A federal appellate court rejected a challenge by a solar developer to a Connecticut competitive solicitation for renewable power that would permit winning bidders to receive wholesale power contracts to sell the power to the state's utilities. The developer claimed that the state violated federal law because it did not limit the eligible bidders to qualifying facilities under the federal Public Utility Regulatory Policies Act, or PURPA. The court found that the state action was not inconsistent with federal law and that it was not an undue burden on interstate commerce.
As a general matter, another federal law, the Federal Power Act gives the federal regulatory agency known as FERC the exclusive authority over wholesale electric rates in interstate commerce.
There are exceptions. State are given limited authority over wholesale rates of “qualifying facilities” under PURPA that use renewable energy and that are not above a maximum size. A key issue in this case was whether the state had the authority to direct its regulated utilities to sign wholesale contracts that resulted from the bidding for projects that did not qualify under PURPA.
The issue became more significant as a result of the recent US Supreme Court decision of Hughes v. Talen. In that case the state required the state's utilities to sign contracts with winning bidders who would construct gas-fired power plants and sell the output into the competitive regional market known as the PJM market. The state required the winning bidder to participate in the PJM auction for its sales of capacity, and to clear the auction and net the auction payments against the contract prices under the contract. The Supreme Court found that this state action interfered with FERC's exclusive rights over wholesale rates, since the PJM auction was approved by FERC.
The federal appellate court here, in dismissing the solar developer challenge, distinguished the Connecticut solicitation from the case in Hughes v. Talen. The court found, that, unlike Hughes v. Talen, the contracts here were bilateral contracts that did not require participation in the wholesale market auction. It also found that the Connecticut law authorized but did not compel the state's utilities to accept specific bids, unlike the state commission action reviewed in Hughes v. Talen.
This decision is likely to be cited by litigants in current federal court proceedings challenging the state of New York and Illinois' recent creation of zero-emission credits (or ZECs) to support the prices of operating nuclear plants that are competing in the wholesale power markets.