By William Opalka
A federal appeals court has rejected challenges to the Lower Hudson Valley Capacity Zone in New York (14-1786).
Utility companies and the New York Public Service Commission had appealed an August 2013 order by the Federal Energy Regulatory Commission creating the zone, saying it would lead to a windfall for power generators. (See New Yorkers Upset over NYISO Capacity Zone.)
A three-judge panel of the U.S. Second Circuit Court of Appeals ruled in favor of FERC on April 2 in a 61-page opinion.
“We conclude that FERC articulated sound economic principles supporting the creation of the Lower Hudson Valley Zone and satisfactorily explained how those principles justified its conclusion,” the court said.
The options for the losing parties are to ask for an en banc rehearing before the entire court or to directly petition the U.S. Supreme Court.
“We are disappointed, as the capacity zone has unfairly and artificially raised energy prices for homes and businesses in our service territory. We are reviewing the court’s decision, however our legal options are very limited as there are no reasonable or promising actions available to us,” said Central Hudson Gas & Electric spokesman John Maserjian.
Central Hudson says monthly bills have increased by 6% for residential customers and 10% for large industrials.
NYISO, in response to previous FERC orders, created the zone in the counties north of New York City in August 2013. The lawsuit challenging was filed after additional charges in the zone went into effect May 1, 2014.
NYISO and FERC maintained that generation resources were needed because price signals were insufficient to encourage power plant developers to site facilities there and that transmission constraints threatened reliability.
“We are not persuaded that there is anything unreasonable in FERC’s conclusion that higher prices were necessary to ensure reliability by generating accurate price signals in the long run,” the court wrote.
FERC said the congestion issue has been discussed since 2006 without a solution. Consumers have been shielded from higher prices since that time, it noted.
The companies and the PSC had argued that proposed transmission projects would relieve the constraints. (See Tx Plan to Open NY Choke Points Without New ROWs.) Another project would create a corridor from the Canadian border to New York City, making renewable energy generation from upstate more readily available.
The court sided with FERC’s contention that the projects have not yet been certified and that FERC “rationally explained its decision to act according to existing market conditions rather than speculative future conditions.”