New York lawsuit threatens US cap-and-trade scheme

The US's first carbon emissions cap-and-trade scheme, the Regional Greenhouse Gas Initiative (RGGI), could be under threat after New York-based utility Indeck Corinthe filed a legal challenge against the state of New York's participation in the mandatory scheme.

The suit, filed against governor David Paterson, the Department of Environmental Conservation and the New York State Energy and Research Development Authority, claims the cap-and-trade scheme puts the company at an unfair disadvantage, and argues that the allowances that power plants need to purchase under the initiative constitute a tax.

Indeck's concern focuses on a long-term, fixed-price contract that it signed in 1989 to sell electricity to Consolidated Edison from its combined-cycle, natural gas-burning plant in Corinth, New York.

The original contract, which expires in 2015, did not anticipate a cap-and-trade scheme. However, the New York Public Service Commission "strongly discouraged" a re-opener that could have allowed the company to renegotiate its prices, meaning that Indeck is unable to pass on the cost of the RGGI allowances to its customers, said Peter Barden, spokesman for Indeck.

Indeck would need 450,000-480,000 allowances for its Corinthe plant, said Barden, adding that the state set aside 1.5 million credits for companies in its position. "But there are other companies which requested allowances too, and the demand for those allowances is in the region of six million. So the state didn't set aside enough," he explained.

Indeck has made further claims, arguing that the governor entered into RGGI without necessary legal authority from the state legislature.

According to a report in the New York Times, a spokesperson at the Department of Environmental Conservation rejected that claim, along with another in Indeck's suit that said the states participating in RGGI needed an act of Congress to enter into a multi-state pact.

RGGI refused to comment on the lawsuit yesterday.