Advanced Energy Perspectives

Supreme Court Stays CPP While Senate Halts Energy Bill

Posted by Matt Stanberry and Arvin Ganesan

Feb 11, 2016 6:24:22 PM

    

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This week, the U.S. Supreme Court issued a stay of EPA’s Clean Power Plan until the pending litigation against the rule is resolved, including any appeal to the high court. This means the rule will be in legal limbo until the Supreme Court rules on the merits of the case. In response to the Court’s action, AEE’s Malcolm Woolf said that while we are disappointed by the decision, which could have a “disruptive and chilling” effect on modernizing our electricity system, “we are witnessing the inevitable rise of better technology designed to meet the energy needs of the 21st century, and we feel confident that, upon full review, the rule will be upheld on the merits.” But what does this mean for our industry, nationally and in the states? 

So, here’s what happened.

In a 5-4 ruling, the Supreme Court overturned the decision of the Court of Appeals for the D.C. Circuit to deny petitioners a stay of the Clean Power Plan (CPP). This was an unusual action by the high court. Stays of governmental action while litigation is pending are rare, especially as the Supreme Court generally gives wide deference to the D.C. Circuit on matters of administrative law. However, the high profile of the case makes it somewhat less surprising that the Supreme Court would seek to preserve the status quo (i.e. forestall implementation of the new rules) pending a full hearing and decision on the merits of the plaintiffs' Constitutional and statutory claims.

The case now moves to consideration of the merits. The case before the appeals court was already set on an expedited schedule, with briefs due in April and oral arguments scheduled for June 2. Whatever the decision in the D.C. Circuit, one of the sides will file an appeal. Assuming the Supreme Court takes up the case, a decision would not be expected until 2017, and could even be 2018.

Implications for federal and state actions

Since the stay decision essentially pauses implementation of the CPP until the litigation concludes, the practical implications are complex and uncertain. That is especially true given the lengthy implementation timetable for the CPP, which calls for the voluntary crediting of the Clean Energy Incentive Program to begin in 2020 and mandatory compliance in 2022. 

At the federal level, while EPA cannot enforce implementation of the regulation, the Agency may continue to work on aspects of the rule through the issuance of guidance materials, such as the one it drafted on demand side energy efficiency EM&V, and other mechanisms.

At the state level, some states have already taken the opportunity to put away their planning pens, but others will likely continue their efforts (see map). Nine states – California, Colorado, Minnesota, New York, Oregon, Pennsylvania, Virginia, Washington, and Wyoming – have already announced intentions to continue planning, and more are likely to follow in the coming days and weeks. Even states that are suing EPA are still aware of the need to continue planning. The Arkansas Department of Environmental Quality and Public Service Commission issued a joint statement saying they were pleased with the decision, but that they would “strive to 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.”

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While the Supreme Court is years away from a final decision on the CPP, it has already confirmed EPA’s authority to regulate carbon emissions. So even if the Supreme Court rules against EPA in this case, the electricity sector will eventually have to comply with some form of carbon limit—perhaps one that is less flexible than the CPP.

Implications for the advanced energy industry

Despite the short-term uncertainty around the CPP caused by the stay, prospects for the advanced energy industry remain bright. With the final rule pushing the start of compliance back to 2022, CPP is a market driver for the long term. In the meantime – as the rule gets litigated on the merits – there are several trends driving industry growth:

  • Extension of the ITC and PTC, with phase-down of the credits, through 2022 provides a longer period of market certainty than the solar and wind industries have had for some time. As a result, initial modeling estimates of renewable energy deployment over the next few years are large, with over 15 GW/year of deployment predicted for much of the next five years. Congress is also considering expanding this tax credit for technologies such as CHP and fuel cells.  
  • Natural gas, solar, and wind power are dominating new capacity installations, with low-priced natural gas and record-low PPA prices for renewable energy, and accounting for a growing share of generation – trends that are likely to continue.
  • Energy efficiency, demand response (aided by a favorable Supreme Court decision preserving DR’s role in wholesale electricity markets), and other demand management technologies continue to grow due to cost-competitiveness.
  • Utilities are continuing to plan and invest in advanced energy technology, regardless of CPP litigation, with the awareness that customers and markets are pushing for more investment in cleaner technologies. 

Energy bill slows to a halt in the Senate

While the Supreme Court’s decision grabbed most headlines this week, the Senate pulled the comprehensive energy bill from the floor for the foreseeable future. It was the ongoing water crisis in Flint, Michigan, rather than anything having to do with energy, that knocked the bill off track. Democrats, led by Sen. Debbie Stabenow (D-MI) and Sen. Gary Peters (D-MI), pushed for spending to address the crisis while Republicans insisted on a spending offset if the amendment were to be adopted. The bill seemed to gain some traction earlier this week with a proposal from Senate Environment and Public Works Chairman James Inhofe (R-OK) that the Congressional Budget Office says will not add to the deficit. Nonetheless, Senate Majority Leader Mitch McConnell (R-KY) decided to focus floor time on other issues this week. Stabenow believes that the energy bill can pass if a compromise to address the Flint crisis is reached, but as of right now, that looks unlikely.

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Topics: Federal Policy Update

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