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No decision today on constitutionality of power plant subsidy program

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Opponents of a controversial program designed to spark power plant construction got their day in court today, but a decision on the constitutionality of the subsidy program is still weeks away.

U.S. District Court Judge Peter G. Sheridan heard arguments this morning regarding the state's Long-Term Capacity Agreement pilot program, called LCAPP. The program, which was signed into law last year, was designed to kick start the construction of new power plants in New Jersey by offering price guarantees to approved power plant developers.

The plaintiffs, a group of energy companies including Public Service Enterprise Group and Atlantic City Electric, argue LCAPP interferes with federal regulation of regional energy markets, and thus is unconstitutional. They have filed a motion of summary judgment asking Sheridan to side with them.

The Board of Public Utilities, meanwhile, is asking the judge to affirm the program's constitutionality. They say LCAPP is a state matter that won't affect the wider market, and so is not interference.

The hearing was the first major step in the case since a federal judge refused to dismiss the lawsuit last October. The lawsuit was originally filed in February 2011.

Today's hearing ended without a decision. Sheridan is expected to review filings from the two sides before scheduling a hearing, likely some time next month.

Three companies — Hess Corp., Competitive Power Ventures and NRG Energy — won inclusion in LCAPP. Two of those providers — Hess and CPV — cleared in May's regional capacity auction, which determines which power plants will provide extra generation capacity for the grid beginning in 2015. Based on contract data released by the BPU, CPV would stand to make $30 million that year due to the gap between the state-guaranteed price and the actual auction clearing price. Hess' plant isn't scheduled to open until the following year. Each of the contracts lasts 15 years, though the rate of the subsidy — or, possibly, refund — will depend on the clearing price in each year's auction.

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