Canada’s Algonquin Power & Utilities has agreed to purchase The Empire District Electric Co. for $2.4 billion, including the assumption of Empire’s debt.
The Missouri-based Empire, with 218,000 customers in Missouri, Kansas, Oklahoma and Arkansas, will be folded into Algonquin’s Liberty Utilities unit at the close of the transaction, Algonquin said. Liberty Utilities has about 485,000 customers in Arizona, Arkansas, California, Georgia, Illinois, Iowa, Massachusetts, Missouri, New Hampshire and Texas.
Empire’s headquarters will remain in Joplin after the deal closes, the companies said. Empire shareholders will receive $34 per common share, a 21% premium to Empire’s Feb. 8 closing price. The Ontario-based Algonquin said all of Empire’s 750 employees will be retained, and customer rates are not expected to change.
Algonquin said it doesn’t expect to close the deal until the first quarter of 2017. Approval is needed from various state and federal regulatory agencies, including FERC and the Department of Justice, as well as the Federal Trade Commission. Because Algonquin is a Canadian company, the acquisition will also need the approval of the federal interagency Committee on Foreign Investment.
“The acquisition of Empire represents a continuation of our disciplined growth strategy, which strengthens and diversifies Algonquin’s existing businesses and strategically expands our regulated utility footprint in the Midwest,” said Algonquin CEO Ian Robertson.
It was the second takeover of an American utility company by a Canadian firm in the same week. Earlier, Newfoundland-based Fortis announced it plans to buy ITC Holdings, the largest independent transmission operator in the U.S., for $11.3 billion. (See related story, Fortis to Acquire ITC Holdings for $11.3B.)
U.S. utilities are an attractive target for Canadian companies. They are typically permitted a larger return on equity than Canadian firms. At the same time, analysts say, Canadian companies have access to cheaper financing, making it easier for them to complete transactions and to outbid U.S. competitors for acquisitions.
ITC and Empire aren’t the only companies attracting Canadian interest. Last fall, Nova Scotia-based Emera announced its intention to buy Florida-based TECO Energy for $10.4 billion. TECO owns electric and gas companies in Florida and New Mexico. That deal is expected to close in the middle of this year.
NEW YORK — Investor-owned utilities will have a central role in the expansion of distributed generation and renewables, ensuring profit growth even as load remains flat, the industry’s trade group told securities analysts Wednesday.
At its annual Wall Street briefing, leaders of the Edison Electric Institute touted utilities’ dividend growth and partnerships with technology companies to make their case for utility stocks.
But when EEI President Tom Kuhn and five other executives completed their presentations and opened the floor to questions, the first query addressed the lack of load growth, an analyst calling it “the elephant that, frankly, is not in the room.”
“You have had no sales growth whatsoever in something like the past eight years despite the increase in the economy. My question to you is: What are you going to be selling … to customers in the future if they’re not buying electricity?”
Tom Kuhn
Kuhn said that while increasing efficiency has disconnected load growth from the gross domestic product, it is also providing opportunities for capital expenditures — about $7 billion annually, he told about 150 analysts at the luncheon session at the University Club off Fifth Avenue in Manhattan.
He also cited spending on grid security and opportunities in the electrification of transportation.
“You want to sell what’s best for the customer,” Kuhn said. “In the future it may be things that flatten load — storage and other kinds of things … I think [vehicle] electrification is an important part of the equation, but [we’re] not really counting on major electricity growth to deliver what’s best for the customer.
“Over the past seven years, although load hasn’t really increased, you’ve seen utilities do pretty well,” he continued, citing the growth in dividends (39 of 46 publicly traded companies tracked by EEI raised dividends in 2015) and stock prices (up 71.5% over five years, despite a 3.9% drop in 2015).
Kuhn blamed 2015’s drop on rising interest rates and low natural gas prices. The EEI index’s 2015 performance trailed the Dow Jones Industrial Average (0.2%), the S&P 500 (1.4%) and the NASDAQ (5.7%). EEI’s five-year average beat the Dow Jones (70.8%) but fell short of the S&P (80.8%) and NASDAQ (88.8%).
The EEI index was up 7% in January, however, while broader indexes lost more than 10% amid concern over slowing economic growth in China.
Kuhn noted that utility credit ratings have improved to an average of BBB+, with 84% of companies rated as stable or positive as balance sheets have shifted toward regulated operations and away from competitive businesses.
Capital expenditures, which hit a record $108.6 billion in 2015, are forecast at $101.2 billion for 2016 and $92.2 billion next year. Spending, which was formerly dominated by generation, has shifted to distribution, which has doubled its share over the last five years, he said.
‘Enhanced Relationship’
In recent strategy meetings with utility CEOs, EEI identified grid modernization, clean energy and customer solutions as areas for growth, said David Owens, executive vice president for business operations and regulatory affairs.
David Owens
“It’s not just about electricity sales. It’s about your enhanced relationship with the customer,” Owens said.
It is utilities that are developing microgrids for military bases and that will build the charging infrastructure needed for electric vehicles, he said.
“We have many customers who are looking at a full array of technologies where they have greater control over their usage and greater control over their bills,” he said. “We’re seeking to become a full-service provider behind the meter… so we see a bright future.”
Role in Renewables
Richard McMahon, vice president of energy supply and finance, said utilities are the “primary investors” in all forms of renewables, with utility-scale solar representing 60% of all installed solar capacity.
EEI’s solar value proposition is cost. Utility-scale solar costs less than half as much as roof-top panels ($1.48/W versus $3.55/W for the first three quarters of 2015), according to the group.
McMahon said utilities also will be “major players” in buying and deploying storage. “Maybe the one silver bullet in energy storage hasn’t emerged yet, but there’s a lot of testing … currently going on in the industry and its happening really across the value chain,” he said, citing uses at the wholesale level for peaking, at transmission for voltage control and in distribution for power quality.
Brian Wolff, executive vice president for public policy and external affairs, touted EEI’s 182 technology partnerships with the likes of Tesla, Apple, Google and Nest Labs. “We view many of the so-called ‘competitors’ or ‘disruptors’ to our industry as partners,” he said.
EEI members spent more than $90 million last year to add 800 plug-in electric vehicles to their fleets. Seventy utilities have committed to invest at least $250 million over the next five years to increase their EV fleets. “This helps to push down vehicle development costs for automakers, making EVs more affordable for customers,” Wolff said.
Policy Initiatives
In addition to making their case for utility stocks in investors’ portfolios, EEI officials also briefed analysts on the group’s policy initiatives — chief among them changing state net metering policies to eliminate cost shifting from customers with rooftop solar. Owens said legislatures or utility regulators in more than three dozen states are considering changes.
The issue could be addressed by increasing charges for the fixed costs of the grid; through separate rates for buying and selling power; or a three-part rate, including a monthly basic service charge, a demand charge and an energy charge, Owens said.
Wolff expressed disappointment that a bipartisan energy bill stalled in the Senate earlier this month over aid to Flint, Mich., which is seeking funding to address lead in its water system. Assuming the hurdle is overcome, it would have to be reconciled with legislation that cleared the House earlier.
Although Senate leaders said they will reconsider their bill later this year, Wolff said, chances of passage are far from certain. “The closer we get to the election, the less appetite Congress has for doing big things,” he said.
Former FERC Commissioner Philip Moeller, who joined EEI last month as senior vice president of energy delivery and “chief solutions officer,” expressed disappointment at the Supreme Court’s January ruling upholding FERC Order 745.
Moeller was the lone dissenter on the order, which required RTOs to pay demand response at the same LMP rate as generation. Moeller argued for payment of LMP minus the avoided cost of generation. “I hope the commission will [revisit DR pricing] sooner rather than later,” he said. (See Clark Calls for New Look at Order 745.)
Ohio PPAs
EEI executives declined to take sides when asked about the power purchase agreements FirstEnergy and American Electric Power are seeking for their merchant generation in Ohio. The issue has pitted EEI Chairman Nick Akins, AEP’s CEO, against EEI Vice Chairman Chris Crane, CEO of Exelon. (See Exelon Calls FirstEnergy PPA ‘Grossly Lopsided,’ Says it Can Offer a Better Deal.)
All but one of the Ohio plants at issue are coal-fired, the exception being FirstEnergy’s Davis-Besse nuclear station.
But EEI’s McMahon chose to focus on the woes of nuclear plants whose revenues have decreased as low natural gas prices have lowered clearing prices — an issue on which AEP, FirstEnergy and Exelon are in agreement.
“I think there’s an overall recognition that companies are going to do what they need to do” to protect their baseload generation, he said. “Our focus has been more working with the FERC, working with the other trades and the RTOs to address these issues so that the markets really provide the appropriate price signals to those companies.”
FERC’s general counsel told a congressional subcommittee that there are “significant benefits” to a proposed amendment to the Federal Power Act that would allow challenges to rates that take effect as a result of a commission deadlock.
The proposed amendment to Section 205 was considered in a hearing before the House Energy and Power Subcommittee on Feb. 2.
Kennedy III
The Fair RATES Act (H.R. 2984) was proposed last year by Rep. Joseph P. Kennedy III (D-Mass.) after he found there was no legal recourse to challenge the results of ISO-NE’s eighth Forward Capacity Auction. The results were certified “by operation of law” in 2014 when commissioners failed to take action and indicated in public statements that they were split 2-2. (See FERC Commissioners at Odds over ISO-NE Capacity Auction.)
FCA 8, effective for the 2017/18 capacity commitment period, saw capacity costs total $3 billion, about triple the previous year’s results. New England’s congressional delegation protested the results but found itself in legal limbo because there was no FERC order on which to request a rehearing by the commission, nor any way to appeal to federal court.
“Appellate review is an important procedural avenue for those who do not prevail before an administrative agency. It would also correct an unusual outcome in a specific context that may arise when the commission has four voting members,” FERC General Counsel Max Minzner said.
FERC’s five-member panel dropped to four again last fall with the departure of Commissioner Philip Moeller. Thus the commission could find itself split again when it is asked to certify the results of FCA 10, which was held Monday. (See Prices Down 26% in ISO-NE Capacity Auction.)
“This outcome is certainly not impossible before we get this law across the finish line … given the fact that there are four [commissioners] … and no other nominations are in the pipeline,” Kennedy said.
Minzner said a complainant persuasive enough to convince a second commissioner of the merits of its case deserved an opportunity for further review.
He said he is aware of only six times under the FPA or the Natural Gas Act when a public utility filing went into effect without a FERC order. However, Minzner said he believes any change in the law should apply to “future cases,” leaving FCA 8 results intact.
After the congressional hearing, Sen. Edward Markey (D-Mass.) introduced a version of Kennedy’s bill in the upper chamber (S. 2494). The two congressmen also wrote a letter to President Obama urging a nomination to fill the current vacancy and pointing out that the five-member panel could be reduced to three with Commissioner Tony Clark not seeking reappointment when his term ends in June. (See Clark Won’t Seek New FERC Term.)
AUSTIN, Texas — The ERCOT Board of Directors Feb. 9 remanded to the Technical Advisory Committee a proposal to pay lost opportunity costs to generators ordered to ramp down for grid reliability.
Nodal protocol revision request (NPRR) 649, in the works since September 2014, received 56% support in a TAC roll call vote in November, short of the two-thirds threshold for approval.
Odessa-Ector plant (Source: Odessa-Ector Power Partners)
ERCOT submitted the NPRR to satisfy a settlement agreement with Odessa-Ector Power Partners, owner of a West Texas combined cycle plant that said it lost $300,000 because of dispatch overrides during three days in November 2012.
The settlement came in response to an appeal the company and Merrill Lynch, its qualified scheduling entity at the time, filed with the Public Utility Commission of Texas (docket #41790).
Odessa-Ector, a subsidiary of Koch Ag & Energy Solutions, asked the ERCOT board to override the TAC’s rejection. “While nearly all out-of-merit actions have financial protection in the protocols, these specific actions, which were not foreseen during the original protocol development, result in financial losses for those complying with ERCOT’s instructions,” the company said, predicting that remanding the issue to TAC would not resolve the impasse.
ERCOT CEO Bill Magness proposed that the board return the issue to the TAC.
“We believe if we remand this [to the TAC], there could be an opportunity for further discussion around the compensation issue and put further alternatives on the table,” Magness said. “We would commit to filing comments and identifying options we might put forward. It seems like it might be better to take one more crack at it [in the TAC] and work it out.”
Interested parties who had filed position statements supported Koch.
“After more than a year of work on this NPRR by stakeholders and ERCOT staff, it is clear that there is no acceptable resolution that would be achieved by additional time or debate,” said Texas Competitive Power Advocates, which called the NPRR “fair and appropriate.”
South Texas Electric Cooperative and Golden Spread Electric Cooperative also asked the board to grant the appeal, saying “strong support at multiple TAC subcommittees are indicative of a NPRR that is well vetted and developed.”
The Wholesale Market Subcommittee unanimously endorsed the proposal in October and the Protocol Review Subcommittee endorsed it with one opposing vote.
Twelve voters from ERCOT’s Consumer, Cooperative and Independent Retail Electric Provider (IREP) market segments opposed the proposal at the TAC meeting, where there were also three abstentions from the IREP and Investor-Owned Utility segments.
Some opponents said that since ERCOT’s nodal market went live in December 2010, ramp-down dispatch orders have been rare and do not justify the estimated cost. Others contended that that the proposal could overcompensate generators rather than making them whole.
“It’s a slippery slope when you start paying opportunity costs and lost profits,” said Valero Services’ Jack Durland, who represents industrial customers. “ERCOT does everything it possibly can, but it can’t always take power. Should generators be guaranteed payments?”
“There are solid arguments on both sides of this issue,” said unaffiliated director Karl Pfirrmann. “It’s important for stakeholders to reach [a] solution, rather than us direct it from above.”
Pfirrmann said he was “concerned about precedent-setting issues as we go forward,” expressing his hope that “we find resolution in our committee structure.”
The motion to remand the issue to the TAC carried with one abstention. The board also directed ERCOT staff to file suggested alternatives that might satisfy the two-thirds majority requirement.
TAC Chair Randa Stephenson promised the board her committee would be “very diligent” about bringing the NPRR back to the board for its next meeting in April.
The Supreme Court’s stay of the Clean Power Plan won’t affect PJM’s planned analysis of the economic and reliability implications of complying with the federal program.
“Our main concern is reliability. We don’t have a position on the Clean Power Plan as far as merits, but we recognize it is a transformational change that we need to be prepared for,” PJM’s Muhsin Abdurrahman told the Transmission Expansion Advisory Committee on Thursday. (See Supreme Court Blocks Clean Power Plan.)
Earlier in the week, PJM released the methodology it will use to study the CPP for a report to be published by May 31. That target date still stands.
PJM said the report will “identify potential economic, operational, resource adequacy and transmission usage implications” of the CPP, emphasizing that the review will not be used to decide on specific transmission upgrades.
PJM’s analysis of the Clean Power Plan will model various scenarios to provide states with detailed information about the impact and costs of possible compliance pathways.
States had faced a Sept. 6 deadline to file a compliance plan or request an extension. Now that they have more time, Abdurrahman said, they are asking for even more sensitivity studies.
“They want to know, is my state a net buyer or seller of allowances? Do I have to incentivize more wind and solar, or do I have an option to purchase it externally, and what would it cost?” he said.
PJM’s first review will address the long-term impacts of the plan and be confined to the PJM footprint. Future analyses coordinated with other balancing authorities will address energy market interchange and broader emissions trading in the medium term and short term, the RTO said.
The EPA rule includes performance standards for generators. Together, PJM said, the standards would “shift the way energy is produced and delivered within the PJM system and influence future investments in generation sources.”
In PJM, the rule would reduce carbon emissions by 36% from 2005 levels by the year 2030.
The key variable in compliance will be the choice of a rate- or mass-based approach, along with the level of credit trading in which generators will be permitted to engage. Rate-based compliance limits emissions in tons per megawatt-hour; the mass-based method caps emissions in tons per year.
“Each of the compliance pathways is likely to yield different economic and reliability results for the PJM region over the interim (2022-2029) and final (2030 and beyond) compliance periods,” PJM said in announcing its methodology. “PJM’s modeling approach is designed to provide states with answers on how compliance with the CPP will drive market outcomes and the need for additional investment in the electric system.”
Natural gas prices and state renewable portfolio standards “have the potential to affect power sector-wide economic outcomes and incremental CPP compliance cost perhaps more than any other driver,” according to PJM. “Consequently, PJM will study each of the compliance pathways and the reference case with and without the renewable portfolio standards and for a high and low natural gas price forecast.”
Analysts will employ the reliability pricing model base case — used to develop the parameters for PJM’s capacity auctions — for their initial transmission and generation assumptions.
Initial assumptions regarding renewable resources available in 2019/20 will be based on an evaluation of the historic commercial probability of resources that enter the generation queue and the incentives from the extension of the federal production and investment tax credits, PJM said.
Texas, one of the states suing to block the EPA rule, said it will take no steps to comply while the challenge is pending. It would be required to cut CO2 emissions by almost one-third by 2030.
“The whole point of the stay is to stop us from having to provide any implementation plan, so we’re not moving forward with anything until this case is resolved,” state Attorney General Ken Paxton said in a press conference Wednesday.
ERCOT said in a statement that it “will continue to monitor developments and provide information as needed to Texas policymakers on this and other matters that could affect future electric reliability.”
ISO-NE
The New England states are supporting EPA in the legal challenge.
Connecticut Gov. Dannel Malloy called the stay “disappointing and shortsighted.”
“Through programs like the Regional Greenhouse Gas Initiative, we already have achieved significant reductions in carbon pollution from the electric sector, while growing our economies and maintaining reliable power. We have an obligation to combat greenhouse gases, and Connecticut is going to continue to do just that,” Malloy said.
“As we have always done, ISO New England will continue to provide support to the New England states as they develop their clean energy policies, while the [D.C. Circuit] takes this under consideration,” ISO-NE spokeswoman Marcia Blomberg said.
MISO
All but three of MISO’s 15 states — Iowa, Minnesota and Illinois — are opposing the EPA rule.
“MISO is still studying the Supreme Court’s stay, and we will have discussions with our stakeholder community to better understand their perspectives as we move forward,” MISO spokesperson Andy Schonert said in statement. “Our job as a reliability and transmission planner is to plan into a future that is uncertain as to how much and how fast policy might shift. Because of that, MISO’s modeling and planning efforts are designed to capture various potential outcomes.”
MISO said it is considering modeling a “partial CPP future,” which would assume that legal and political disputes slow the rule’s compliance or even bring it to a standstill, culminating in limited implementation.
Schonert said no decisions have been made yet to add the additional modeling option. Late last month, MISO was presenting results from a near-term analysis while it began to run scenarios under a mid-term analysis. The RTO also submitted comments to EPA on the federal plan that asked for the addition of a reliability safety valve. (See MISO: Mass-Based CPP Plan 1/3 Cost of Rate-Based.)
Minnesota Gov. Mark Dayton said the court’s stay would not affect the state’s clean energy initiatives. “We shouldn’t need a federal edict to understand how vital it is that we keep doing everything in our collective powers to reduce harmful greenhouse gas emissions, improve energy efficiency and advance Minnesota’s clean energy economy,” he said.
In Missouri, the leaders of the House budget committee said last week they will add language into the state spending plan to prevent the Department of Natural Resources from working on compliance. It would need a 37% emissions reduction.
Montana, which would have to cut emissions by 47%, is putting its compliance plans “on hold,” Gov. Steve Bullock said.
NYISO
The stay is unlikely to affect New York, which would be required to cut CO2 emissions by 19.5%.
Last month, the New York Public Service Commission approved a 10-year, $5.3 billion Clean Energy Fund to accelerate the state’s switch to cleaner resources. The commission moved forward on creation of a Clean Energy Standard that would mandate 50% of New York’s electricity come from clean energy sources by 2030. (See NYPSC OKs $5.3B Clean Energy Fund.)
New York Attorney General Eric T. Schneiderman issued a statement on behalf of his and 14 other states professing confidence that the rule will ultimately be upheld.
“PJM is committed to delivering to the states, as promised, the analysis of the potential effects of the Clean Power Plan on wholesale markets and reliability,” PJM spokeswoman Paula DuPont-Kidd said. “Our role is to provide data and analysis to help inform the states should the states need to make decisions in the future.”
A Pennsylvania Department of Environmental Protection spokesman told the Pittsburgh Business Times the state “will continue planning and engagement with stakeholders on the Clean Power Plan, pending final decision” by the courts.
Virginia Gov. Terry McAuliffe vowed to “stay on course and continue to develop the elements for a Virginia plan to reduce carbon emissions and stimulate our clean energy economy.”
SPP
SPP has been urging states in its recently expanded territory to work together in compliance, arguing that state-by-state compliance would be more expensive and more difficult for the RTO to manage. (See SPP to Push Regional Approach in First CPP Webinar.)
“SPP is still evaluating the implications of the Supreme Court’s decision to stay the EPA’s Clean Power Plan,” said Lanny Nickell, SPP vice president of engineering. “We will work closely with our stakeholders to determine how this action impacts both our ongoing regional transmission planning efforts and our work to facilitate compliance with the federal government’s carbon reduction goals.”
Oklahoma, which faces a one-third emission reduction, said it is banking on a rejection by the courts. “Since the Supreme Court has stayed implementation, Oklahoma no longer faces a September compliance date and can focus on assisting the attorney general on overturning this rule,” Oklahoma Secretary of Energy and Environment Michael Teague said.
— Amanda Durish Cook, Rich Heidorn Jr., Suzanne Herel, Tom Kleckner and William Opalka
Since EPA finalized its Clean Power Plan last August, RTOs have been working to evaluate the compliance options for states in their territories and how they may affect energy prices and transmission needs.
Last week, the Supreme Court gave them another variable to account for.
The court’s surprise stay prevents EPA from enforcing the rule pending the outcome of court challenges, meaning states will most likely not have to file compliance plans or extension requests by September, as the rule requires.
RTOs said they will continue to analyze the plan but that it was too early to say how the court’s stay would affect their evaluations. (See related story, RTOs, States Respond to CPP Stay.)
States Hedging Bets
The stay was requested by officials from 29 states, led by Texas Attorney General Ken Paxton and West Virginia Attorney General Patrick Morrisey.
When EPA released its final version of the Clean Power Plan, Senate Majority Leader Mitch McConnell advised states to ignore the rule, calling it illegal.
On Wednesday, Paxton told reporters that Texas would heed that advice. “We had no plans to proceed with anything other than fighting this,” he said in a joint conference call with Morrisey.
And, he said, the state has no intention of preparing a compliance filing in case the rule is ultimately upheld. “The whole point of the stay is to stop us from having to provide any implementation plan, so we’re not moving forward with anything until this case is resolved,” Paxton said.
But while the plaintiff attorneys general joined Paxton in celebrating, some states are hedging their bets.
In Arkansas, Attorney General Leslie Rutledge said the stay “helps ensure that Arkansas and other states are not forced to comply with a rule that will likely be found unlawful and will skyrocket energy rates.”
But Department of Environmental Quality Director Becky Keogh and Public Service Commission Chairman Ted Thomas said that the state would “balance our obligation to be wise stewards of taxpayer money with our obligation to be fully prepared should the Supreme Court ultimately uphold the plan.”
The two officials, who have been leading the state’s work on an implementation plan, scheduled public hearings around the state to gathered stakeholder feedback. An ADEQ spokesperson last week did not know the status of those hearings.
“We’re evaluating our options on next steps,” Keogh said. “We’re seeking input from our stakeholders on what those next steps will be and will continue to engage our stakeholders on environmental policy matters.”
States that were not part of the challenge, such as Virginia and Pennsylvania, said they will continue to work on their compliance plans regardless of how the case proceeds.
“We will stay on course and continue to develop the elements for a Virginia plan to reduce carbon emissions and stimulate our clean energy economy,” Virginia Gov. Terry McAuliffe said in a statement.
For its part, EPA remains open to engaging with states.
“EPA firmly believes the Clean Power Plan will be upheld when the merits are considered because the rule rests on strong scientific and legal foundations,” EPA said in a statement posted on the rule’s website. “For the states that choose to continue to work to cut carbon pollution from power plants and seek the agency’s guidance and assistance, EPA will continue to provide tools and support.”
EPA Administrator Gina McCarthy told state regulators that they should continue work on emissions reductions. The stay “doesn’t mean we won’t continue to support any state that voluntarily wants to move forward,” she said at a meeting of the National Association of State Energy Officials in D.C.
President Obama also put on a brave face at a Democratic National Committee fundraiser in California on Thursday. “One of reasons I want to talk about this is because in the last couple of days I’ve heard people say, ‘The Supreme Court struck down the Clean Power Plan rule,’” Obama said. “That’s not true, so don’t despair, people. This a legal decision that says, ‘Hold on until we review the legality.’ We are very firm in terms of the legal footing here.”
‘Baked In’
Exactly why the court took the highly unusual — if not unprecedented — step to grant a stay before a lower court ruling on the merits is unknown. The one-page order provided no details. (See related story, Supreme Court Blocks Clean Power Plan.)
Opponents of the rule asked the court to prevent EPA from “baking in” its mandates before the court could rule to avoid a repeat of Michigan v. EPA, in which the court declared EPA’s Mercury and Air Toxics Standards illegal.
In their stay application, the plaintiffs pointed out that by the time the court reached a decision, most companies had put in place irreversible plans to shutter or upgrade plants to comply with the rules. (See MATS Challenge Too Late for Targeted Coal Plants.)
“The day after this court ruled in Michigan that EPA had violated the Clean Air Act in enacting its rule regulating fossil fuel-fired power plants under Section 112 of the CAA, EPA boasted in an official blog post that the court’s decision was effectively a nullity,” the plaintiffs wrote. “Because the rule had not been stayed during the years of litigation, EPA assured its supporters that ‘the majority of power plants are already in compliance or well on their way to compliance.’”
“In the present case, EPA is seeking to similarly circumvent judicial review, but on an even larger scale” and “deploy again the cynical tactic that [it] successfully used just last term to nullify this court’s holding” in the MATS case, they wrote.
— Amanda Durish Cook, Rich Heidorn Jr., Suzanne Herel, Tom Kleckner and William Opalka contributed to this report.
WASHINGTON — The death of conservative Supreme Court Justice Antonin Scalia likely improved the odds that the Clean Power Plan will survive court challenges.
Four days before his death Saturday, Scalia was in the majority in the court’s 5-4 vote to stay the EPA rule pending legal challenges.
Many observers took the stay as a sign that the court would likely reject the plan — which relies on a novel interpretation of the Clean Air Act — when it hears it on the merits.
But without a ninth member, a 4-4 split would prevent the court from overturning the D.C. Circuit Court of Appeals if it backs EPA. (If the lower court rejects the rule, of course, there would be no chance for the liberal justices to save it without help from another justice, such as swing vote Anthony Kennedy.)
While Democrats want President Obama to appoint Scalia’s successor, Republicans said the appointment should come after the presidential election. The GOP, which controls the Senate 54-46, could deny Obama the 51 votes needed for confirmation.
Senate Majority Leader Mitch McConnell (R-Ky.) and Judiciary Committee Chairman Charles Grassley (R-Iowa) said Saturday that it should be Obama’s successor who replaces Scalia.
Backfire?
President Obama commenting on Scalia’s death
Denying Obama the chance to add a fifth liberal to the court has implications for a number of divisive and high profile cases facing the court, including abortion, affirmative action and immigration. But it could backfire on efforts by McConnell and others to block the Clean Power Plan.
The three-judge D.C. Circuit panel appointed to hear the CPP appeal — which had earlier rejected a stay request — includes two jurists appointed by Democrats. (One of them, Obama appointee Sri Srinivasan, has been widely mentioned as a possible Supreme Court nominee himself.)
The D.C. Circuit will hear oral arguments June 2 and is expected to rule this fall. It would be up to the Supreme Court to decide first whether to hear an appeal of the D.C. Circuit’s ruling and second to rule on the merits.
In a 4-4 deadlock, “there is no majority for a decision and the lower court’s ruling stands, as if the Supreme Court had never heard the case,” wrote attorney and SCOTUSblog publisher Tom Goldstein. “Because it is very unlikely that a replacement will be appointed this term, we should expect to see a number of such cases in which the lower court’s decision is ‘affirmed by an equally divided court.’”
Goldstein noted that the court was also limited to eight members during Chief Justice John Roberts’ first term. To avoid equally divided rulings, he said, the court “decided a number of significant cases by instead issuing relatively unimportant, often procedural decisions.”
In televised remarks Saturday, Obama promised he will nominate Scalia’s successor before leaving office. After praising Scalia as a “brilliant legal mind,” Obama said he will nominate a new justice “in due time.”
“There will be plenty of time for me to do so and for the Senate to fulfill its responsibility to give that person a fair hearing and a timely vote,” he said.
Earlier in the day, McConnell had taken the opposite stance. “The American people should have a voice in the selection of their next Supreme Court justice,” he said. “Therefore, this vacancy should not be filled until we have a new president.”
Republicans cited historical precedent in contending Scalia’s replacement should be chosen by Obama’s successor. “The fact of the matter is that it’s been standard practice over the last 80 years to not confirm Supreme Court nominees during a presidential election year,” Grassley said.
In 1988, however, McConnell and Grassley voted to confirm Justice Anthony Kennedy, appointed by President Ronald Reagan during his last year in office. Kennedy was confirmed 97-0 by the Senate, which was then controlled by the Democrats. Kennedy’s confirmation ended a seven-month vacancy on the court, coming after the Senate rejected Robert Bork, and a second nominee, Douglas Ginsburg, withdrew.
If Republicans have their way, Scalia’s seat would likely be open for more than a year, a gap Senate Minority Leader Harry Reid (D-Nev.) called “unprecedented in recent history.”
From 1967 through 1994, according to a 2005 Congressional Research Service report, 12 of 19 court nominations were pending in the Senate for more than nine weeks before receiving final action.
CRS says the Senate has confirmed all but 36 of 160 Supreme Court nominees since 1789. Both of Obama’s previous nominees, Justice Sonia Sotomayor (August 2009) and Justice Elena Kagan (August 2010), were confirmed — albeit when Democrats controlled the Senate.
Scalia’s replacement has already become an issue in the presidential race, with Republican candidates calling for a delay and Democrats backing Obama.
Electoral politics also could be at play if Obama gets a nominee to a confirmation vote. Twenty-four Republican senators are seeking reelection including those in the swing “purple” states of Wisconsin, Pennsylvania and Illinois, where blocking a nominee could undermine their appeal to Democratic voters.
Obama would need at least 14 Republicans to compile the 60 votes to force a vote in event of a filibuster. In 1968, the Senate refused to vote on President Lyndon Johnson’s chief justice nominee Abe Fortas. The seat was filled by Johnson’s successor, President Richard Nixon, who nominated Warren Burger.
“Competition was robust in this year’s Forward Capacity Auction,” ISO-NE CEO Gordon van Welie said in a statement. “The high participation in the auction demonstrates the interest in the New England marketplace and bodes well for meeting future resource adequacy requirements.”
The region is expected to lose 4,200 MW of coal, oil and nuclear generation by 2019, including Entergy’s 680-MW Pilgrim Nuclear Power Station.
RTO officials said 35,567 MW of capacity cleared the auction to meet the 34,151-MW installed capacity requirement for 2019/20:
31,371 MW of generation, including 1,459 MW of new generation;
2,746 MW of demand-side resources, including 371 MW that is new; and
1,450 MW of imports from New York and Canada.
New Generation
Three new gas-fired generators totaling 1,302 MW cleared the auction.
“These resources cleared at a price that was lower than the estimated cost of building a new power plant,” Robert Ethier, vice president of market operations, said during a media briefing. “Even at that price, three new, large power plants cleared at the auction.”
The pre-auction estimate for a new gas-fired plant was $10.81/kW-month. Like all recent construction in New England, the plants will have dual-fuel capability to burn fuel oil in the winter when necessary.
Ethier said ISO-NE and other financial analysts two years ago arrived at the higher figure based on their estimates of where the market was headed. “It certainly came in lower than a lot of industry observers expected,” he said.
The new generation is being built in areas where they are most needed, Ethier said, relatively close to where the Pilgrim plant is located.
About 485 MW of the Burrillville Energy Center 3 in Burrillville, R.I., cleared the auction. Chicago-based Invenergy is developing the $700 million, 900-MW combined cycle facility in the northwest corner of the state.
NRG Energy’s 333-MW Canal 3 in Sandwich, Mass., also cleared. The fuel oil-burning plant is being repowered to natural gas.
“I think it’s fair to project that those resources will provide energy to the region where the Pilgrim generation is retiring from,” Ethier said.
The auction also cleared a new 484-MW natural gas-fired combined cycle plant in Bridgeport, Conn., owned by Public Service Enterprise Group’s PSEG Power. The $550 million plant is expected to begin construction in 2017 and will be located at the site of the existing coal-fired Bridgeport Harbor Station site.
PSEG said Thursday it will finalize plans to retire the 400-MW Bridgeport Harbor and create a $2 million fund to support environmental projects and improvements for city residents to meet a state law that mandates community environmental benefit agreements to mitigate environmental effects of development projects. It also said it will work with Bridgeport to support local hiring. The city has promised “unqualified support” for the new power plant.
Unlike in FCA 9, the same clearing price will be paid to all capacity zones in New England. About 850 MW of the new resources will be built in the reconfigured Southeastern New England zone.
In its former configuration, the Southeast Massachusetts/Rhode Island zone last year failed to attract adequate resources. Administrative prices there were set at $17.73/kW-month as a result.
This year, the region was divided into two zones: Rest of Pool, which comprises Connecticut, western and central Massachusetts, Vermont, New Hampshire and Maine; and Southeastern New England (SENE), which includes Northeast Massachusetts/Greater Boston and Southeast Massachusetts/Rhode Island. (See ISO-NE Proposes New Capacity Zones for FCA 10.)
Firsts
The auction included several firsts, the RTO said.
The first offshore wind farm in the U.S. cleared the auction, with 6.8 MW, or 20% of its nameplate 34-MW capacity. Deepwater Wind is building the facility off Block Island, R.I. It is expected to be operating by the end of the year.
Two large fuel cell facilities, providing 2.5 MW each, also cleared.
ISO-NE said 27 MW of new wind and 44 MW of new solar cleared the auction; in all, 135 MW of wind and 65 MW of solar facilities cleared in FCA 10.
A total of 40,131 MW of resources, including 6,700 MW of new resources, qualified to compete in the auction.
NEW YORK — The Supreme Court’s stay of the Clean Power Plan throws the fate of President Obama’s signature environmental initiative into doubt, but it is not likely to end the shift to gas and renewables and away from coal, the Edison Electric Institute said Wednesday.
“Yesterday’s ruling, while fascinating, doesn’t really change anything,” Quinlan Shea III, EEI’s vice president for the environment, told analysts at EEI’s annual Wall Street briefing in Manhattan. “There’s a lot of drivers. A lot of what we’re seeing now in the domestic utility fleet is occurring anyway.”
Power sector CO2 emissions and carbon intensity have dropped by about 17% and 11%, respectively, since 2000, according to EEI data. The organization cited an Energy Information Administration projection that non-hydro renewables will more than triple from 2010 levels by 2040. “Greenhouse gas reductions are going to continue in our industry,” Shea said.
That’s not to say the stay announced late Tuesday wasn’t a jolt, said Shea. “I think anybody who wasn’t surprised is somebody you’d like to take with you to Vegas.” (See Supreme Court Blocks Clean Power Plan.)
A lawyer who began his career at EPA, Shea predicted the D.C. Circuit Court of Appeals will rule on the merits of the legal challenges by fall, with a likely Supreme Court ruling within 16 months, before the end of 2017. Other observers have said a Supreme Court ruling is unlikely before 2019. (See Former EPA Official: Clean Power Plan won’t Survive.)
That means, Shea said, that the stay will only affect for certain the September 2016 deadline for states to file compliance plans or seek extensions. Later deadlines — the first emission target in 2022 and the final 2030 target — could be undisturbed if the Supreme Court ultimately upholds the rule.
That is a big “if,” however.
Shea noted that Justice Anthony Kennedy — the swing vote between the liberal and conservative wings of the court, who authored the 2007 ruling that gave EPA the authority to regulate carbon dioxide — sided with conservatives in the 5-4 ruling ordering the stay.
“It makes you wonder what his thinking is.”
The one-page stay order did not disclose the majority’s rationale. “Do [the five justices] have the same reason for agreeing with the stay? None of us know what their reasoning was.”
Another question is whether the states and RTOs will slow down their compliance efforts as a result of the ruling.
One thing virtually certain is that Obama will leave office not knowing whether the CPP will be part of his legacy.
EEI officials said it’s unlikely Obama’s successor will seek to revoke the CPP immediately after taking office.
“This probably won’t be the first thing” on the new president’s to do list, said EEI President Thomas Kuhn, who noted the formal process required to revoke regulations. “They will be waiting for the Supreme Court to speak and then figure out where to go from there,” he said.
