,

rather than the chainsaw of preemption.

Several vehicle problems also afflict the Petition.

First, this case does not present the Question Presented.

Petitioners build their Question on the premise that

ZEC plants necessarily and inevitably “sell their entire

output via [wholesale] auctions.” Pet. i. But as both

circuits found, the complaint’s well-pleaded allegations

do not establish this premise (which is also contradicted

by facts subject to judicial notice). So, Petitioners must

4

resort to protesting that the circuits “brushed aside the

complaint’s allegations.” Pet. 21. They are wrong that

the circuits made any error. But at minimum, this

dispute makes the case a poor vehicle. To reach the legal

question Petitioners pose, Petitioners admit that the

Court would first need to referee this case-specific

pleading quarrel.

Second, the district court below found Petitioners

lacked Article III standing to advance a key part of their

argument—their challenge the ZEC price adjustment—

and both district courts concluded that Petitioners

lacked a cause of action under Armstrong v. Exceptional

Child Center, Inc., 135 S. Ct. 1378 (2015). Without

addressing those issues, the Court cannot reach the

merits—yet no circuit court has considered them.

The decisions below are also correct. ZEC programs

pay for what generators produce, not what they sell in

wholesale auctions. They therefore are permissible

exercises of States’ authority over generation. The

decisions below so holding are consistent with Hughes,

and the FPA’s text, legislative history, and purpose.

They also accord with long-established FERC precedent

concerning the bounds of FERC’s jurisdiction, a matter

on which FERC receives deference.

The Court should deny the Petition.

STATEMENT OF THE CASE

A.

The FPA’s Cooperative Federalism.

1. The electricity sector is an area of “congressionally

designed interplay between state and federal

regulation.” Nw. Cent. Pipeline Corp. v. State Corp.

5

Comm’n of Kan., 489 U.S. 493, 518 (1989). FERC

regulates wholesale electricity sales, ensuring that

“rates and charges made, demanded, or received … for

or in connection with” such sales are “just and

reasonable.” 16 U.S.C. § 824d(a). In Illinois, FERC sets

some wholesale prices via auctions administered by

private regional organizations. FERC also allows

wholesale buyers and sellers to enter (and set prices for)

bilateral contracts outside the auctions. Pet. App. 6a,

16a.

2. Meanwhile, States have exclusive jurisdiction over

“facilities used for the generation of electric energy,”

including electricity production, as well as over retail

sales. 16 U.S.C. § 824(b)(1).

States have long exercised this authority to pursue

state policies that help determine which generators

produce electricity.

Some States guarantee that

generators can recover their costs—keeping generators

open that otherwise would shutter. Utilization of Elec.

Storage, 158 FERC ¶61,051, P.22 (2017). States also

“grant loans, subsidies, or tax credits” to encourage

cleaner generation, or impose costs on generators that

pollute. Cal. Pub. Utils. Comm’n, 133 FERC ¶61,059,

P.31 n.62 (2010); Pet. App. 3a. FERC accepts these

policies even though they “driv[e] significant changes in

the mix of resources” in wholesale markets.

Transmission Planning & Cost Allocation by

Transmission Owning & Operating Pub. Utils., 139

FERC ¶61,132, P.5 (2012); Conn. Dep’t of Pub. Util.

Control v. FERC, 569 F.3d 477, 481 (D.C. Cir. 2009).

That reflects the “fact of economic life that the wholesale

and retail markets in electricity … are not hermetically

6

sealed from each other.” Elec. Power Supply Ass’n, 136

S. Ct. at 776. Quite the opposite: “transactions that occur

on the wholesale market have natural consequences at

the retail level,” and vice-versa. Id.; see Pet. App. 4a

(“[E]ach use of authorized power necessarily affects

tasks that have been assigned elsewhere.”).

Of note here, States for decades have offered

payments or imposed costs tied to each unit of electricity

(called a “megawatt-hour”) that generators produce.

Pet. App. 19a n.10, 37a, 77a. In particular, 29 States

(including Illinois) provide renewable energy credits

(“RECs”) to subsidize renewable generators. RECs are

“state-created and state-issued” credits “certifying that

electric energy was generated” using renewable

technology. WSPP Inc., 139 FERC ¶61,061, P.21 (2012).

In 2012, FERC confirmed it lacked jurisdiction over

RECs sold separately from electricity, because REC

sales are not sales of “electric energy at wholesale,” but

of “state-created” certificates reflecting how electricity

was produced. Id. FERC so held even though many of

these programs apply to generators that sell electricity

exclusively at wholesale. Coal. for Competitive Elec. v.

Zibelman, 906 F.3d 41, 55 (2d Cir. 2018), petition for cert.

filed, 87 U.S.L.W. 3295 (U.S. Jan. 7, 2019) (No. 18-879).

B.

The ZEC Program.

1. In December 2016, Illinois enacted comprehensive

energy legislation.

It provided energy-efficiency

funding, a community solar fund, job training for lowincome communities, and an expanded REC program.

SB2814, Public Act 099-0906, 99th Gen. Assemb. (Ill.

2016) (“SB2814”); see Pet. App. 13a. It also authorized

the ZEC Program.

7

The ZEC Program applies the REC model to

preserve prematurely retiring nuclear generation.

Recently, nuclear plants have been squeezed—between

fossil-fuel generators that do not bear the cost of their

air pollution, and renewable generators that receive

subsidies like RECs. When nuclear plants retire, the

result is heavier reliance on fossil-fuel plants. Illinois

enacted the ZEC Program to avoid the “dire

consequences to the environment” “associated” with

“premature closure of … nuclear power plants.” SB2814

§1.5(8) (SA.5).1

To address this crisis, the ZEC Program seeks to

“[r]educ[e] emissions of carbon dioxide and other air

pollutants,” id. §1.5(1)-(2) (SA.3), by attaching “value

[to] the environmental attributes” of “nuclear power,”

id. §1.5(3) (id.)—that is, the value of the positive

environmental externalities created by their continued

operation. A ZEC, like a REC, is a “credit that

represents the environmental attributes of one

megawatt hour of energy produced” by a nuclear plant.

20 ILCS 3855/1-10.

A state-administered competitive procurement

selects which facilities will receive ZECs. Any nuclear

plant interconnected with the two regional grids

covering Illinois—PJM Interconnection, L.L.C. (“PJM”)

or the Midcontinent Independent System Operator, Inc.

(“MISO”)—can apply.

The Illinois Commerce

Commission (“ICC”) selects plants based on

environmental criteria: “minimizing carbon dioxide

1 “SA” is the Supplemental Appendix attached to Exelon’s Seventh

Circuit brief.

8

emissions that result from electricity consumed in

Illinois”; “minimizing sulfur dioxide, nitrogen dioxide,

and particulate matter emissions that adversely affect

the citizens” of Illinois; and “any existing environmental

benefits that are preserved by” selection of the winning

facilities. 20 ILCS 3855/1-75(d-5)(1)(C). The ICC then

directs the State’s utilities to buy ZECs—but not energy

or capacity—from the winning plants. Id.

2. The ZEC Program does not specify how plants are

to sell the electricity they produce, nor does it condition

eligibility or payment on selling in any particular way.

Pet. App. 6a. In practice, ZEC plants have historically

sold their electricity in a variety of ways, including

outside FERC’s auctions. See infra at 25-26.

3. The ZEC price is capped at the social cost of

carbon—a federal interagency task force’s estimate of

damage from carbon emissions. 20 ILCS 3855/1-75(d5)(1)(B)(i); Pet. App. 2a, 19a n.11. Illinois used that

figure to measure the harm that would result from

nuclear plants’ closure. SB2814 §1.5(8) (SA.5). The ZEC

price begins at the social cost of carbon. But to protect

consumers, the ZEC price can fall below the social cost

of carbon (though never rise above it).

Each year, the ICC calculates a “market price

benchmark” based on forecasted energy prices (derived

from an energy futures price index at a regional trading

hub, which is not subject to FERC jurisdiction), and the

average of capacity prices in the two regional

transmission organizations covering Illinois (PJM and

MISO). Pet. App. 2a, 19a-20a. Those prices are never

paid to ZEC plants; rather, the benchmark is used as a

referent to potentially reduce the ZEC price.

9

“[T]herefore, even an adjusted ZEC price is not based

on the wholesale price a ZEC recipient receives.” Id. at

43a. If the benchmark is above $31.40/MWh (a historical

approximation of electricity prices), the ZEC price is

reduced below the social cost of carbon by the difference

between the benchmark and $31.40/MWh. Id. at 2a; id.

at 20a n.13; 20 ILCS 3855/1-75(d-5)(1)(B). There is no

true-up or reconciliation if (as is inevitable) actual

market prices diverge from forecasts.

C.

Proceedings Below.

1. In February 2017, Petitioners sued, claiming that

the FPA preempts the ZEC Program. The district court

dismissed. See Pet. App. 12a-55a. It held that

Petitioners lacked Article III standing insofar as their

suit was based on “the ZEC program’s price

adjustment”: Petitioners claimed an injury from the

ZEC Program’s effects on FERC’s markets, but the

price adjustment only decreased the ZEC price (and

hence any market effect). Id. at 24a-25a. Hence,

Petitioners’ alleged injury “is not traceable to the price

adjustment.” Id. at 24a. The court also held that

Petitioners lacked a cause of action to bring their

preemption claim. Id. 30a-34a. Finally, the court

rejected Petitioners’ preemption claim on the merits. Id.

34a-47a.2

2 The Seventh Circuit also affirmed dismissal of a similar suit by

certain industrial customers. Pet. App. 9a. Those customers have

not sought certiorari. Nor, contrary to their purported “Waiver of

Response,” see Feb. 15, 2019 Letter from Patrick N. Giordano, are

they Respondents here. The Seventh Circuit consolidated the two

cases only “for purposes of briefing and disposition”—not all

10

2. Petitioners appealed.

A broad coalition of

stakeholders—seven

States,

environmental

organizations such as Natural Resources Defense

Council, Inc. (“NRDC”) and Environmental Defense

Fund, energy economists, legal scholars, and trade

associations—all filed amicus briefs that opposed

Petitioners’ preemption theory, recognizing that it

would “cast a pall of uncertainty over a wide range of

longstanding and effective efforts states have

traditionally employed to promote the use of clean

energy and further the welfare and wellbeing of their

citizens.” NRDC 7th Cir. Br. 21.

After oral argument, the Seventh Circuit invited the

United States to provide its views in an amicus brief.

With the Solicitor General’s approval, see 28 C.F.R.

§ 0.20, FERC “and the United States then filed a joint

brief concluding that Illinois’ program does not interfere

with interstate auctions and is not otherwise

preempted.” Pet. App. 4a; infra at 19-21. The brief also

noted that FERC was conducting a proceeding to

address Petitioners’ concerns about the indirect effects

of the ZEC Program and other state subsidy programs

on wholesale markets. U.S. Br. 8, 21-22.

The Seventh Circuit panel, composed of Judges

Easterbrook, Sykes, and Reagan (sitting by

designation), unanimously affirmed the district court’s

dismissal. Pet. App. 1a-9a. The court declined to

purposes, Order, Village of Old Mill Creek v. Star, No. 17-2433 (7th

Cir. July 18, 2017), ECF No. 5, and issued separate mandates on

different dates. No timely certiorari petition was filed from the

industrial customers’ Seventh Circuit case, No. 17-2433.

11

address whether Petitioners have a cause of action.

Because

“none

of

the

procedural

disputes

concern[]subject-matter jurisdiction,” it stated it could

“go straight to the merits” and affirm on that basis. Id.

at 3a. It did not mention the district court’s Article III

holding.

The court noted Petitioners’ concession that “a state

may take many steps that affect the price of power.”

Pet. App. 3a. That includes “a tax on carbon,”

“subsidi[zing] some or all generators,” or “creat[ing] a

cap-and-trade system.” Id. So despite Petitioners’

rhetoric about the ZEC Program’s effects on federal

markets, the court understood Petitioners’ challenge to

rest on the ZEC Program’s “price-adjustment aspect,”

which Petitioners claimed triggered preemption under

Hughes because it “us[ed] average auction prices as a

component in a formula.” Id. at 2a-3a.

The court rejected Petitioners’ reading of Hughes.

The court interpreted Hughes to “draw[] a line between

state laws whose effect depends on a utility’s

participation in an interstate auction (forbidden) and

state laws that do not so depend but that may affect

auctions (allowed).” Id. at 4a-5a. The ZEC Program did

not run afoul of this line: “To receive a credit, a firm must

generate power, but how it sells that power is up to it. It

can sell the power in an interstate auction but need not

do so. It may choose instead to sell power through

bilateral contracts with users (such as industrial plants)

or local distribution companies that transmit the power

to residences.” Id. at 6a. The court also rejected

Petitioners’ argument that the price-adjustment

mechanism was identical to the Hughes program,

12

explaining that the ZEC Program did not involve “the

adjustments that Maryland law required.” Id.

The Seventh Circuit noted that FERC was

considering how to address “the effect of state programs

designed to subsidize producers of electricity” and that

FERC had “opened a new proceeding so that the

Commission may determine for itself what changes, if

any, should be made” to PJM’s market rules. Id. at 6a7a; infra at 13-14. While Petitioners “insist[ed]” that

these proceedings “show[ed] that the Illinois statute

must be preempted,” FERC had said the very opposite:

In a June 2018 order, FERC noted that it was

considering rule changes but emphasized that these

proposals “‘in no way divest[] the states in the PJM

region of their jurisdiction over generation facilities.

States may continue to support their preferred types of

resources in pursuit of state policy goals.’” Pet. App. 7a

(quoting Calpine Corp. v. PJM Interconnection, L.L.C.,

163 FERC ¶61,236, P.158 (2018)). As the Seventh

Circuit explained, “the need to make adjustments in

light of states’ exercise of their lawful powers does not

diminish the scope of those powers.” Id. “Once the

Commission reaches a final decision in the ongoing

proceeding,” the court noted, “the adequacy of its

adjustments will be subject to judicial review.” Id.

The Seventh Circuit therefore affirmed the district

court’s dismissal.

Petitioners filed for rehearing, arguing that the court

failed to “accept[] as true the complaint’s factual

allegations.” Pet. for Panel Reh’g at 4. In Petitioners’

view, the court failed to credit their allegations that

ZEC “plants have no choice but to bid all the electricity

13

they generate into the PJM and MISO auctions,” and

they argued that the court made a factual error in

concluding that the ZEC Program did not involve “‘the

adjustments that [the] Maryland law [at issue in

Hughes] required.’” Id. at 5, 7 (quoting Pet. App. 6a).

These supposed “discrepanc[ies],” Petitioners said, were

“material” to their legal arguments. Id. at 5.

The Seventh Circuit denied rehearing. Pet. App.

56a-57a.

Shortly after the Seventh Circuit’s unanimous

decision, the Second Circuit also unanimously rejected

Petitioners’ challenge to New York’s ZEC program. See

Zibelman, 906 F.3d 41 (Jacobs, J., joined by Livingston,

J., and Chen, D.J.).

3. Meanwhile, the FERC proceedings noted in the

Seventh Circuit’s opinion remain ongoing.

Those

proceedings began in January 2017, when Petitioner

EPSA asked FERC to “modif[y]” its existing rules

governing the wholesale markets in both Illinois and

New York to apply a “minimum offer price rule” to ZEC

plants, which would have the effect of excluding ZEC

plants from FERC’s capacity markets.3 That relief, it

said, would “address” the “threat” posed by the ZEC

3 Motion to Amend, and Amendment To, Complaint, and Request

for Expedited Action on Amended Complaint at 2-3, 13, 16, Calpine

Corp. v. PJM Interconnection, L.L.C., Docket No. EL16-49-000

(FERC Jan. 9, 2017) (“PJM Complaint”); Request for Expedited

Action at 6, 15-16, IPPNY, Inc. v. NYISO, Inc., Docket EL13-62002 (FERC Jan. 9, 2017) (“New York Complaint”).

14

Program without

preemption.”4

FERC

needing

to

“address

FERC is still considering EPSA’s petitions. In a

June 2018 order, as noted above, FERC proposed

changes to PJM’s market rules. FERC’s intent was “to

accommodate state policy decisions” to grant subsidies

to certain generators, while addressing those subsidies’

indirect effects on wholesale market prices. See Calpine

Corp., 163 FERC ¶61,236, P.8. FERC proposed that

subsidized plants would not participate in the capacity

market, and that States supporting plants outside the

market would receive credit for the capacity those

plants provide. Id. at PP 8, 149, 157-158, 160-161. FERC

received comments from dozens of parties, including

Petitioners. Those proceedings remain pending.

REASONS FOR DENYING THE PETITION

This case presents no split of authority, no

disagreement among sovereigns, and no sound reason to

grant certiorari in the absence of any such division.

Meanwhile, before the Court could reach the merits, it

would have to address multiple threshold obstacles no

circuit court has ruled upon—and if the Court reached

the merits, it would discover that this case does not

actually present Petitioners’ Question Presented. The

Court should deny the petition.

4 PJM Complaint at 11 & n.46; New York Complaint at 11 & n.46.

15

I.

There Is No Split Of Authority

Disagreement Among Sovereigns.

Or

1. Petitioners claim that the Illinois and New York

programs are preempted because they are “just like the

Maryland subsidy program” in Hughes. Pet. 12.

According to Petitioners, that is because (1) ZEC plants

supposedly, “as a practical matter,” sell all the

“electricity they generate into the wholesale markets,”

and (2) the ZEC price supposedly is “tethered to

wholesale market prices.” Pet. 4, 11, 21. These

programs, Petitioners contend, thus “guarantee” ZEC

plants a price “for the electricity [they] sell at

wholesale,” and so are preempted under Hughes. Pet.

11-12.

There is no division of authority on these issues. All

eight judges to consider Petitioners’ claims have

analyzed them the same way and rejected them for the

same reasons.

First, each court has taken the same approach in

rejecting Petitioners’ claim that ZEC payments are

received “in connection with” wholesale sales simply

because ZEC plants, “as a practical matter,” sell

exclusively at wholesale. Pet. 19, 21. Each court

followed Hughes in asking whether the payments were

contingent upon making a wholesale sale. In Hughes,

Maryland

claimed

that

its

payments

were

“consideration” for various services “separate from …

wholesale sales of capacity.” 136 S. Ct. at 1297 n.9. In

response, Hughes asked whether the “payments are

conditioned on … capacity clearing the auction.” Id.

And because Maryland had placed that condition on its

16

payments, those payments were “‘received … in

connection with’ interstate wholesale sales.” Id.

Here, each court applied the same test and reached

the opposite result because—as is undisputed—neither

Illinois nor New York imposed any such condition. Pet.

App. 4a-5a, 43a-44a; Zibelman, 906 F.3d at 951-52. That

result is consistent with Allco Finance Ltd. v. Klee,

which is the only other Circuit decision addressing a

claim that a state program was “‘economically identical’”

to the Hughes program. 861 F.3d 82, 98 (2d Cir. 2017),

cert. denied, 138 S. Ct. 926 (2018) (Calabresi, J., joined by

Raggi and Lynch, J.J.). Those three judges likewise

concluded that, because a Connecticut program did not

“condition” payments on selling electricity in a FERC

auction, it fell “outside [Hughes’] limited holding.” Id. at

98-100.

None of these courts believed it had accepted a

“form-over-substance” evasion. Pet. 25. When a State

does not condition payment on wholesale sales, it is not

paying for wholesale sales. That is substance, not form.

Rather, these programs pay for what they say they pay

for: “the environmental attributes” of “nuclear power”

from the participating generators. Supra at 7; see Pet.

App. 6a, 44a; Zibelman, 906 F.3d at 45.

The courts also all rejected the argument that

preemption should turn on whether generators “as a

practical matter” sell at wholesale. Pet. 4, 21. Where to

sell is a “business decision that does not give rise to

preemption.” Zibelman, 906 F.3d at 52. “To receive a

credit, a firm must generate power, but how it sells that

power is up to it.” Pet. App. 6a. So far as Illinois and

17

New York are concerned, a plant “need not” sell “in an

interstate auction” and may “choose instead to sell

power through bilateral contracts with users (such as

industrial plants) or local distribution companies that

transmit the power to residences”—regardless, the

generator receives ZECs. Id.; see id. at 42a & n.30. This

indifference shows that the States are not paying for

wholesale sales.

Each court, too, has taken seriously Hughes’

avowedly “limited” holding, 136 S. Ct. at 1299, in view of

the lack of any limiting principle to Petitioners’ theory—

that Hughes preempts any state subsidy received by

generators that “as a practical matter” sell exclusively

at wholesale. On that rule, many state programs will fall:

For example, many “REC recipients … are required” by

market rules “to sell their output exclusively at

wholesale” or “to bid into wholesale auctions.”

Zibelman, 906 F.3d at 55; see Pet. App. 42a, 44a. As each

court has recognized, that sweeping result is impossible

to square with Hughes itself, which adopted its test

precisely to avoid undermining “the permissibility of

various other measures States might employ to

encourage development of new or clean generation,

including tax incentives, land grants, direct subsidies.”

136 S. Ct. at 1299; see Pet. App. 3a, 5a-6a, 37a; Zibelman,

906 F.3d at 51, 56; see also Coal. For Competitive Elec.

v. Zibelman, 272 F. Supp. 3d 554, 572 (S.D.N.Y. 2017)

(“fatal to Plaintiffs’ argument is their failure to offer any

cogent explanation why ZECs are preempted but other

state incentives to generate clean energy … are not”).

Second, each court has also rejected Petitioners’

argument that ZEC programs are “just like” Hughes

18

because the ZEC price supposedly “varies inversely

with FERC-approved auction rates,” like the “contract

for differences” in Hughes. Pet. 12, 17, 19.

To begin, each court has recognized that Hughes

focused on whether the state subsidy was “tethered to

wholesale market participation”—not to wholesale

prices. Hughes, 136 S. Ct. at 1299; Pet. App. 5a-6a, 43a44a; Zibelman, 906 F.3d at 51; Zibelman, 272 F. Supp.

3d at 569. When States set payments for products in

States’ domain, like retail rates or production attributes,

they can set any price they see fit. Pet. App. 5a-6a;

Zibelman, 906 F.3d at 51-52. Hughes thus preempted

Maryland’s program not because it used a contract for

differences, but because the “payments [we]re

conditioned on … capacity clearing the auction.” 136 S.

Ct. at 1297 n.9. And here, as just discussed, it is

undisputed that there is no such condition. Pet. App. 6a.

Regardless, the ZEC pricing mechanism is quite

different and does not involve “the adjustments that

Maryland law required.” Pet. App. 6a; see Zibelman, 906

F.3d at 51 (noting that Petitioners’ price-tethering

argument depends upon “mischaracteriz[ing] Hughes

and the ZEC program”). The Hughes subsidy was a

“contract for differences” that moved up and down to

offset changes in the wholesale prices the recipient

generator actually received for its sales of capacity in the

FERC-regulated auction market, eliminating all market

risk and providing the generator a fixed capacity price

for (and only for) its auction sales. 136 S. Ct. at 1295.

The ZEC Program is not like that:

19

•

“[T]he initial price of ZECs (the Social Cost of

Carbon) has nothing to do with wholesale prices.”

Pet. App. 43a; see id. at 2a.

•

“The price adjustment allows the price of ZECs

to fall below that initial price,” but (unlike in

Hughes) never to rise above it—and thus

generators remain exposed to market risk. Id. at

43a; see id. at 2a.

•

“[E]ven an adjusted ZEC price is not based on the

wholesale price a ZEC recipient receives”;

instead, it “is calculated using a composite of

projected prices from the energy and capacity

markets.” Id. at 43a (emphasis added); see id. at

20a & nn.12-13.

•

This figure, moreover, combines “PJM and MISO

forecast … prices.” Pet. App. 81a-82a; see id. at

2a. Because a generator can participate in PJM

or MISO, but not both, no generator can ever

receive this price. Moreover, “[t]hese projected

and composite prices are not within FERC’s

jurisdiction.” Id. at 43a.

Thus, “the ‘tether’ in this case is not to wholesale

participation or transactional pricing; the tether is to

broader, indirect wholesale market forces.” Id. The

lower courts thus have unanimously rejected

Petitioners’ claims that the ZEC pricing mechanism is

“just like” that in Hughes. Pet. 11-12.

2. Conceding “the absence of any circuit conflict,”

Petitioners claim the Court should grant certiorari

anyway because it did so in Hughes. Pet. 30. But the

20

Court granted review in Hughes at Maryland’s request

after the Third and Fourth Circuits, at the federal

government’s urging, invalidated state laws in Maryland

and New Jersey. Here, such inter-sovereign conflict is

absent. No state law has been invalidated. And FERC

and the United States have filed an amicus brief urging

the same result and same rationale the circuit courts

adopted.

The federal government’s view is that Illinois’ ZEC

Program is “not preempted” and instead falls within the

authority the FPA reserves to the States. U.S. Br. 7; id.

at 27. ZEC programs, the United States and FERC

explained, lack the key fact that drove preemption in

Hughes: Maryland “conditioned [its] subsidy on

generators’ participation in the wholesale auction …

while promising a rate distinct from the wholesale

market price.” Id. at 9. But ZEC programs, in the

federal government’s view, are different: “Generators

may receive ZECs even if they do not clear the capacity

auctions,” because “ZECs are separate commodities that

represent the environmental attributes of a particular

form of power generation.” Id. at 10. “[T]hey are not

payments for, or otherwise bundled with, sales of energy

or capacity at wholesale, and thereby fall outside of

FERC’s exclusive jurisdiction over wholesale

transactions.” Id. In addition, “[u]nlike [in Hughes],”

ZEC programs “do[] not link ZECs to a particular

generator’s actual wholesale revenues.” Id. at 14.5

5 Nor is the United States’ present position a new position, as

Petitioners imply. Pet. 28. Although the United States urged

preemption in Hughes, it advocated there the same line that every

21

The federal government adopted this view in part

because, like the courts below, it was keenly aware of the

consequences that Petitioners’ theory would inflict.

Making preemption turn on the business choices of

private parties rather than the State’s own action, the

United States and FERC explained, “would take

preemption doctrine down a path not contemplated” by

this Court in Hughes. Id. at 13. “Business realities and

market forces cannot be so easily equated with

requirements imposed by force of law—a generator’s

‘business decision’ to sell at the auction ‘is irrelevant

from a preemption perspective’ and is not equivalent to

a ‘state directive.’” Id. at 12 (quoting Zibelman, 272 F.

Supp. 3d at 570).

II.

No Crisis Justifies A Grant.

Petitioners claim this is the rare case meriting

certiorari absent any disagreement because FERC’s

markets are on the verge of “break[ing].” Pet. 30.

judge below applied: If a program does not condition payment on

wholesale sales—as with ZEC programs—it is not preempted. See

Tr. of Oral Arg. at 57:2-4, Hughes, 136 S. Ct. 1288 (No. 14-614)

(stating that a State-imposed subsidy “is not preempted here. It’s

just when there’s a bidding-and-clearing requirement.”); id. at 52:314 (CHIEF JUSTICE ROBERTS: How far . . . do you think your

authority reaches with respect to indirect effects on the auction? …

Is it [preempted] only because of the legal mandate [requiring

wholesale sales] in this case? [UNITED STATES]: Yes. It’s …

because [the] program in this case, by requiring the capacity to be

bid into the auction and clear, it directly targets the auction.”

(emphasis added)); id. at 48:4-12 (no preemption “if the State just

paid to build a power plant,” but “if there was some kind of a bidand-clear requirement in the auction attached to it,” that would be

preempted).

22

The answer to this argument is the one FERC and

the United States gave below: FERC “is familiar with

the challenge of regulating the wholesale markets while

respecting [the] statutory division of federal/state

authority and addressing, as necessary, effects of state

initiatives on those markets.” U.S. Br. 8. FERC assured

the Seventh Circuit that the “Commission can exercise

its responsibility under the [FPA] to ensure just and

reasonable prices in the wholesale markets,” and that

ZEC programs “pose[] no obstacle to the Commission

exercising its regulatory authority.” Id. at 20, 22.

Indeed, when it filed its brief, FERC was in the midst

of considering proposed rules changes aimed “to

accommodate state policy decisions and allow resources

that receive out-of-market support to remain online.”

Calpine Corp., 163 FERC ¶61,236, P.8. That FERC

proceeding is ongoing. FERC made clear that its

proposal, unlike Petitioners’ suit, “in no way divests the

states … of their jurisdiction over generation facilities.

States may continue to support their preferred types of

resources in pursuit of state policy goals.” Id. at P.158.

In view of that ongoing proceeding, the United States

and FERC urged the Seventh Circuit not to “resort here

to the extraordinary and blunt remedy of preemption.”

U.S. Br. 20. Instead, FERC has the regulatory tools to

address Petitioners’ concerns in a tailored way that

respects the FPA’s cooperative federalism. Thus, to the

extent there is an important issue to be addressed, it is

being addressed where it should be—at FERC. Id.

(“[T]he solution lies with the Commission, not with

courts.”). And “[o]nce the Commission reaches a final

decision in the ongoing proceeding, the adequacy of its

23

adjustments will be subject to judicial review.” Pet.

App. 7a; infra at 30.

FERC could not have been clearer in rejecting

Petitioners’ claim that FERC’s markets are at a “critical

inflection point,” Pet. 30, necessitating an immediate

ruling on preemption. Petitioners contend that FERC’s

engagement should be taken as a reason for preemption,

rather than judicial restraint. Pet. 29. But when

“coordinate state and federal efforts exist within a

complementary administrative framework, and in the

pursuit of common purposes, the case for federal preemption becomes a less persuasive one.” N.Y. State

Dep’t of Soc. Servs. v. Dublino, 413 U.S. 405, 421 (1973).

As both circuits understood, this “Court remarked in

Hughes [that] the exercise of powers reserved to the

states under §824(b)(1) affects interstate sales. Those

effects do not lead to preemption; they are instead an

inevitable consequence of a system in which power is

shared between state and national governments.” Pet.

App. 7a; see Zibelman, 906 F.3d at 50 (“Courts must

avoid mistaking the ‘congressionally designed interplay

between state and federal regulation for impermissible

tension that requires pre-emption under the Supremacy

Clause.’” (quoting Hughes, 136 S. Ct. at 1300

(Sotomayor, J., concurring)). Indeed, States for decades

have “provid[ed] loans, subsidies, or tax credits to

particular facilities on environmental or policy grounds.”

U.S. Br. 26. And for decades, “FERC itself has

sanctioned” these programs even though they “may

‘affect[] the market clearing price.’” Zibelman, 906 F.3d

at 56 (quoting Conn. DPUC, 569 F.3d at 481).

Petitioners’ claims about “serious distortions” to

24

FERC’s markets, Pet. 15, also have little to do with the

legal theories they press. In proposing changes to its

market rules to address the effects of state subsidies,

FERC pointed broadly to all programs covering clean

generators, including REC programs for “solar … and

wind resources.” Calpine Corp., 163 FERC ¶61,236,

P.151; see id. at P.152 (pointing to requirements under

“existing state [renewable portfolio standard]

programs”). Yet Petitioners disclaim any challenge to

these other programs. Pet. 10 n.2.

Even as to state programs aimed at supporting

nuclear generation, Petitioners’ claim that other States

“are considering similar measures,” Pet. 15, cuts

against—not for—certiorari. These programs differ in

their design, so that a decision in this case may provide

limited guidance to lower courts facing future

challenges. New Jersey’s program, for example, lacks

the price-adjustment mechanism Petitioners claim is so

important here. Pet. 11, 19; see N.J.S.A. §§ 48:3-87.3 to

48:3-87.7. Connecticut’s program is not a zero-emissions

credit program at all.6 And Pennsylvania is considering

still other alternatives, including a carbon pricing

program.7 If anything, those variations underscore the

wisdom of allowing continued percolation, particularly

given Hughes’ recent vintage.

6 Conn. Dep’t of Energy & Envtl. Protection, Notice of Request for

Proposals from Private Developers for Zero Carbon Energy (July

31, 2018), https://bit.ly/2Q7kj0y.

7 See Penn. Gen. Assembly Nuclear Energy Caucus, Bicameral

Nuclear Energy

30 (Nov. 29, 2018).

Caucus

Report:

2017-2018

Session,

at

25

III.

This Case Is Rife With Vehicle Problems.

The Petition is also rife with vehicle problems.

A.

This Case Does Not Present Petitioners’

Question Presented.

Petitioners have lost in every court in part because

they consistently misrepresent the way the ZEC

Program works. Zibelman, 906 F.3d at 51; see Pet. App.

5a-6a, 41a-44a. That continues in this Court. And, as a

result, this case does not present Petitioners’ Question

Presented.

1. Petitioners’ build their Question Presented on the

premise that ZEC plants have always “sold and

necessarily must sell all of their output at wholesale” via

“FERC-approved auctions.” Pet. 3; see Pet. i. But that

premise is false, and the lower courts were not bound to

accept it even at the pleading stage. Not only do the

ZEC programs not require ZEC plants to participate in

wholesale auctions, but ZEC plants may “choose instead

to sell power through bilateral contracts with users

(such as industrial plants) or local distribution

companies.” Pet. App. 6a; see Zibelman, 906 F.3d at 52

(where to sell is a “business decision”).

Even as to what occurs today, Petitioners’ assertion

is simply untrue, contradicted by Petitioners’ own

allegations and orders subject to judicial notice on a

motion to dismiss. First, one plant selected to receive

ZECs—Quad Cities—is owned 25% by a vertically

integrated utility that sells directly to retail customers

and was eligible to apply for ZECs corresponding to its

26

share of the plant’s output. C.A. Appendix A.45 n.2. 8

Second, Exelon’s 75% share of Quad Cities will still

receive ZECs even though it failed to sell its capacity in

the PJM capacity auction—the very result that the

Hughes program was designed to prevent. Pet. App. 78a

(¶ 55) (complaint of Petitioners). Third, both plants

selected to receive ZECs have sold through bilateral

contracts outside the auctions. C.A. Appendix A.142

(¶ 54) (complaint of industrial customers); see Pet. App.

70a-71a (¶ 37) (complaint of Petitioners). The courts

below thus were not required to accept Petitioners’

assertion that ZEC plants have and will always “sell

their entire output via [wholesale] auctions.” Pet. i.

Indeed, the federal government’s amicus brief noted

that ZEC plants may “opt to” sell via “wholesale auction,

bilateral contracts, or directly to retail customers,” and

that Petitioners’ counsel had conceded at oral argument

that ZEC plants had not always sold through the

wholesale auctions. U.S. Br. 15-16; id. at 11 & n.3.

Petitioners lament that the circuit courts supposedly

“brushed aside the complaint’s well-pled allegations.”

Pet. 3. But this Court should not grant certiorari in a

case where, in order to reach the Question Presented,

the Court would first need to determine that the lower

courts misapplied the well-settled pleading standard of

8 Petitioners wrongly predicted that this portion of Quad Cities

would not be eligible for ZECs. C.A. Appendix A.45 n.2. The

State’s procurement plan allowed “facilities with costs recovered

through regulated rates [to] participat[e].” Illinois Power Agency,

Zero Emission Standard Procurement Plan 47 (July 31, 2017),

https://www.illinois.gov/sites/ipa/Documents/2018ProcurementPla

n/Zero-Emission-Standard-Procurement-Plan-ICC-Filing.pdf.

27

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), on questions

that Petitioners concede are “material” to the

arguments they press. Pet. for Panel Reh’g at 5; see Pet.

21.

2. This case is an even worse vehicle because of

Petitioners’ concession that they do not challenge REC

programs’ legality. Pet. 10 n.2; see Pet’rs’ 7th Cir. Br. 51

(“Plaintiffs do not allege that state Renewable Energy

Credit (‘REC’) programs are preempted.”). Yet many

REC recipients sell their output exclusively at

wholesale. Zibelman, 906 F.3d at 55. Under Plaintiffs’

ostensible theory of the case, those REC payments

should also be preempted. Petitioners’ choice to disavow

that conclusion means that their case does not actually

present the Question Presented. Instead, the case (in

Petitioners’ true view) turns on alleged factual

distinctions between REC programs and the ZEC

Program that their Petition buries in marginalia. Cf.

Pet. 10 n.2. The Court should be loath to grant certiorari

when Petitioners’ Question Presented is so

transparently a Trojan horse for some fact-intensive

theory they intend to litigate if the Court reaches the

merits.

B.

The Court Cannot Reach Petitioners’

Question

Presented

Without

Addressing Threshold Justiciability

Barriers No Circuit Court Has

Considered.

Before the Court could reach the merits, it would also

need to grapple with two threshold justiciability

barriers no circuit court has addressed. That is another

reason to deny. This Court is “a court of review, not of

28

first view.” Cutter v. Wilkinson, 544 U.S. 709, 718 n.7

(2005).

1. First, as both district courts held, Petitioners lack

a cause of action to pursue their preemption claims. Pet.

App. 30a-34a; Zibelman, 272 F. Supp. 3d at 563-67. In

Hughes, no party “challenged whether [the] plaintiffs”

had a cause of action, and so the Court “assume[d]

without deciding that they may” sue. 136 S. Ct. at 1296

n.6. But here, Respondents have preserved (and will

continue to assert) that argument. In this federalism

case, it would be irresponsible to take up Petitioners’

claim that Illinois and New York have transgressed

federal law in the face of a preserved argument—and

two square district court holdings—that federal courts

cannot entertain Petitioners’ challenge. Yet because

neither the Seventh nor the Second Circuits addressed

the issue (because they could affirm the district court

without doing so), the Court would have to resolve that

potentially far-reaching question with no circuit opinion.

Instead, the Court should deny.

The district courts were correct that Petitioners

have no cause of action. No statute provides such an

action. The Supremacy Clause does not do so either.

Armstrong, 135 S. Ct. at 1383-84.

That means

Petitioners’ preemption claims may proceed only based

on a “judge-made action at equity,” id. at 1386, and only

if they seek the type of relief that “courts of equity”

historically provided against “illegal executive action,”

id. at 1384. Such relief, moreover, is unavailable if

Congress “inten[ded] to foreclose” it. Id. at 1385.

Here, Petitioners do not bring a claim equity courts

would have entertained. They invoked Ex parte

29

Young—but “Ex parte Young actions historically

involved a party bringing a preemptive action … to

challenge a possible enforcement proceeding under state

law.” Pet. App. 33a (citing Va. Office for Prot. &

Advocacy v. Stewart, 563 U.S. 247, 262 (2011) (Kennedy,

J., concurring)); accord Douglas v. Indep. Living Ctr. of

S. Cal., Inc., 565 U.S. 606, 620 (2012) (Roberts, C.J.,

dissenting, joined by Scalia, Thomas, and Alito, JJ.)

(similar). Petitioners “are not the potential target of any

state enforcement proceedings.” Pet. App. 33a. No one

could indict them, sue them, or penalize them based on

the ZEC Program. Rather, they claim a regulatory

program will indirectly make them less profitable. That

is not an Ex parte Young claim. See Safe Streets

Alliance v. Hickenlooper, 859 F.3d 865, 903-04 (10th Cir.

2017) (rejecting similar bystander suit).

Even if an Ex parte Young action were otherwise

available, moreover, the district courts were also right

that the FPA “foreclose[s] equitable relief.” Armstrong,

135 S. Ct. at 1385. Each factor that yielded that result in

Armstrong is present here. First, as in Armstrong, the

FPA provides a detailed administrative scheme tailormade to address complaints about how state actions

affect FERC’s markets. Pet. App. 33a-34a; Zibelman,

272 F. Supp. 3d at 565-66. Second, Congress in the FPA

expressly provided federal-court causes of action in

multiple places. But it nowhere authorized a suit like

this one. Pet. App. 32a; Zibelman, 272 F. Supp. 3d at

565. Third, also like Armstrong, the “sheer complexity”

of FERC’s wholesale-market regulation confirms that

Congress intended to foreclose suits like this one. 135 S.

Ct. at 1385; see Pet. App. 34a. Petitioners complain

30

about how ZEC programs supposedly affect FERC’s

markets. And that issue—regulating interconnected

electricity markets and determining how they should

interact with state authority—requires the “expertise,

uniformity, widespread consultation, and resulting

administrative guidance” that FERC’s oversight brings.

Armstrong, 135 S. Ct. at 1385.

Congress thus intended that claims like Petitioners’

proceed, if at all, before FERC. If Petitioners are

aggrieved by FERC’s decision, they can then file a

petition for review. See 16 U.S.C. § 825l(b); Armstrong,

135 S. Ct. at 1389 (Breyer, J., concurring); see also U.S.

Br. 22; Pet. App. 7a. Congress designated that path

because it allows courts to focus review on FERC’s

authoritative resolution of such claims, in light of a

record created before the agency.

2. The second obstacle is jurisdictional. As the

district court recognized, Petitioners lack Article III

standing to raise one of their primary objections to the

ZEC Program—the price-adjustment mechanism. Pet.

App. 25a. Indeed, the Seventh Circuit understood

Petitioners’ entire preemption challenge to depend on

this mechanism. Pet. App. 2a-3a (Petitioners “contend

that the price-adjustment aspect of the state’s system

leads to preemption”). Petitioners claim that the ZEC

pricing mechanism is unlawful because it relies on

forecasts of wholesale electricity prices. Pet. 3, 4, 10 n.2,

11. But the price-adjustment mechanism can only

reduce the ZEC price, thereby reducing the subsidy paid

to ZEC plants. That can only lessen, not increase, any

“distortion” of the wholesale markets—and so could only

help, not hurt, Petitioners. For that reason, the district

31

court held that Petitioners lack Article III standing to

challenge the price-adjustment mechanism. Pet. App.

24a-25a.

So, again: If the Court granted certiorari, it would

find its consideration consumed not with any “question

of exceptional importance to the regulation and efficient

functioning of wholesale energy markets,” Pet. 13, but

with justiciability issues no circuit court has decided.

IV.

The Decision Below Is Correct.

The decision below is also correct.

1. ZEC programs pay generators for what they

produce, not what they sell in wholesale auctions—just

like the REC programs FERC has approved. Supra at

6. These programs fall squarely within states’ reserved

authority over generation.

That holding is consistent with Hughes. There,

Maryland argued that its payment was really one for

constructing a generation facility in a particular location.

In rejecting that argument, and finding that the

payment was actually for wholesale sales, the Court

deemed it dispositive that “the payments [were]

conditioned on … capacity clearing the auction.” 136 S.

Ct. at 1297 n.9. That conditioning is why the payments

in Hughes were “‘received ... in connection with’

interstate wholesale sales.” Id.; accord Elec. Power

Supply Ass’n, 136 S. Ct. at 777 (“To set a … electricity

rate is … to establish the amount of money a consumer

will hand over in exchange for power.”). Contra

Petitioners, the Court’s emphasis on whether a state

payment is conditioned upon a wholesale sale does not

come only from Hughes’ “final substantive paragraph,”

32

but is the test Hughes invokes at beginning, middle, and

end. 136 S. Ct. at 1292, 1297 n.9, 1299. To avoid any

doubt on that point, the Court underscored that

“[n]othing in this opinion should be read to foreclose …

States” from undertaking programs lacking this “fatal

defect.” Id. at 1299. Here, Illinois has not so conditioned

its payments. So, Hughes does not preempt its program.

The courts below properly rejected Petitioners’ attempt

to rewrite Hughes to hold something it did not.

2. Sound, functional reasons support this line. When

States offer to pay if, but only if, generators sell capacity

at wholesale, they are—in substance—paying for

wholesale sales. And when States do not make payment

contingent on wholesale sales, then they are paying for

something else. The distinction matters, even if the

recipient happens to sell only at wholesale when the

program begins. After all, in the decade-plus these

programs last, many things can change. Generators

could choose to sell bilaterally, or directly at retail. Or

FERC could modify its market rules to exclude the

participating generators from the wholesale market (as

FERC is considering today). Yet so long as the plant

continues to produce, the State will continue to pay—no

matter how or where the electricity is sold.

Indeed, Petitioners concede that—as a matter of

substance—ZEC programs differ critically from the

Hughes program. They recount that, in Hughes, “the

State’s goal was to increase long-term wholesale supply

commitments” in the wholesale capacity markets in

order to reduce wholesale prices. Pet. 17 (emphasis

added); 136 S. Ct. at 1294. If generators did not clear the

wholesale auction, they would not reduce wholesale

33

prices. The “subsidized plant’s participation in the

capacity auction was therefore necessary to achieve

Maryland’s objective.” Pet. 17 (emphasis added). Here,

by contrast, the ZEC Program does not, and does not

need to, hijack FERC’s wholesale markets to accomplish

its aims.

Its goal is “to achieve the State's

environmental objectives and reduce the adverse impact

of emitted air pollutants on the health and welfare of the

State’s citizens.” SB2814 § 1.5 (SA.5). That goal is

achieved whenever clean electricity is generated and

consumed (thereby displacing fossil-fuel generation),

whether the electricity is sold in auctions, bilateral

contracts, or at retail. The ZEC Program does not

require wholesale sales or wholesale auction

participation because, unlike in Hughes, they are

irrelevant to the program’s success.

3. The FPA’s history also accords with the line

applied by the courts below, and it refutes Petitioners’

theory that the FPA preempts state subsidies to

generators that happen to sell exclusively at wholesale.

Even before the FPA’s enactment, this Court and

Congress understood that electricity’s production and

its subsequent sale are often intertwined. In 1932, this

Court held that States retain their authority over

generation, even when the electricity is sold interstate.

Utah Power & Light Co. v. Pfost, 286 U.S. 165, 178

(1932). The Court knew it was drawing a fine line,

acknowledging that electricity is “not stored in

advance,” so interstate transmission and sale are

“substantially instantaneous” with production. Id.

Nonetheless, the Court treated generation as “separable

and distinct.” Id.

34

The FPA carried forward this distinction between

regulating electricity’s production and regulating its

wholesale sale. The initial Senate bill proposed stripping

States of their Utah Power jurisdiction over the subset

of “generating facilities” that “produce energy for

interstate [wholesale] sale.” S. Rep. No. 74-621, at 48

(1935) (discussing Utah Power). But Congress opted

against that “usurpation” of existing “State regulatory

authority,” electing to preserve state authority over all

generating facilities—including those selling only at

wholesale. Conn. Light & Power Co. v. FPC, 324 U.S.

515, 526-27 (1945) (quoting H.R. Rep. No. 74-1318, at 8,

27 (1935)). Congress’s choice forecloses Petitioners’

theory: even if ZEC plants did sell exclusively at

wholesale, that would not strip Illinois of its authority to

subsidize those plants’ production.

4. By contrast, accepting Petitioners’ theory would

have sweeping effects. Many state programs provide

payments to generators that sell exclusively at

wholesale, including the REC programs FERC has

approved. Supra at 17. While Petitioners insist they do

not challenge those programs, Pet. 10 n.2, they cannot so

easily avoid their theory’s implications. Petitioners’

sweeping reading of Hughes cannot be squared with this

Court’s “limited” holding, which was so careful not to

disturb the many “other measures States might employ

to encourage development of new or clean generation.”

136 S. Ct. at 1299. Nor can it be squared with FERC’s

understanding of the bounds of its own jurisdiction,

which treats payments for production as falling on the

state side of the line, even when the recipient sells

exclusively at wholesale. U.S. Br. 10; Zibelman, 906

35

F.3d at 54-55 (discussing WSPP). That is a matter on

which FERC receives deference.9

5. Petitioners’ remaining arguments lack merit.

They principally rely on non-FPA preemption cases, like

Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627, 636-37

(2013), and National Meat Ass’n v. Harris, 565 U.S. 452

(2012). But those cases merely require a focus on “what

the state law in fact does, not how the litigant might

choose to describe it.” Wos, 568 U.S. at 637. Thus, in

Harris, the state law was preempted because it

“function[ed] as a command” to slaughterhouses

regarding their internal operations, which were within

the federal field. 565 U.S. at 463-64. In both cases, the

relevant question was what the State was requiring,

explicitly or “function[ally].” Yet Plaintiffs do not argue

that the ZEC Program “in fact does” mandate ZEC

plants to sell at wholesale, Wos, 568 U.S. at 637, or that

the ZEC Program effectively “functions as a command”

to ZEC plants to sell at wholesale. Rather, they assert

(incorrectly) that, for reasons entirely unrelated to

Illinois, ZEC plants will always sell at wholesale. So,

Wos and Harris are off point.

Petitioners also rely on Northern Natural Gas Co. v.

State Corporation Commission of Kansas, 372 U.S. 84

(1963). As the Second Circuit explained, however, that

case undermines their argument. In Northern Natural,

9 FERC’s interpretation is entitled to Chevron deference, and so is

“dispositive” “unless … inconsistent with clearly expressed

congressional intent.” Hillsborough Cty. v. Automated Med. Labs.,

Inc., 471 U.S. 707, 714 (1985); see City of Arlington v. FCC, 569 U.S.

290, 306-07 (2013).

36

much like in Hughes, the State directly regulated

interstate gas pipelines’ wholesale transactions by

requiring them to purchase whole gas “ratably” from

producers. Id. at 88-89, 92. Because the program “was

‘unmistakably and unambiguously directed at

purchasers [i.e., interstate pipelines],’” it was

preempted. Zibelman, 906 F.3d at 53 (quoting N. Nat.,

372 U.S. at 92).

But in Northwest Central Pipeline Corp. v. State

Corp. Commission of Kansas, 489 U.S. 493 (1989), this

Court held that States could achieve the “same end

result” “by regulating the producers,” Zibelman, 906

F.3d at 54—and they could do so even if those

regulations would “affect[]” the wholesale market, Nw.

Cent., 489 U.S. at 514, and even if they were “‘intended

to influence’ the [interstate] pipeline’s purchasing

decisions,” Zibelman, 906 F.3d at 53 (quoting FERC

brief in Northwest Central). Despite these intended

effects on FERC’s domain, the Court rejected the

preemption challenge, emphasizing that “Congress has

drawn a brighter line, and one considerably more

favorable to the States’ retention of their traditional

powers to regulate rates of production.” Nw. Cent., 489

U.S. at 514. “[R]egulat[ing] production” was a matter

“firmly on the States’ side of that dividing line,” and the

Court held that it “must take seriously the lines

Congress drew in establishing [this] dual regulatory

system.” Id. at 512-14. So it is again here.

37

CONCLUSION

The Court should deny the petition.

March 11, 2019

Respectfully submitted,

MATTHEW E. PRICE

Counsel of Record

IAN HEATH GERSHENGORN

DAVID W. DEBRUIN

ZACHARY C. SCHAUF

JENNER & BLOCK LLP

1099 New York Ave. NW

Suite 900

Washington, DC 20001

(202) 639-6000

mprice@jenner.com