Respondents Brief — Electric Power Supply Association, et al., Petitioners v. John B. Rhodes, et al.

No. 18-879

IN THE

Supreme Court of the United States

_________

ELECTRIC POWER SUPPLY ASSOCIATION

and NRG ENERGY, INC.,

Petitioners,

v.

JOHN B. RHODES, in his official capacity as Chair of the

New York Public Service Commission, GREGG C.

SAYRE, in his official capacity as Chair of the New York

Public Service Commission, DIANE X. BURMAN, in her

official capacity as Commissioner of the New York

Public Service Commission, JAMES S. ALESI, in his

official capacity as Commissioner of the New York

Public Service Commission, and EXELON CORP., R.E.

GINNA NUCLEAR POWER PLANT LLC, CONSTELLATION

ENERGY NUCLEAR GROUP, LLC, NINE MILE POINT

NUCLEAR STATION LLC,

Respondents.

________

On Petition for a Writ of Certiorari

to the United States Court of Appeals for the

Second 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, Respondents

state as follows:

Constellation Energy Nuclear Group, LLC, is not a

public company. Exelon Corporation indirectly owns a

50.01% share in Constellation Energy Nuclear Group,

LLC, and is publicly held. Électricité de France SA

indirectly owns a 49.99% share in Constellation Energy

Nuclear Group, LLC, and is publicly held.

Exelon Corporation is a publicly held company. It

has no parent corporation and no publicly held

corporation owns 10% or more of its stock.

R.E. Ginna Nuclear Power Plant LLC is not a public

company. Its indirect parent, Constellation Energy

Nuclear Group, LLC, is indirectly owned by Exelon

Corporation and Électricité de France SA, two publicly

held companies.

Nine Mile Point Nuclear Station LLC is not a public

company. Its indirect parent, Constellation Energy

Nuclear Group, LLC, is indirectly owned by Exelon

Corporation and Électricité de France SA, two publicly

held companies.

ii

TABLE OF CONTENTS

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

TABLE OF AUTHORITIES ......................................... vi

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

STATEMENT OF THE CASE ....................................... 5

A.

The FPA’s Cooperative

Federalism. .................................................. 5

B.

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

C.

Proceedings Below. .................................... 8

REASONS FOR DENYING THE PETITION ......... 11

I.

There Is No Split Of Authority Or

Disagreement Among Sovereigns. .................... 12

II.

No Crisis Justifies A Grant. ................................ 19

III.

This Case Is Rife With Vehicle Problems. ....... 22

A.

This Case Does Not Present

Petitioners’ Question Presented. ........... 22

B.

The Court Cannot Reach

Petitioners’ Question Presented

Without Addressing Threshold

Justiciability Barriers No Circuit

Court Has Considered. ............................ 25

iii

IV.

The Decision Below Is Correct........................... 28

CONCLUSION ................................................................ 34

iv

TABLE OF AUTHORITIES

CASES

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

2017), cert. denied, 138 S. Ct. 926 (2018) .............. 13

Armstrong v. Exceptional Child Center, Inc.,

135 S. Ct. 1378 (2015).............................. 4, 26, 27, 28

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................ 24

Calpine Corp. v. FERC, 702 F.3d 41 (D.C. Cir.

2012) .......................................................................... 23

City of Arlington v. FCC, 569 U.S. 290 (2013) ......... 32

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) ......................................................... 31

Cutter v. Wilkinson, 544 U.S. 709 (2005)................... 25

Douglas v. Independent Living Center of

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

(2012) ........................................................................ 26

Electric Power Supply Ass’n v. Star, 904 F.3d

518 (7th Cir. 2018), reh’g denied (Oct. 9,

2018), petition for cert. filed, 87 U.S.L.W.

3279 (U.S. Jan. 8, 2019) (No. 18-868) ........... passim

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

Ct. 760 (2016) ................................................... 3, 6, 29

Hillsborough County v. Automated Medical

Laboratories, Inc., 471 U.S. 707 (1985) ................ 32

v

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

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

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

(2012) .................................................................. 32, 33

New York State Department of Social Services

v. Dublino, 413 U.S. 405 (1973) ............................. 20

Northern Natural Gas Co. v. State

Corporation Commission of Kansas, 372

U.S. 84 (1963) ........................................................... 33

Northwest Central Pipeline Corp. v. State

Corporation Commission of Kansas, 489

U.S. 493 (1989) ............................................... 5, 33, 34

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

865 (10th Cir. 2017) ................................................. 27

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

(1932) ........................................................................ 31

Village of Old Mill Creek v. Star, No. 17 CV

1163, 2017 WL 3008289 (N.D. Ill. July 14,

2017), aff’d sub nom. Electric Power

Supply Ass’n v. Star, 904 F.3d 518 (7th Cir.

Sept. 13, 2018), petition for cert. filed, 87

U.S.L.W. 3279 (U.S. Jan. 8, 2019) (No. 18868) .................................................... 14, 25, 26, 27, 28

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

(2013) .................................................................. 32, 33

STATUTES

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

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

vi

16 U.S.C. § 825l(b) ........................................................ 27

N.J.S.A. §§ 48:3-87.3 to 48:3-87.7 ................................ 21

LEGISLATIVE MATERIALS

S. Rep. No. 74-621 (1935) ............................................. 31

ADMINISTRATIVE R ULINGS

Calpine Corp. v. PJM Interconnection, LLC,

163 FERC ¶61,236 (2018) .......................... 11, 19, 21

Entergy Nuclear FitzPatrick, LLC, 118

FERC ¶62,085 (2007) ............................................. 23

Nine Mile Point Nuclear Station, LLC v.

Niagara Mohawk Power Corp., 110 FERC

¶61,033 (2005) .......................................................... 23

R.E. Ginna Nuclear Power Plant, LLC, 151

FERC ¶61,023 (2015) ............................................. 23

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 ............................................................... 9

Connecticut Department of Energy &

Environmental Protection, Notice of

Request for Proposals from Private

Developers for Zero Carbon Energy (July

31, 2018), https://bit.ly/2Q7kj0yhttp ..................... 21

John Harrison, Ex parte Young, 60 Stan. L.

Rev. 989 (2008) ........................................................ 26

vii

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) .......................................................................... 11

Pennsylvania General Assembly Nuclear

Energy Caucus, Bicameral Nuclear

Energy Caucus Report: 2017-2018 Session

(Nov. 29, 2018) ......................................................... 22

4 John Norton Pomeroy, A Treatise on Equity

Jurisprudence, § 1360 (3d ed. 1905) ..................... 26

Request for Expedited Action, IPPNY, Inc. v.

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

Jan. 9, 2017).............................................................. 11

2 Joseph Story, Commentaries on Equity

Jurisprudence, § 875 (13th ed. 1886) ................... 26

Transcript of Oral Argument, Hughes v. Talen

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

(No. 14-614) ............................................................. 18

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 New York and

Illinois. 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 New York and Illinois). 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 Second and Seventh Circuits have applied that

decision, and each has interpreted Hughes and the FPA

in the same way.

Each affected sovereign also agrees. In a companion

case from the Seventh Circuit, presenting the same

question and also pending before this Court on a petition

for certiorari, No. 18-868, 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

3

Commission at 20, Nos. 17-2433, 17-2445 (7th Cir. May

29, 2018), 2018 WL 2746229 (“U.S. Br.”). Also urging the

same result was a coalition of eight States as amici.

Petitioners cry that ZEC programs will destroy

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

words. In their brief, 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. U.S. Br. 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

4

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

resort to protesting that the circuits “brushed aside the

complaint’s allegations.” Pet. 23. 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, both district courts concluded that

Petitioners lacked a cause of action under Armstrong v.

Exceptional Child Center, Inc., 135 S. Ct. 1378 (2015),

and one district court found they lacked Article III

standing in part. Without addressing those issues, the

Court cannot responsibly 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.

5

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.

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 New York, 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. 104a.

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, P22 (2017). States also

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

cleaner generation, or impose costs on generators that

pollute. Pet. App. 26a (quotation marks omitted).

FERC accepts these policies even though they “driv[e]

significant changes in the mix of resources” in wholesale

markets. Id.; Conn. Dep’t Pub. Util. Control v. FERC,

569 F.3d 477, 481 (D.C. Cir. 2009). That reflects the “fact

6

of economic life that the wholesale and retail markets in

electricity … are not hermetically 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.

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. 22a. In particular, 29 States (including New

York) provide renewable energy credits (“RECs”) to

subsidize renewable generators. RECs are “statecreated 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. Pet. App. 24a.

B.

The ZEC Program.

1. In August 2016, New York adopted the ZEC

Program as part of a comprehensive energy reform

aimed at reducing greenhouse-gas emissions. C.A.

Appendix A-86. In addition to the ZEC Program, New

York required new REC procurements and financial

support for “certain existing at-risk” and new renewable

facilities. Id. at A-86, 101-02.

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. Nuclear plant retirements result

in “significantly increase[d] air emissions due to heavier

reliance on existing fossil-fueled plants.” Id. at A-103.

To address this crisis, the ZEC Program “valu[es]

and pay[s] for the zero-emissions attributes” of nuclear

generators at risk of retirement—that is, the value of the

positive environmental externalities created by their

continued operation. Id. at A-133. A ZEC, like a REC,

is a “credit for the zero-emissions attributes of one

megawatt-hour of electricity production by” a

participating nuclear plant. Pet. App. 8a. The New York

Public Service Commission (“PSC”) selected three

plants to receive the first two-year tranche of ZECs

after considering five criteria, including potential

recipient plants’ likely avoidance of carbon emissions.

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.

In practice, ZEC plants have historically sold their

electricity in a variety of ways, including outside

FERC’s auctions. See infra at 23-24.

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

carbon—a federal interagency task force’s estimate of

damage from carbon emissions. Pet. App. 9a. The PSC

used that figure to measure the harm that would result

from nuclear plants’ closure. Id. For the Program’s first

8

two years, the price is fixed based on the social cost of

carbon. Id. at 9a, 16a.

Beginning in 2019, a new price is fixed for each

subsequent two-year period. Two adjustments can

reduce the ZEC price below the social cost of carbon.

First, the price falls if there is “additional renewable

energy penetration.” Id. at 9a. That is because, as the

mix of generators that would replace nuclear generators

gets cleaner, the air emissions avoided by nuclear plants

declines. Second, to ensure the Program remains

affordable even if consumers’ electricity bills are

forecast to rise, id.; see C.A. Appendix A-212, the price

fixed for each two-year period can adjust downward

based on forecast wholesale prices at the start of the

two-year period. Those forecast prices are never paid to

ZEC plants. Indeed, ZEC plants’ own revenues are

unlikely to ever match forecasted prices from two years

earlier. C.A. Appendix A-212, 222-23.

C.

Proceedings Below.

1. In October 2016, Petitioners and other plaintiffs

sued, claiming that the FPA preempts the ZEC

Program. The district court dismissed Petitioners’

claims. See Pet. App. 34a-91a. The court first concluded

that Petitioners lacked a cause of action to bring their

FPA preemption claim. Id. 45a-51a. The court also

rejected Petitioners’ preemption claims on the merits.

Id. 51a-78a.

2. Petitioners appealed.

A broad coalition of

stakeholders—eight

States,

environmental

organizations such as Natural Resources Defense

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

9

Fund, energy economists, legal scholars, and trade

associations—all filed amicus briefs that opposed

Petitioners’ preemption theory. These organizations

recognized that Petitioners’ theory would “cast a pall of

uncertainty over a wide range of long-standing and

effective strategies states have traditionally employed

to promote the use of clean energy and further the

welfare and well-being of their citizens.” NRDC 2d Cir.

Br. 15.

Respondents also lodged with the Second Circuit the

amicus brief that the United States and FERC had filed

with the Seventh Circuit in a nearly identical suit

brought by Petitioners against a ZEC program in

Illinois, now also pending before this Court on petition

for writ of certiorari. See Electric Power Supply Ass’n

v. Star, No. 18-868. The United States and FERC—with

the Solicitor General’s approval, see 28 C.F.R. § 0.20—

agreed with Respondents that the ZEC “program is not

preempted.” U.S. Br. 7. They 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.

Id. at 8, 21-22.

The Second Circuit panel, composed of Judges

Jacobs, Livingston, and Chen (sitting by designation),

unanimously affirmed the district court’s dismissal. Pet.

App. 1a-31a. The court declined to address whether

Petitioners have a cause of action. Id. at 12a. Instead,

the court addressed and rejected Petitioners’ argument

that Hughes preempted the ZEC Program. It explained

that, unlike the Hughes program, nothing in the ZEC

Program required ZEC recipients to sell electricity at

10

wholesale. Id. at 18a; id. at 18a-22a. The Second Circuit

also concluded that the ZEC price did not “insulate []

generators from fluctuations in wholesale prices,” id. at

16a, and that there was “no support for [Petitioners’]

contention that the ‘subsidy varies in almost exactly the

same manner’ as in Hughes,” id. at 17a. The Second

Circuit deemed it “telling” that Petitioners “cannot

persuasively explain why FERC’s holding” that RECs

fall outside its jurisdiction “does not apply equally to

ZECs.” Id. at 24a-25a.

As to conflict preemption, the Second Circuit noted

that “FERC itself has sanctioned state programs that

increase capacity or affect wholesale market prices, so

long as the states regulate matters within their

jurisdiction.” Pet. App. 26a. Thus, while “FERC uses

auctions to set wholesale prices and to promote

efficiency,” it does so “with the background assumption

that … states engage in public policies that affect the

wholesale markets.” Id. at 28a.

Shortly before the Second Circuit’s unanimous

decision, the Seventh Circuit also unanimously rejected

Petitioners’ challenge to Illinois’ ZEC program. See

Elec. Power Supply Ass’n v. Star, 904 F.3d 518 (7th Cir.

2018) (Easterbrook, J., joined by Sykes, J., and Reagan,

D.J.), reh’g denied (Oct. 9, 2018), petition for cert. filed,

87 U.S.L.W. 3279 (U.S. Jan. 8, 2019) (No. 18-868).

3. Meanwhile, Petitioner EPSA sought relief from

FERC. In January 2017, it asked FERC to “modify” its

existing rules governing the wholesale markets in both

New York and Illinois to apply a “minimum offer price

rule” to ZEC plants, which would have the effect of

11

excluding ZEC plants from FERC’s capacity markets.1

That relief, it said, would “address” the “threat” posed

by the Program without FERC needing to “address

preemption.”2

FERC is still considering EPSA’s petitions. It has

taken no action in New York. Regarding Illinois, in June

2018 FERC proposed changes to the rules for the

market operated by PJM Interconnection, L.L.C., which

covers Illinois and twelve other States. 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. v. PJM Interconnection, L.L.C., 163

FERC ¶61,236, P.8 (2018). 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 ongoing.

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.

1 Request for Expedited Action at 6, 15-16, IPPNY, Inc. v. NYISO,

Inc., Docket EL13-62-002 (FERC Jan. 9, 2017) (“New York

Complaint”); 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. EL1649-000 (FERC Jan. 9, 2017) (“PJM Complaint”).

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

12

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.

I.

There Is No Split Of Authority

Disagreement Among Sovereigns.

Or

1. Petitioners claim that the New York and Illinois

programs are preempted because they are “just like the

Maryland subsidy program” in Hughes. Pet. 14.

According to Petitioners, that is because ZEC plants

supposedly, “as a practical matter, sell all their

electricity into the wholesale market,” and because the

ZEC price supposedly is “tethered to wholesale market

prices.” Id. at 14, 23-24. These programs, Petitioners

contend, thus “guarantee” ZEC plants a price “for the

electricity [they] sell at wholesale,” and so are

preempted under Hughes. Id. at 14.

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. Id. at 21, 24. Each court

followed Hughes in asking whether the payments were

contingent upon making a wholesale sale. In Hughes,

Maryland

claimed

that

its

payments

were

13

“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

payments, those payments were “‘received … in

connection with’ interstate wholesale sales.” Id. (ellipsis

in original).

Here, each court applied the same test and reached

the opposite result because—as is undisputed—neither

New York nor Illinois imposed any such condition. Pet.

App. 18a, 59a; Star, 904 F.3d at 523. 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 they had accepted a

“form-over-substance” evasion. Pet. 28. 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 “zero-emission attributes of [how] electricity [is]

produced.” Pet. App. 2a.

The courts also all rejected the argument that

preemption should turn on whether generators “as a

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

14

is a “business decision that does not give rise to

preemption.” Pet. App. 18a. So far as New York and

Illinois are concerned, a “ZEC plant may … sell directly

to consumers,” or sell via bilateral contracts, “and still

receive ZECs.” Id. This indifference shows that the

States are not paying for wholesale sales. See Star, 904

F.3d at 523 (“To receive a credit, a firm must generate

power, but how it sells that power is up to it.… 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.”).

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. Pet. 4. 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.” Pet. App. 24a; see Pet. App. 64a. 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. 15a, 55a; Star, 904 F.3d

at 523; Village of Old Mill Creek v. Star, No. 17 CV 1163,

2017 WL 3008289, at *11 (N.D. Ill. July 14, 2017), aff’d

sub nom. Star, 904 F.3d 518.

Second, each court has also rejected Petitioners’

15

argument that ZEC programs are “just like” Hughes

because the ZEC price supposedly “varies inversely

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

for differences” in Hughes. Pet. 14, 19, 21 (quotation

marks and alterations omitted).

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. 17a; Star,

904 F.3d at 523-24. 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. 17a. 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: “[Petitioners] concede that the ZEC

program ‘does not expressly mandate that the plants

receiving ZEC subsidies bid into the NYISO auctions.’”

Pet. App. 19a (quoting Br. of Appellants 8).

Regardless, Petitioners’ price-tethering argument

depends upon “mischaracteriz[ing] Hughes and the ZEC

program,” Pet. App. 16a, in order to hide their

differences. 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 different.

As the Second

16

Circuit explained:

•

“[T]he ZEC price is fixed for two-year periods,

and does not fluctuate during those periods to

match the wholesale clearing price.” Pet. App.

16a.

•

“Because the fixed ZEC price is capped based on

an independent variable (the social cost of

carbon), generators are exposed to market risk in

the event that energy prices fall.” Id.

•

“[After 2019], the price may be fixed below the

social cost of carbon, but only on the basis of

forecast wholesale prices—forecasts based on

futures prices that FERC does not regulate…”

Id.

•

Those forecast prices are for an area of New York

different from the one in which the plants

receiving ZECs are located. C.A. Appendix A223.

•

“[T]here is no true-up to reconcile forecasts with

actual rates.” Pet. App. 16a-17a.

•

“The ZEC price also adjusts based on the amount

of renewable generation in New York.” Id. at 17a.

Thus, the Second Circuit held, “there is no support for

[Petitioners’] contention that the ‘subsidy varies in

almost exactly the same manner’ as in Hughes.” Pet.

App. 17a (quoting Br. of Appellants 38). Accord Star,

904 F.3d at 522.

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

Petitioners claim the Court should grant certiorari

17

anyway because it did so in Hughes. Pet. 34. But the

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 at the

Seventh Circuit’s invitation, FERC and the United

States filed an amicus brief urging the same result and

the same rationale the circuit courts adopted.

The federal government’s view is that ZEC

programs are “not preempted” and instead fall within

the authority the FPA reserves to the States. U.S. Br.

7; id. at 27. These 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

18

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

14.3

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 Pet. App. 59a).

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

Petitioners imply. Pet. 32. Although the United States urged

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

adopted and that every 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 52:3-14 (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 bid-and-clear requirement in the auction

attached to it,” that would be preempted).

19

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. 34.

The answer to this argument is the one FERC and

the United States gave the Seventh Circuit: 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

20

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 to the extent Petitioners disagree with

FERC’s resolution of that issue, they can obtain judicial

review at that time by petitioning for review of FERC’s

order. Infra at 27-28.

FERC could not have been clearer in rejecting

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

inflection point,” Pet. 33, 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. 33. 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 the Second and Seventh Circuits understood,

“[c]ourts must avoid mistaking the ‘congressionally

designed interplay between state and federal regulation

for impermissible tension that requires pre-emption

under the Supremacy Clause.’” Pet. App. 14a (quoting

Hughes, 136 S. Ct. at 1300 (Sotomayor, J., concurring));

Star, 904 F.3d at 524 (“[T]he 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.”).

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

21

decades, “FERC itself has sanctioned” these programs

even though they “may ‘affect[] the market clearing

price.’” Pet. App. 26a (quoting Conn. Dep’t of Pub. Util.

Control, 569 F.3d at 481).

Petitioners’ claims about “serious distortions” to

FERC’s markets, Pet. 17, 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. 17, 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. 13-14; 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.4 And Pennsylvania is considering

still other alternatives, including a carbon pricing

4 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.

22

program.5 If anything, those variations underscore the

wisdom of allowing continued percolation, particularly

given Hughes’ recent vintage.

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.

Pet. App. 16a (“Plaintiffs

mischaracterize … the ZEC program.”). 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[] the ZEC plants to

participate in the wholesale market,” but ZEC plants

could make the “business decision” “to sell directly to

consumers” at retail, or sell via bilateral contracts, “and

still receive ZECs.” Pet. App. 18a; see Star, 904 F.3d at

523 (similar).

Even as to what occurs today, Petitioners’ assertion

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

Nuclear Energy

30 (Nov. 29, 2018).

Caucus

Report:

2017-2018

Session,

at

23

is simply untrue, contradicted by FERC orders that are

subject to judicial notice on a motion to dismiss. One

ZEC plant is co-owned by the Long Island Power

Authority, which delivers its share of the plant’s

electricity directly to retail customers—and ZECs are

received for that electricity. C.A. Appendix A-144, 23132. Several ZEC plants have recently sold electricity

through bilateral contracts at negotiated prices, outside

the auctions. 6 And one ZEC plant has in the past

produced power at one of its units that is immediately

consumed at its other unit, which involves no wholesale

sale.7 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 United States and FERC

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

6 See R.E. Ginna Nuclear Power Plant, LLC, 151 FERC ¶61,023,

P.2 (2015); Entergy Nuclear FitzPatrick, LLC, 118 FERC ¶62,085,

at 64,222 (2007). The FitzPatrick plant continues today to sell

through a bilateral contract. While Petitioners insist that bilateral

contracts are indistinguishable from auction sales, Pet. 24 n.9, this

Court thought otherwise in Hughes: It deemed it “significant” that

Maryland’s contract-for-differences “differs from traditional

bilateral contracts.” 136 S. Ct. at 1299. For good reason: Bilateral

contracts are subject to ex post “reasonableness review” by FERC,

which will ensure that the price they set is just and reasonable. Id.;

see Allco, 861 F.3d at 100.

7 See Nine Mile Point Nuclear Station, LLC v. Niagara Mohawk

Power Corp., 110 FERC ¶61,033, P.3 (2005); Calpine Corp. v.

FERC, 702 F.3d 41, 42, 47-50 (D.C. Cir. 2012).

24

always sold through the wholesale auctions. U.S. Br. 1516; 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

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). See Pet. 2324.

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’ 2d Cir. Br. 40

(“Plaintiffs do not allege that state Renewable Energy

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

REC recipients sell their output exclusively at

wholesale. Pet. App. 24a. 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.

25

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

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. 45a-51a; Star, 2017 WL 3008289, at *8-10. 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 New York and Illinois 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 Second nor the Seventh Circuit 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.

26

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

Young—but “Ex parte Young actions historically

involved a party bringing a preemptive action … to

challenge a possible enforcement proceeding under state

law.” Star, 2017 WL 3008289, at *9 (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).8 Petitioners “are not the potential

target of any state enforcement proceedings.” Star,

2017 WL 3008289, at *9. No one could indict them, sue

them, or penalize them based on the ZEC Program.

8 Those cases fell within equity’s historic jurisdiction because an

injunction to stop an enforcement proceeding is an anti-suit

injunction, a type of action recognized by equity courts for

centuries. See 4 John Norton Pomeroy, A Treatise on Equity

Jurisprudence, § 1360, at 2699-2700 (3d ed. 1905) (“The use of

injunctions to stay actions at law was almost coeval with the

establishment of the chancery jurisdiction….”); 2 Joseph Story,

Commentaries on Equity Jurisprudence, § 875, at 190 (13th ed.

1886) (discussing anti-suit injunctions); John Harrison, Ex parte

Young, 60 Stan. L. Rev. 989, 997-1001 (2008) (same).

27

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. 47a-49a; Star, 2017

WL 3008289, at *9. 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. 48a-49a; Star, 2017 WL 3008289, at

*8-9. 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 Star, 2017 WL 3008289, at *8. Petitioners

complain 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,

28

135 S. Ct. at 1389-90 (Breyer, J., concurring); see also

U.S. Br. 22. 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 Illinois

district court recognized, Petitioners lack Article III

standing to raise one of their primary objections to these

ZEC programs. Star, 2017 WL 3008289, at *5-6.

Petitioners claim that the ZEC pricing mechanism is

unlawful because it relies on forecasts of wholesale

electricity prices. Pet. 13-14, 26.

But the priceadjustment 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 Illinois district court

held that Petitioners lack Article III standing to

challenge the price-adjustment mechanism.

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. 15, 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.

29

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. (ellipsis in original);

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,” 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, New York 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

30

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. 19 (emphasis

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

wholesale auction, they would not reduce wholesale

prices. The “subsidized plant’s participation in the

capacity auction was therefore necessary to achieve

Maryland’s objective.” Pet. 19 (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 “fight climate change and …

reduce carbon emissions.” C.A. Appendix A-234. 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

31

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, 178-79

(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.

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 New York of its

authority to subsidize those plants’ production.

4. By contrast, accepting Petitioners’ theory would

32

have sweeping effects. Many state programs provide

payments to generators that sell exclusively at

wholesale, including the REC programs FERC has

approved. Supra at 14. 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; Pet. App. 22a-25a

(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

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).

33

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 New

York, 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,

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. Pet. App. 20a (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,” Pet. App. 21a—

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,” Pet. App.

21a (quoting FERC brief in Northwest Central).

Despite these intended effects on FERC’s domain, the

34

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.

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