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Archive for the ‘Legislation’ Category

Zuckerberg

In response to the Cambridge Analytica/data-scraping crisis, Facebook’s CEO Mark Zuckerberg has said he’s open to “the right regulation.”

You should be very afraid.

Companies as big as Facebook don’t recoil from regulation. They seek it. Regulation brings inestimable advantages, chief among which is the opportunity to capture the regulator. One need not look far to find prior examples.

In the run-up to the Great Recession of 2008, the Federal Reserve under Alan Greenspan treated the largest banks and mortgage lenders not as entities they regulated but as clients they had to help.

The Nuclear Regulatory Commission would be better known as the Nuclear Plant Approval and Preservation Commission.

Nuclear regulators in Japan looked forward to employment with Tokyo Electric Power Company, which had predictable effects on their reviews of plants like Fukushima. These are just a few examples, and we haven’t even touched Big Pharma.

Creation of some new commission to regulate privacy matters on social media would provide a juicy target for cooptation by Facebook’s immense wealth. No federal agency (and presumably it would be a federal, rather than a state, agency) can compete with Facebook’s immense resources, and Zuckerberg’s friends in Congress could control its funding levels year by year. As with Fukushima, regulators would view their time at the agency as a rung on the ladder to a higher-paying job with Facebook. A new statute granting this commission jurisdiction over privacy issues in social media could insulate Facebook from class actions if such matters were reserved to the new agency’s expertise.

When Facebook talks about “the right regulation,” he has in mind a well-trained regulatory spaniel that will run and fetch the frisbee no matter how far Zuckerberg flings it.

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Today’s edition of Utility Dive discusses our pending appeal in the Illinois Zero Emission Credit Case. You may read the article here.

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Exelon CEO Chris Crane

Exelon CEO Chris Crane

Chicago, IL February 14, 2017:  Chicago energy attorneys, Patrick N. Giordano and Paul G. Neilan, announced they filed a lawsuit in the U.S. District Court Northern District of Illinois today against Anthony Star in his Official Capacity as Director of the Illinois Power Agency.  Village of Old Mill Creek, et al. v. Anthony Star was filed on Tuesday, February 14, 2017 at the U.S. District Court Northern District of Illinois.

Attorneys Giordano and Neilan represent Plaintiffs that are governmental, residential, commercial, and industrial electricity consumers located throughout the State of Illinois. Plaintiffs claim that P.A. 99-0906, executed by Governor Rauner on December 7, 2016, violates the U.S. Constitution’s Supremacy Clause, Commerce Clause, and 14th Amendment Equal Protection Clause. The underlying basis for the constitutional claims is that the prices charged by electricity generating plants are subject to federal rather than state regulation. A similar case has already been filed in federal court in New York challenging that state’s subsidy of Exelon nuclear plants by the law firm Boies, Schiller & Flexner, LLP, which is headed by preeminent attorney David Boies.

Among other things, P.A. 99-0906 is designed to subsidize Exelon Corp.’s Quad Cities and Clinton nuclear plants. This subsidy will be charged to all Illinois electricity consumers beginning June 1, 2017 regardless of what company supplies the consumer’s electricity. The lawsuit specifically asks that the U.S. District Court grant a permanent injunction blocking the charges from going into effect as scheduled on June 1, 2017. According to Mr. Giordano: “These additional charges will reverse twenty years of deregulation in Illinois which have given us perhaps the one advantage we have over neighboring states: relatively low electricity charges due to an effectively functioning competitive market.” Mr. Giordano also said: “We’re challenging the nuclear bailout provision of the legislation because the prices charged by electricity generators have already been established by the competitive wholesale electricity market subject to federal jurisdiction and cannot be increased by the State of Illinois.”

The estimated impact to all Illinois consumers will be about $3.3 billion over the ten years of the nuclear bailout. Mr. Neilan points out that: “This nuclear bailout is one of four rate increases to Illinois consumers this year, including increased delivery charges, increased renewable energy subsidies, increased energy efficiency subsidies, and these nuclear energy subsidies.” When the nuclear subsidies go into effect on June 1, 2017, Illinois residents and businesses can expect to see an average 3% increase in their electricity bills due to the nuclear subsidies alone.”

Giordano & Associates, Ltd. is Chicago’s first law firm devoted to energy issues. We provide clients with experienced counsel on regulatory, litigation, transactional, and legislative matters in the areas of electricity and natural gas. Pat Giordano can be reached at pgiordano@dereglaw.com.

The Law Offices of Paul G. Neilan, P.C. represents commercial, industrial and governmental energy users in disputes against public utilities, as well as in litigation and transactional matters with non-utility competitive energy suppliers.

FACT SHEET

  1. Village of Old Mill Creek, et al. v. Anthony Star was filed in the United States District Court for the Northern District of Illinois on February 14, 2007.
  2. The Plaintiffs are: Village of Old Mill Creek, Ferrite International Company, Got it Maid, Inc., Nafisca Zotos, Robert Dillon,Richard Owens, and Robin Hawkins, both individually and d/b/a Robin’s Nest.
  3. The Defendant is Anthony Star in his official capacity as Director of the Illinois Power Agency.
  4. This case arises from unlawful Illinois legislation that invades the exclusive jurisdiction of the Federal Energy Regulatory Commission (“FERC”) over “the sale of electric energy at wholesale in interstate commerce” pursuant to the Federal Power Act. 16 U.S.C. 824(b)(1).
  5. The unlawful legislation is contained in subsection (d-5) Zero Emission Standard of Illinois Public Act 99-0906 (“P.A. 99-0906”), which was enacted on December 7, 2016 and is available at http://www.ilga.gov/legislation/99/HB/09900HB65761v.htm.
  6. Subsection (d-5) Zero Emission Standard of P.A. 99-0906 requires the Illinois Power Agency to procure contracts for Illinois utilities Commonwealth Edison Company, which serves northern Illinois, and Ameren Illinois Company, which services central and southern Illinois, for purchases of Zero Emission Credits (“ZECs”) from nuclear-fueled generating plants.
  7. The ZEC payments will be passed through by the utilities to all Illinois consumers through automatic adjustment tariffs.
  8. A. 99-0906 is designed to provide additional revenues to the Illinois-based Quad Cities and Clinton nuclear plants.
  9. Exelon Corp. owns both the utility ComEd and Exelon Generation, which owns the Quad Cities and Clinton nuclear plants that will sell the ZECs to the utilities.
  10. Although P.A. 99-0906 has many other provisions, this case concerns only subsection (d – 5) Zero emission standard.
  11. Plaintiffs are not challenging any other provisions of P.A. 99-0906. Section 97 of P.A. 99-0906 provides that the provisions of the Act are severable under Section 1.31 of the Illinois Statute on Statutes. 5 ILCS 70/1.31.
  12. In New York, ZEC payments to Exelon nuclear plants in that state are being challenged on the same grounds set forth by Plaintiffs in Illinois. Coalition for Competitive Electricity, et al. v. Audrey Zibelman, et al. was filed in the U.S. District Court Southern District of New York on October 19, 2016.
  13. A typical residential customer using 1 mWh (1,000 kWh) per month would pay an additional $2.64 per month beginning June 1, 2017 based on the initial ZEC price established in P.A. 99-0906.
  14. A manufacturing company using 10,000 mWh per month would pay an additional $26,400 per month beginning June 1, 2017 based on the initial ZEC price established in P.A. 99-0906.

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Clinton Nuke Plant

Clinton Nuclear Plant

The history of the Big Bank Bailouts of 2008-09 is now repeating itself as farce. The 2016 tsunami of crony capitalist entitlement is scheduled to hit Illinois tomorrow in Clinton, where according to news reports Gov. Rauner will sign the Exelon Dividend Protection Act. We’ll have to more to say on the legislation, but one may read the story here.

 

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Today’s  Chicago Sun-Times discusses the Exelon Bail-Out Bill.

What began as a means of rewarding Exelon Corp. for generating “clean” nuclear energy and  keeping unprofitable plants in Clinton and the Quad Cities open has evolved into a far-reaching and  contentious revamp of state energy policy.

Check out the article here.

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Coal-fired Power

Coal-fired Power

While the Hillary v. Donald Rumble on Monday night garnered all the media attention, the D.C. Circuit Court of Appeals heard a far more substantive discussion the following morning. An en banc panel of ten federal appellate judges heard oral argument on the Obama Administration’s Clean Power Plan.

It was a “hot bench,” with lots of questions from the judges. And while Hillary and The Donald put down their swords after 90 minutes, the oral argument on the CPP went on for more than seven hours.

West Virginia’s Solicitor General opened with an artillery barrage in the putative war on coal. The CPP sets target emission rates for fossil fuel generators such as coal, and prohibits them from operating if they exceed those limits unless they purchase carbon credits from generators whose emissions are below their assigned limits. He argued that the CPP thus forces coal plant owners into an impossible choice: they either subsidize their renewable energy competitors or shut down prematurely. In his view, that would affect not just West Virginia but the nation as a whole. W. Va. and other opponents argued that the Clean Air Act does not allow the EPA to require plant owners to invest in different generation resources.

The question of the scope of the EPA’s authority got a lot of attention. The EPA and other proponents of the plan countered that this type of regulation is already commonplace in the power industry. They argued that the emissions trading contemplated by the CPP would be the least expensive method of pollution control, especially when compared to setting emissions caps for each plant. EPA argued that the Clean Air Act mandates that it devise the best system of reductions for any particular pollution type, and that’s what the CPP does. They pointed to the Supreme Court’s 2007 ruling in Massachusetts v. EPA, which mandates that the agency act to regulate carbon. And, they continued, the high court’s 2011 ruling in AEP v. Connecticut affirmed the EPA’s regulation of carbon, declaring that because climate change damages were within the EPA’s jurisdiciton, individual states could not sue power companies for climate change harms.

Their opponents argued that other language in AEP casts doubt on the scope of that holding.

Other CPP opponents claimed that because CPP requires major changes to the power grid, that the EPA is infringing on states’ rights because each state is responsible for the reliability of its own electric power system. Numerous shut-downs of coal-fired plants that would follow implementation of the CPP would adversely affect grid reliability.

Once again, it comes down to the Third Branch Default Setting that we’ve seen before in litigation interpreting laws that are both complex and unclear. The almost endless adventures of the 8th Circuit Court of Appeals with the Telecommunications Act of 1996, now forgotten like some long-ago war over an equally forgotten issue, comes to mind. Yet the problem is essentially the same. Congress enacts a law, but because of its own inability to agree on what that law should really say, it gets passed with provisions that don’t add up, or are even contradictory. But those problems are down the road, and it’s more important for legislators to get some earned media at the signing ceremony and have some accomplishment to write home to constituents about. Thus it falls the judiciary, sooner or later, to sort things out. C’est la vie, c’est la guerre.

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Rick and Inspector Louis Renault, at the Cafe Americain, Casablanca, ca. 1942.

Rick and Inspector Louis Renault, at the Cafe Americain, Casablanca, ca. 1942.

Who can forget that scene in Casablanca when Inspector Louis Renault (Claude Rains) shuts down Rick’s (Humphrey Bogart) Café Americain because he’s shocked (shocked!) to find that gambling is going on in Rick’s establishment. Just then, a croupier hands a thick wad of bills to Inspector Renault: “Your winnings, sir.” Ever the gentleman, the Inspector thanks him very much.

Exelon has now assumed the role of Inspector Renault before the Ohio Public Utilities Commission, where it is shocked (shocked!) that First Energy, one of the nation’s largest merchant generators, may get a bailout in the form of revenue guarantees that will, supposedly, enable it to keep its generating stations open. (Ohio P.U.C. Docket No. 14-1297-EL-SSO, Second Supplemental Testimony of L. Campbell on behalf of Constellation and Exelon Generation).

Yes, that’s right, Exelon, the parent of Exelon Generation: the same Illinois-based nuclear generation giant that tally-ho’d down to Springfield last year to seek its own economic protectionism measure (Illinois General Assembly, H.B. 3293) in the form of a new “low carbon emission standard,” a standard so narrowly tailored that Exelon Generation was its only conceivable beneficiary. Exelon had, and still has, its hands full trying to polish its own Illinois bailout with high-gloss “market-based” varnish.

In Ohio, First Energy confronts the same issue that Exelon and others have been complaining about for several years now: market electricity prices are so low that First Energy, like Exelon, is threatening to shutter some of its generating stations unless the state bails it out.

As The Sparkspread previously explained, in the early 2000s Exelon, First Energy and many other large electric utilities, like so many itinerant free market monks, preached a pure, Ayn-Randian gospel to state legislatures and regulators: the salvation lower consumer electricity prices could be attained only through faith in unfettered (well, almost unfettered) retail competition.

Utility executives urging state legislators to adopt retail electric competition.

Utility executives urging state legislators to adopt retail electric competition, ca. 2004.

Illinois, Ohio and a number of other states joined this crusade and opened their electricity markets to competition. They spun off their generation assets to new genco subsidiaries, leaving just the delivery services (wires) under the traditional regime of cost-of-service rate regulation. They were betting on a future of increasing natural gas prices, which ordinarily set electricity prices at the margin. Visions of dollar signs danced in their CEOs’ heads.

Unfortunately, things didn’t quite work out. Caught between the expansion of natural gas supply obtained by fracking and a glacially-paced economic recovery, the real shock (shock!) to Exelon and First Energy is that the market went against them, as free markets have been known to do. That’s why they’re called “free” markets.

In Ohio, Exelon claims that the bailout of First Energy will hurt consumers to the tune of $2.0 billion. Besides, the holy canons of the free market prohibit bailouts of risk-taking, private, for profit enterprises like merchant generators. (Of course, those same holy market canons likewise forbid Exelon’s Illinois bailout, but they deserve a dispensation, right?)

Consistency is merely the hobgoblin of little electric consumers.
But in Ohio, the Public Utilities Commission might allow a bailout of First Energy’s merchant generation fleet, which is one of Exelon’s competitors in the PJM market. In a precise reversal of the tone Exelon adopted in the fight for its own Illinois bailout, in Ohio it finds horrifying the prospect of precisely the same type of bailout for First Energy.

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