The parties to a lawsuit challenging New York State’s participation in, and its rules to implement, the Regional Greenhouse Gas Initiative (“RGGI”) have reached a settlement. On December 23, 2009, a proposed consent decree in the matter of Indeck Corinth, L.P. v. Paterson, No. 5280-09, was filed with the Supreme Court of the State of New York in Albany. The litigation, which commenced on January 29, 2009, was brought against Governor Paterson, various State entities, and Consolidated Edison (“ConEd”) by Indeck Corinth, the operator of a gas-fired energy co-generation facility that held a long-term contract with ConEd. Two other gas-fired energy co-generation facilities with long-term ConEd contracts later intervened in support of Indeck. As described in the proposed consent decree, Indeck alleged that New York’s participation in RGGI was outside the scope of the State’s lawful authority (ultra vires) and unconstitutional, and that the rules implementing RGGI were arbitrary, capricious, and not supported by a proper record. Indeck contended that its long-term contract prevented it, unlike other generators without such contracts, from passing on to ratepayers the costs of complying with New York’s rules implementing RGGI (“RGGI Rules”).
RGGI is an agreement among ten Northeast and Mid-Atlantic states, including New York, to limit greenhouse gas emissions through a cap-and-trade system. As summarized by the New York State Energy Research and Development Authority (“NYSERDA”), the agreement “calls for states to cap power sector carbon emissions through 2014 and then reduce emissions by 2.5 per year for the next four years, resulting in a 10 percent reduction by 2018.” The RGGI Rules were promulgated by the New York State Department of Environmental Conservation (“DEC”) (codified at 6 NYCRR Part 242) and by NYSERDA (codified at 12 NYCRR Part 507). As summarized by the DEC, the RGGI Rules “require power plant owners in New York to obtain sufficient allowances to cover their annual CO2 emissions,” primarily by purchasing them at auctions or through a secondary market, but with “a limited number of allowances” allocated at no charge to power generators with long-term contracts that prevent them from passing the cost of such allowances to ratepayers.
The settlement provides that ConEd will pay Indeck and the intervenors for the cost of allowances in excess of those allocated to them under DEC rules, and that NYSERDA will allot a portion of RGGI proceeds to offset ConEd’s costs. According to NYSERDA, the settlement “maintains the number of set-aside allowances and the size of the emissions cap,” and is “designed to be ratepayer neutral,” with provisions for NYSERDA to partially fund efficiency and infrastructure improvements for ConEd, which should offset consumer costs.
The Court has not yet entered the proposed consent decree as an order. Although not required by law to do so, the State seeks public comment on the settlement agreement, which will be considered in the Court’s approval process. The 30-day comment period began on December 30, 2009. Comments will be collected by the New York Attorney General’s office; instructions for submitting comments are available here.