Energy companies’ lawsuit against BPU allowed to proceed

TRENTON – A consortium of energy companies has won a legal ruling in its lawsuit against the state Board of Public Utilities over a law that allows BPU to set certain wholesale prices in the energy market governed by the Federal Energy Regulatory Commission.

In a ruling handed down in U.S. District Court, a motion by BPU to dismiss the energy companies’ suit was denied.

In the suit, which now can proceed, the energy companies argue that the state law  violates the Supremacy and Commerce clauses of the Constitution because only FERC has the power to regulate wholesale electricity sales.

The plaintiffs also are arguing that the law will favor in-state companies over out-of-state companies.

BPU, among other things, had argued that since the Act has yet to be implemented, the energy companies have suffered no injury. BPU also stated that this Act furthers the goals of FERC.

On Jan. 28, the New Jersey Legislature enacted a law to foster new electric generation and provide New Jersey with new generation capacity.

Under this Act, the BPU will select a limited number of electric generation companies for entry into a pilot program. These electric generation companies will enter into irrevocable, long-term contracts with each of New Jersey’s electric public utilities.

These contracts, or standard offer capacity agreements (“SOCAs”), guarantee the state selected electric generation companies a fixed price for electric capacity.

In exchange for the price guarantee, the Act requires the state-selected generation companies to sell the rest of their  capacity in interstate electricity auctions. The SOCAs operate to insulate the state-selected generation companies from losses at auction because the SOCAs exist outside of the auction process and are regulated by the BPU.

Spokesman Mike Jennings said that “PSEG is pleased by the decision. We believe there is a strong legal argument that the law is unconstitutional.”

Energy companies’ lawsuit against BPU allowed to proceed