United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
S. SHAH UNITED STATES DISTRICT JUDGE.
state of Illinois created a “zero emission
credit” program to effectively subsidize nuclear power
generation and corresponding sales of nuclear power in the
wholesale market. The Future Energy Jobs Act amended the
Illinois Power Agency Act, 20 ILCS 3855/1-1 et seq.,
and created a new commodity, the ZEC. The statute grants ZECs
to certain qualifying energy-generating facilities. Those
facilities are likely to be two nuclear power plants owned by
Exelon in Illinois. Utilities that sell electricity to
consumers must purchase ZECs from the qualifying power
plants, and those utilities will pass the costs of ZECs onto
their customers. The result is money in the coffers of Exelon
from the sale of ZECs that will give it a benefit when
pricing its energy in the wholesale market relative to
competing energy producers that do not receive ZEC payments.
sets of plaintiffs filed suit to challenge the statute. In
one case, the plaintiffs, Village of Old Mill Creek, Ferrite
International Company, Got It Maid, Inc., Nafisca Zotos,
Robert Dillon, Richard Owens, and Robin Hawkins, are delivery
services customers of Commonwealth Edison Company in
Illinois. In the second suit, plaintiff Electric Power Supply
Association is a national industry association for
competitive electric power producers, and plaintiffs Calpine
Corporation, Dynegy Inc., Eastern Generation, LLC, and NRG
Energy, Inc. are independent power producers that operate
generators nationwide and provide wholesale electricity to
utilities. Both the consumer plaintiffs and the generator
plaintiffs bring claims against Anthony Star in his official
capacity as Director of the Illinois Power Agency and the
Commissioners of the Illinois Commerce Commission in their
official capacities, seeking to invalidate the statute.
Exelon intervened in both actions to defend the ZEC program.
and Exelon each filed motions to dismiss the complaints. The
motions are granted.
survive a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), a complaint must contain factual
allegations that plausibly suggest a right to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When
analyzing a motion under Rule 12(b)(6), a court must accept
all factual allegations as true and draw all reasonable
inferences in the plaintiffs' favor, but a court need not
accept legal conclusions or conclusory allegations.
Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir.
2011) as amended (Jan. 3, 2012) (citing
Iqbal, 556 U.S. at 680-82). Rule 12(b)(6) limits a
court's consideration to “allegations set forth in
the complaint itself, documents that are attached to the
complaint, documents that are central to the complaint and
are referred to in it, and information that is properly
subject to judicial notice.” Williamson v.
Curran, 714 F.3d 432, 436 (7th Cir. 2013); see
also Fed. R. Evid. 201(b). A challenge to
plaintiffs' standing to bring a claim is a challenge to
the court's subject-matter jurisdiction, and as in a Rule
12(b)(6) motion, the facts of the complaint are accepted as
true. Silha v. ACT, Inc., 807 F.3d 169, 173-74 (7th
two lawsuits are companion cases. The complaints are
substantially similar, except that the consumer plaintiffs
have an additional claim under the equal protection clause.
In responding to defendants' and Exelon's motions to
dismiss, the consumer plaintiffs largely adopted the
generator plaintiffs' arguments.
The Federal Power Act, FERC, and Wholesale Energy
Federal Power Act, 16 U.S.C. § 791a et seq.,
allows both the Federal Energy Regulatory Commission and the
states to regulate aspects of the electricity industry. Under
the Federal Power Act, FERC has exclusive jurisdiction over
wholesale sales of electric energy in the interstate market;
it has the power to regulate wholesale electricity rates and
any rule or practice that affects such rates.16 U.S.C.
§§ 824(b), 824e(a). The states may regulate
“any other sale” of electricity, which includes
retail electric energy sales. Id. § 824(b).
regulates wholesale rates of electric energy via interstate
auctions.  ¶¶ 29-30. For most of Illinois,
wholesale electricity is exchanged through auctions conducted
by the Midcontinent Independent System Operator,
Id. ¶ 30. In Chicago and parts of northern
Illinois, wholesale electricity is exchanged through auctions
conducted by PJM Interconnection, L.L.C. Id. Gaps
between the supply and demand of electric energy can cause
“uncontrolled widespread blackouts.” Id.
¶ 32. To prevent such gaps, MISO and PJM continuously
run two types of wholesale auctions, “energy” and
“capacity, ” because electricity cannot be stored
economically or in sufficient quantities. Id.
MISO and PJM run day-ahead and real-time energy auctions.
Id. ¶ 31. In the day-ahead energy auction,
generators submit a bid for a price at which they are willing
to generate a particular quantity of electricity to be
delivered the next day. Id. ¶ 34. In the
real-time energy auction, MISO and PJM each increase or
decrease the prices of electric energy every five minutes to
signal the need for generators to produce more or less
electricity as conditions change in real time. Id.
“In contrast to the energy auctions, where
electricity itself is bought and sold, capacity
auctions are for the purchase and sale of options to
purchase electricity.” Id. ¶ 38 (emphasis
original). MISO and PJM calculate the generating capacity
needed for the electric grid to run reliably each year and
they establish the amount of capacity that retail electric
suppliers, known as load serving entities, must purchase to
meet customer demand in their territory each
year. Id. ¶ 37. To satisfy
capacity obligations, load servicing entities may either
enter into bilateral contracts with generators or they may
participate in an auction market conducted by MISO or PJM.
Id. “Each generator that sells capacity in the
MISO and PJM capacity markets is required to participate in
the day-ahead energy market, and to respond in real-time, if
conditions warrant.” Id. ¶ 38.
both energy and capacity auctions, MISO and PJM use a process
called “stacking” to accept generators' bids.
Id. ¶¶ 41-42. The generators' bids are
stacked from lowest to highest in price, and MISO and PJM
accept bids in that order until the demand has been met.
Id. ¶ 41. Each bid that is accepted is said to
“clear the market.” Id. The price of the
highest-accepted bid is called the “market clearing
price”; all generators receive that price for each bid
they submitted that cleared the market, even if a generator
submitted a bid at a lower price. Id. ¶¶
35, 41. Since nuclear generators run continuously at maximum
output and have no alternative to selling their output in
MISO and PJM auctions, they submit conservative bids in the
hopes of clearing the auction. Id. ¶ 36. During
times of oversupply, nuclear generators will even pay to
offload their energy output onto the grid, by submitting a
bid for a negative price, so that they have room to generate
more energy in the future. Id. This bidding strategy
results in lower market clearing prices. Id.
Illinois's Future Energy Jobs Act and the ZEC
Corporation announced that it would shut down two of its
nuclear generator facilities, Clinton and Quad Cities, unless
the Illinois General Assembly passed “adequate
legislation.” [38-4] at 2-3. The two plants had lost
more than $800 million over the last six years; but closing
the plants would result in the estimated loss of 4, 200
direct and secondary jobs, as well as approximately $1.2
billion in economic activity within four years. Succumbing to
that pressure, the Illinois General Assembly created the zero
emission credit program in the Future Energy Jobs
The statute amends the Illinois Power Agency Act.
See 20 ILCS 3855/1-1 et seq. When the
governor signed the legislation into law, Exelon confirmed
that Clinton and Quad Cities would operate for another ten
years due to the new legislation. [38-11] at 2-3.
to plaintiffs, the legislature's asserted goal for the
statute, “environmental protection, ” was mere
pretext for a bailout for Exelon's Clinton and Quad
Cities plants.  ¶ 58. The actual purpose of the
statute-to save jobs and local tax revenues-was clear from
its title, “Future Energy Jobs Act.” Id.
Plaintiffs also noted that when the governor signed the bill
into law, he said, “The Future Energy Jobs bill
protects taxpayers, ratepayers, and the good-paying jobs at
the Clinton and Quad Cities' plants.” Id.
statute created a new commodity called a zero emission
credit. A ZEC is a tradeable credit that represents the
environmental attributes of one megawatt hour of energy
produced from a zero emission facility (a nuclear power plant
interconnected with MISO or PJM). 20 ILCS 3855/1-10. The
Illinois Power Agency confers ZECs on those facilities that
are “reasonably capable of generating cost-effective
zero emission credits in an amount approximately equal to
of the actual amount of electricity delivered by each
electric utility to retail customers in the State during
calendar year 2014.” 20 ILCS 3855/1-75(d-5)(1).
Utilities are required to enter into contracts to purchase
the ZECs from the winning zero emission facilities.
Id. § 1-75(d-5)(1)(C-5). The contracts will
have a term of ten years, ending May 31, 2027. Id.
retail suppliers must purchase all of the ZECs conferred on
the selected zero emission facilities in each delivery year.
Id. The price for each ZEC is the Social Cost of
Carbon; but, it may be reduced according to a
“Price Adjustment, ” which is “the amount
[. . .] by which the market price index for the
applicable delivery year exceeds the baseline market price
index for the consecutive 12-month period
ending May 31, 2016.” Id. §
1-75(d-5)(1)(B). The purpose of the price adjustment is
“to ensure that the procurement remains affordable to
retail customers in this State if electricity prices
receive ZECs, facilities must participate in a procurement
process and submit eligibility information, such as annual
power generation and cost projections, to the Illinois Power
Agency. Id. § 1-75(d-5)(1)(A). The IPA will
publish its proposed zero emission standard procurement plan,
which will explain how bids will be selected based on
“public interest criteria, ” such as minimizing
carbon dioxide emissions that result from electricity
consumed in Illinois, and minimizing sulfur dioxide, nitrogen
oxide, and particulate matter emissions that adversely affect
the citizens of Illinois. Id. §
1-75(d-5)(1)(C). The procurement plan will also provide a
detailed explanation about how the IPA will consider and
weigh each public interest factor. Id. In developing
the plan, the IPA will review “any reports issued by a
State agency, board, or commission [. . .], as well as
publicly available analyses and studies performed by or for
regional transmission organizations that serve the State and
their independent market monitors.” Id.
Effects of the ZEC Program
sale of ZECs will provide those selected nuclear plants with
out-of-market payments for each megawatt hour of electricity
they produce, “effectively replacing the auction
clearing price received by these plants with the alternative,
higher price preferred by the Illinois General
Assembly.”  ¶ 4. This will affect the
FERC-approved energy market auction structure not only
because the nuclear plants will not retire as scheduled, but
also because they will continue to bid into the wholesale
market auctions at artificially lower prices. Id.
¶¶ 6, 10. Lower auction prices lead to lower
revenues for all generators. Id. ¶ 10. In turn,
low revenues could cause generators that are more efficient
than the ZEC recipients to exit the market or it could deter
potential new generators from entering the market.
Id. Additionally, “artificially suppressed
wholesale market prices are likely to result in higher energy
bills for retail ratepayers as they are forced to pay the
nuclear subsidy as a charge on their retail electric
bills.” Id. ¶ 11. ZECs are estimated to
cost Illinois' ratepayers $235 million per year over ten
years. Id. ¶ 3.
generator plaintiffs believe that they will incur millions of
dollars in damages because they will lose auctions they
otherwise would have won and they will receive less revenue
from auctions they do win. Id. ¶ 66. Meanwhile,
the consumer plaintiffs will face higher utilities bills as
Commonwealth Edison Company and Amaren Illinois increase
retail charges pursuant to the automatic adjustment
tariffs. 17-cv-1163,  ¶ 2 (citing 20
ILCS 3855/1-75(d-5)(1)(B) and (d-6)(6)).
seek to invalidate the ZEC program by arguing that it is
preempted by the Federal Power Act and that it violates the
dormant commerce clause. See  ¶¶ 76-93.
The consumer plaintiffs also allege that the program denies
them the equal protection of federal laws governing the
wholesale electricity markets, in violation of the Fourteenth
Amendment. 17-cv-1163,  ¶¶ 88-94.
III of the United States Constitution limits federal court
jurisdiction to “cases” and
“controversies.” U.S. Const., art. III, § 2.
To establish constitutional standing, plaintiffs must show an
“injury in fact” that is “fairly
traceable” to the defendant's conduct and that is
“likely to be redressed by a favorable judicial
decision.” Spokeo, Inc. v. Robins, 136 S.Ct.
1540, 1547 (2016), as revised (May 24, 2016). At the
pleading stage, the plaintiffs must clearly allege facts that
demonstrate each element. Id. To establish
“prudential” or statutory standing, plaintiffs
must show that the statutory cause of action encompasses the
plaintiffs' claim. Bank of Am. Corp. v. City of
Miami, Fla., 137 S.Ct. 1296, 1302 (2017). The
presumption is that “a statutory cause of action
extends only to plaintiffs whose interests ‘fall within
the zone of interests protected by the law
invoked.'” Lexmark Int'l, Inc. v.
Static Control Components, Inc., 134 S.Ct. 1377, 1388
(2014). Courts use “traditional tools of statutory
interpretation” to decide whether a plaintiff is within
the zone of interests and therefore has statutory standing.
Bank of Am., 137 S.Ct. at 1303. The inquiry is not
whether Congress should have authorized the
plaintiff's cause of action, but whether Congress in
fact authorized it. Lexmark, 134 S.Ct. at 1388
(“Just as a court cannot apply its independent policy
judgment to recognize a cause of action that Congress has
denied, [. . .] it cannot limit a cause of action that
Congress has created merely because ‘prudence'
The Generator Plaintiffs Do Not Have Article III Standing
to Challenge the Price Adjustment
generator plaintiffs take issue with the price adjustment
feature of the ZEC program.  at ¶ 63. The plaintiffs
argue that the state has tied, or tethered, its subsidies to
auction prices and participation in a manner that is
preempted by federal law. The price adjustment is
characterized as a “price collar, ” since it
ensures that the ZEC price decreases if wholesale market
prices increase, up to a limit, and it increases if wholesale
market prices decrease.  at 24, 27 (citing [38-3] ¶
40). A price collar insulates ZEC recipients
from changes in wholesale market prices, the generator
plaintiffs argue. As Exelon points out, though, eliminating
the price adjustment feature would leave in place a fixed ZEC
price that is equal to the Social Cost of Carbon. This would
create a larger subsidy for ZEC recipients, which would cause
more harm to the generator plaintiffs, under their theory.
The injury caused by the ZEC subsidy is not traceable to the
price adjustment, because that injury would exist even if the
statute were cured of its ties to wholesale auction prices.
See Johnson v. U.S. Office of Pers. Mgmt., 783 F.3d
655, 661-62 (7th Cir. 2015).
generator plaintiffs argue that Johnson is
distinguishable from their case because the plaintiffs in
Johnson were injured by amendments to a different
rule than the one they were challenging, whereas the
generator plaintiffs challenge the same regulation that they
allege injured them. What the generator plaintiffs gloss
over, however, is that the court rejected the argument that a
plaintiff has standing to challenge a rule as a whole simply
because that rule is “indivisible” and one part
of the rule injured the plaintiff. Id. at 662-63.
The court reasoned that “demonstrating an injury caused
by one aspect of a legislative action [is] not sufficient to
give [. . .] standing to challenge other aspects of that
action.” Id. at 662. The generator plaintiffs
do not have standing to challenge the ZEC program's price
generator plaintiffs have alleged an injury by a ZEC priced
at the Social Cost of Carbon, and that injury is traceable to
an aspect of the challenged statute-the creation of a minimum
subsidy that rewards a nuclear power plant and leads to
subsidized participation in the federally regulated market. A
court order prohibiting enforcement of the ZEC program
altogether would redress that injury. See Allco Fin. Ltd.
v. Klee, No. 16-2946, 2017 WL 2782856, at *8-9 (2d Cir.
June 28, 2017). The generator plaintiffs present a case or
controversy over the ZEC program.
The Consumer Plaintiffs Do Not Have Prudential Standing
for Preemption Claims
states have the power to regulate retail sales of electricity
and to impose charges on retail bills. Nevertheless, the
consumer plaintiffs challenge the ZEC program on preemption
grounds, arguing that they will be harmed by the resulting
charges on their utility bills and that their payments will
be used by utilities to purchase ZECs. 17-cv-1163, 
¶¶ 9, 11-12. Since the ZEC program authorizes
utilities to recover its costs from all retail customers
through an “automatic adjustment clause tariff, ”
the consumer plaintiffs note that even customers who purchase
electricity from competitive suppliers and not the utilities
will see increased charges. Id. ¶¶ 52, 62.
consumer plaintiffs are injured by the ZEC charges on their
bills, which are traceable to the Illinois statute and would
be redressed if the charges were prohibited. They have
Article III standing, but that does not mean that they can
bring preemption claims under the Federal Power Act. Courts
look to the provision upon which the plaintiff relies, not
the overall purpose of the legislation in question, to
determine if the plaintiffs' interest is within the
statute's zone of interests. Bennett v. Spear,
520 U.S. 154, 175-76 (1997). The consumer plaintiffs'
complaint refers to 16 U.S.C. §§ 824 and 824d.
Section 824 states that “the business of transmitting
and selling electric energy for ultimate distribution to the
public is affected with a public interest, ” and that
while federal regulation “of the transmission of
electric energy in interstate commerce and the sale of such
energy at wholesale in interstate commerce” is
necessary, it should not extend to matters that are subject
to regulation by the states. 16 U.S.C. § 824(a). The
consumer plaintiffs' claim is expressly excluded from
§ 824's interests because the states have the power
to regulate retail sales of electricity and impose retail
charges that are subject to state regulation.
§ 824d is titled, “Rates and charges; schedules;
suspension of new rates; automatic adjustment clauses,
” it refers only to FERC's authority and obligation
to ensure that wholesale electricity rates, and the rules and
regulations affecting them, are “just and
reasonable.” 16 U.S.C. § 824d. It describes what
public utilities may and may not do with respect to charges,
but those directives refer to FERC as the enforcer.
Id. § 824d(b)-(e). Section 824d also provides
that FERC must review public utilities' practices under
automatic adjustment clauses and, after an evidentiary
hearing, FERC may order a public utility to modify the terms
or practices in connection with an automatic adjustment
clause. Id. § 824d(f). Section 824d does not
grant similar authority or establish any such obligation on
public utilities or retail consumers. Given that the consumer
plaintiffs' injury involves the retail surcharge, their
interests are outside of the zone of interests of the federal
statutes. See Nw. Requirements Utils. v. F.E.R.C.,
798 F.3d 796, 809 (9th Cir. 2015).
Plaintiffs Do Not Have Article III Standing for Dormant
Commerce Clause Claims
plaintiff must demonstrate standing for each claim he seeks
to press. This means that, for each claim of wrongdoing
alleged, a plaintiff must demonstrate [. . .] that he has
suffered (or is imminently threatened with) an injury that is
traceable to the wrongdoing alleged in that
particular claim.” Johnson, 783 F.3d at 661
(internal citations omitted) (emphasis original). The dormant
commerce clause challenges raise a standing issue distinct
from the other claims. The injuries are similar-the market
impact on wholesale prices and increased rates passed onto
consumers-but if those harms are not traceable to
discrimination against the commerce of other states, then
plaintiffs do not present a case or controversy under the
dormant commerce clause.
generator plaintiffs say the ZEC program favors the Clinton
and Quad Cities nuclear plants (because of the weighted
factors in the ZEC procurement process), and thereby
discriminates against non-Illinois nuclear generators. 
¶ 90. But the injury to the generator plaintiffs is from
the ZEC subsidy, not the identity of the ZEC
recipient. If the procurement process were
non-discriminatory, the out- of-state, non-nuclear plaintiffs
would still be injured. Similarly, the general
market-distorting effects on non-nuclear plants outside of
Illinois would still be felt if the ZEC procurement process
subsidized nuclear plants without favoring in-state
interests. Finally, the retail surcharges passed onto the
consumer plaintiffs would be the same even if the utilities
purchased ZECs from out-of-state facilities.
generator plaintiffs respond that they have alleged an
inability to compete “on equal footing” in the
interstate market and that courts have found Article III
standing for similarly injured plaintiffs. See All. for
Clean Coal v. Miller, 44 F.3d 591, 594 (7th Cir. 1995)
(quoting Ne. Florida Chapter of Associated Gen.
Contractors of Am. v. City of Jacksonville, Fla., 508
U.S. 656, 666 (1993)). But in these cases, the discrimination
against out-of-state plaintiffs caused the injury; here,
favoritism for Clinton and Quad Cities is a feature of the
overall legislation, but it is not the source of the injury.
The plaintiffs' “injur[ies] would continue to exist
even if the [legislation] were cured” of the alleged
discrimination. Johnson, 783 F.3d at 662. Regardless
of whether ZEC recipients are in Illinois or not, the
generator plaintiffs' injury from ...