Environmentalists and industry insiders are boiling over Cuomo’s nuclear subsidies – will they land in court?

The Cuomo administration’s initiative to subsidize three upstate nuclear plants is a lifeline for their owners, with almost $1 billion to keep them afloat over the next two years and more money to come.

But energy industry insiders warn that a lawsuit could stall the plans and put the power plants back in financial hot water. Legal challenges to the state subsidies are widely expected, multiple sources in the energy industry and the environmental community told City & State.

“It’s a 100 percent certainty that parties will litigate. It’s just too big an issue for them not to,” said an insider who spoke on the condition of anonymity. The source referred to the deal as the “single largest transfer of wealth from the government to a single corporate entity in New York history.”

That corporate entity is Exelon, a Fortune 150 energy company that owns Nine Mile Point Nuclear Generating Station north of Syracuse and Ginna Nuclear Power Plant outside of Rochester. It’s also in the process of buying from Entergy Corp. the James A. FitzPatrick nuclear plant – located next door to Nine Mile Point on the shore of Lake Ontario – in a deal contingent on the state subsidies. The state’s fourth nuclear power plant, Indian Point, which is located about 35 miles north of New York City, will not immediately receive any of the new funding.

The Cuomo administration set a goal of having 50 percent of the electricity used by the state come from renewable sources by 2030. And on Aug. 1, the Public Service Commission approved the state Clean Energy Standard, a set of checkpoints to hit the clean energy goals.

The three upstate nuclear plants are not financially stable, but they are a huge source of clean energy. The Cuomo administration argues that the money spent on keeping them online is worth it because of the long-term benefits of avoiding fossil fuels like oil, coal and natural gas.

Some critics are not buying it. The Alliance for a Green Economy New York supports the state’s clean energy goals, but the group is considering a lawsuit against the nuclear subsidies. Program Director Jessica Azulay said nuclear power was “dangerous” and called for closing the reactors. Tim Judson, the group’s co-founder, accused Cuomo of caving to Exelon and called the subsidies a waste of “billions of dollars on short-term nuclear bailouts instead of accelerating the transition to renewable energy.”

Other critics take issue with the specifics of the subsidies. Instead of transferring money to Exelon, the state is requiring utilities to buy “zero-emission credits” to pay the company for operating plants that do not emit carbon. A coalition of energy companies, including the U.S.-based subsidiaries of Shell and BP, filed comments with the Public Service Commission opposing the plan because only nuclear plants are eligible for the credits, and not other clean energy producers. The coalition also claimed the state would be interfering in the wholesale energy market – charges that have sunk similar cases of state-sponsored energy subsidies, like the U.S. Supreme Court’s recent decision inHughes v. Talen that struck down Maryland’s incentivization program for in-state power generation.

While a New York lawsuit may be imminent, it also may be unnecessary. An easier first step for opponents would be petitioning the Public Service Commission for a rehearing. Petitions are due by the end of the month, and as of Aug. 24, at least one energy company, Ampersand Hydro LLC, had submitted a request calling for hydro facilities to be eligible for the credits, too. Even Exelon has called for a rehearing limited to clarifying a point regarding their purchase of FitzPatrick.

Time is of the essence for Exelon, and any party filing a lawsuit could have an immediate impact if a judge were to grant an injunction. The sale of FitzPatrick is contingent on the subsidies, and the nuclear plant’s current owner, Entergy, says any delay could put a planned January 2017 refueling in jeopardy. Litigation is “anticipated and considered,” said Entergy spokeswoman Patricia Kakridas, adding that “anything short of an injunction blocking its implementation, Exelon will continue to pursue purchasing the plant.”

Judson, of the Alliance for a Green Economy, questioned Entergy’s statements. “Entergy and Exelon have used the threat of imminent plant closures as a political cudgel in this process,” he said. “And I think it’s worth taking any statement like that with about 10 grains of salt.”

The Department of Public Service is optimistic that there will be no injunction, and a department source noted that the tight schedule of the sale and scheduled refueling of FitzPatrick leaves little room for a court to issue a stay. The department issued a statement to City & State saying it is “confident the Clean Energy Standard has been designed to withstand judicial review.”

Time will tell if that confidence is warranted. A lawsuit killed the Cuomo administration’s latest attempt at subsidizing energy companies, which would have had ratepayers helping fund the conversion of Western New York’s Dunkirk coal plant to natural gas. That lawsuit was brought by Entergy, a beneficiary of the state’s new plan as it tries to sell FitzPatrick.

Whatever happens in court, do not expect the Cuomo administration to give in easily. Cuomo made his position clear when he announced FitzPatrick’s sale this month: “I believe the state has a moral obligation, a financial obligation and a civic obligation to step in to this situation to avert a crisis for Central New York and to avert a crisis, an energy crisis, for this entire state.”

With reporting by Jon Lentz