Malloy’s billion-dollar clean energy push weathers federal court challenge 

The Malloy administration’s high-profile plan to buy clean energy from a wind farm in northern Maine has survived a legal challenge that argued that the nearly $1 billion contract violated federal energy laws.

In September 2013, the state Department of Energy and Environmental Protection announced it would buy power and renewable energy credits from two planned clean energy developments: a 20-megawatt solar array in Connecticut and a 250-megawatt wind farm in Maine.

The wind farm’s distance from Connecticut and its overall size raised concerns from other bidders for the contracts as well as state regulators, which resulted in the legal challenge that was dismissed Wednesday.

Allco Finance Ltd., an unsuccessful bidder for the contracts, filed the case in the U.S. District Court in Connecticut against Daniel Esty, who as commissioner of the state Department of Energy and Environmental Protection selected Number Nine Wind Farm for the energy contract. Since Esty left the state office, the named defendant in the case was updated to the current commissioner, Robert Klee.

Weathering the pushback is a major success for the state’s energy department, whose clean energy strategy in recent years has moved more toward the long-term financing of projects like these. The decision, however, runs counter to two similar cases where state efforts to affect energy markets were shown to run afoul of the law.

The legal challenge argued that Connecticut overstepped its authority as a state to approve the contract for the wind farm by setting wholesale electricity prices, a responsibility reserved for federal regulators.

U.S. District Judge Janet Bond Arterton ruled Wednesday that Allco Finance both lacked standing in the case and failed to establish that Connecticut energy officials “fixed” wholesale power prices in approving the contracts.

Thomas Melone, chief executive of Allco Finance, said Wednesday that he will appeal the decision to the U.S. Court of Appeals for the 2nd Circuit.

Allco Finance, a solar developer, built its argument on the fact that the Federal Power Act of 1935 made the setting of wholesale power prices the responsibility of federal energy regulators, not states, with some exceptions. The relevant exception was created in a 1978 law that allows states to set wholesale prices through power agreements if the power plant is smaller than 80 megawatts.

With the Number Nine Wind Farm over that limit, Allco Finance argued that the state, in setting wholesale prices for the project, stepped out into the domain reserved for federal regulators.

In her decision to dismiss the challenge, Arterton concluded that Connecticut’s actions in choosing and approving the contract with the wind farm did not fix the wholesale prices. Instead, the prices were determined by the bidders.

“Although the Connecticut utilities” – Connecticut Light & Power and United Illuminating – “are compelled to accept the prices in the bidders’ offer, which are selected by Defendant, there is no market distortion,” Arterton said.

And to the extent that the state’s decisions to choose one project over another “has a direct effect on the market, it is incidental and within the State’s authority to regulate utilities under its jurisdiction.” Arterton said.

The solar array and wind farm are expected to save Connecticut ratepayers about $200 million over 20 years by adding to New England’s supply of clean energy. Power companies are required to buy a certain percentage of clean energy each year.

Federal courts have decided that two similar cases, one in Maryland and another in New Jersey, complied with the law, only for those decisions to be overturned on appeal. Arterton said the Connecticut case “stands in contrast” to those decisions because those states’ actions more directly overstepped their authority.

Separately, in approving the contracts, in October 2013, the state Public Utilities Regulatory Authority made clear the state energy department determined that the projects were in the interest of ratepayers, a conclusion usually reserved for regulators.

Regulators also concluded: “It appears that the electricity generated by this project will remain exclusively or largely in Maine and not be delivered to Connecticut or elsewhere outside of Maine,’ and that “the environmental effects of the investment … will primarily accrue to the citizens of sparsely populated Aroostook County, certain parts of Canada’s Maritime Provinces, and the Atlantic Ocean. ”

The developer of the Number Nine Wind Farm, EDP Renewables North America, said it expects the project to be operational no later than Dec. 31, 2016.