On May 10, 2017, at the Independent Power Producers of New York (“IPPNY”) conference, Richard Kauffman, Chairman of Energy and Finance for New York, announced that John Rhodes has officially accepted his nomination to head the New York Public Service Commission (“PSC”) and that Governor Cuomo will soon nominate two more PSC commissioners so that the PSC can return to its full strength of five commissioners by the end of the legislative session, which is scheduled to close on June 21, 2017. Rhodes has been the president and CEO of the New York State Research and Development Authority (“NYSERDA”) since 2013, and previously directed the Center for Market Innovation at the Natural Resources Defense Council. Once confirmed, Rhodes will fill the seat vacated by former Chairman Audrey Zibelman, whose departure left the PSC with three vacant seats and gave rise to questions concerning whether the PSC has a quorum to make regulatory decisions.

Meanwhile, at the federal level, the Federal Energy Regulatory Commission (“FERC”) has also been left with three vacant seats and has been lacking a quorum since January 2017 when Commissioner Norman Bay resigned. Without quorum, the FERC has stated it is unable to issue major orders, such as a pending petition filed by independent power producers asking the FERC to take protective measures to address the PSC’s Zero Emission Credit (“ZEC”) program, which provides subsidies to certain nuclear generators and may distort wholesale power prices.

Just as the PSC will reach full strength by this summer, the FERC will also soon have a quorum again. On May 9, 2017, President Trump nominated Neil Chatterjee, advisor to Senate Majority Leader Mitch McConnell, and Rob Powelson, a commissioner at the Pennsylvania Public Utility Commission, to fill two of the three vacant FERC seats.

Once both the PSC and FERC are fully restored, the agencies will begin to square off in what Acting Chairman Cheryl LaFleur described as “the biggest challenge to markets since they were created” – the New York ZEC program and the other variations of state-crafted around-market solutions to the problem of baseload generation exiting the wholesale power markets. At the IPPNY conference, LaFleur stated that this is an “urgent” problem which must be addressed as soon as the agency regains quorum. Others described the New York ZEC program as creating a crisis in wholesale electricity markets that will require extensive litigation to fully resolve.

One thing is clear – after many months of uncertainty, the PSC and FERC are now in the process of being restored to their full operating capacity. In the coming months and years, New York’s ZEC program will undergo significant scrutiny in the courts and at the FERC. In the end, the courts and FERC should provide a clear, categorical answer to whether such solutions are permissible so that the market participants can operate with relative certainty and New York can move forward in reaching its ambitious goals.

Phillips Lytle’s Energy Practice Team has extensive expertise in Public Service Commission/Utility regulatory matters, including all aspects of retail energy regulation in New York and formal petitions to the Public Service Commission. For more information about Phillips Lytle’s Public Service Commission expertise, please contact Thomas F. Puchner, Partner, at (518) 472-1224 Ext. 1245, tpuchner@phillipslytle.com, or Kevin C. Blake, Associate, at (716) 847-7082, kblake@phillipslytle.com.