Settlement Reached in Regional Greenhouse Gas Initiative Lawsuit
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 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 Yorkâ€™s participation in RGGI was outside the scope of the State's lawful authority 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 Yorkâ€™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 and by NYSERDA. 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.