Chip Cannon Quoted on Third Circuit Ruling on New Jersey Subsidy Program by Law360

Law360, for its article “Courts Slamming Brakes On State Power Plant Plans,” quoted Akin Gump energy regulation, markets and enforcement partner Chip Cannon on a ruling by the U.S. Court of Appeals for the Third Circuit regarding New Jersey’s Long Term Capacity Agreement Pilot Program, a subsidy program for new power plant construction, which decreed that, under the Federal Power Act, the program interfered with the Federal Energy Regulatory Commission’s (FERC) jurisdiction over interstate rates for wholesales of electric capacity.

The court noted, however, that the state could offer other incentive programs to power developers including tax breaks and favorable lease terms for state-owned property as well as “directly subsidize generators so long as the subsidies do not essentially set wholesale prices.” Cannon added, “This last sentence [of the ruling], for me, suggests that states can be creative — it’s not just bonding authority or property tax relief. Potentially, there are other opportunities out there for states to incentivize the development of generation without stepping on FERC's jurisdictional toes.”

Cannon noted that the ruling clearly defines states’ jurisdictions, saying, “It’s very clear that states can regulate, or not regulate, the mechanics of siting power plants within their boundaries, and that incentives around the margins to make it less expensive to operate, they have that jurisdiction.” However, he added, “To really go to the heart of the question of whether a generator is economic and can generate sufficient revenue, it’s not clear to me how a state can resolve that issue without coming pretty close to having an impact on the wholesale market. The plants participate in the wholesale market.”

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