By Jonathan Stempel
NEW YORK (Reuters) - A federal judge on Tuesday dismissed a lawsuit by energy companies and trade groups to stop New York Governor Andrew Cuomo from providing billions of dollars in subsidies to prop up struggling nuclear power plants in the state.
U.S. District Judge Valerie Caproni in Manhattan rejected claims that federal law preempted New York and its Public Service Commission from offering credits to promote clean energy and reduce reliance on fossil-fueled or gas plants.
The plaintiffs said the credits could boost electric bills for New York's "captive ratepayers" by $7.6 billion over 12 years, and violate the "dormant" Commerce Clause by impeding Congress' power to regulate commerce among states.
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But the judge said New York's "zero-emissions credits" program was "plainly related to a matter of legitimate state concern": the production of clean energy, and reduction of emissions from other energy that could add to global warming.
"The New York program is constitutional," Caproni wrote. "Fatal to plaintiffs' argument is their failure to offer any cogent explanation why ZECs are preempted but other state incentives to generate clean energy - such as tax exemptions, land grants, or direct financial subsidies - are not."
Seven plaintiffs had challenged the credits, including the Coalition for Competitive Electricity, Dynegy Inc <DYN.N> and NRG Energy Inc <NRG.N>.
Requests for comment from their lawyers were forwarded to a spokesman for New Yorkers for Fair Energy, (http://www.ny4fairenergy.com/), who said there will be an appeal.
The public service commission "failed ratepayers last year when it instituted a $7.6 billion bailout for uneconomic nuclear plants with almost no public input," the spokesman said.
Cuomo welcomed the decision.
"At a time when the federal government has abdicated its leadership on climate change," the decision "ensures our progress will not be blocked or rolled back by fossil fuel interests and others seeking to maintain the status quo," Cuomo said in a statement.
Audrey Zibelman, in her role as PSC chair, was the lead defendant. Nuclear generators receiving the credits and their owners, including Exelon Corp <EXC.N>, also sided with the governor.
Cuomo endorsed the subsidies in connection with his "Clean Energy Standard" announced last August, which required that half of New York's electricity come from renewable energy sources such as wind and solar by 2030.
The case is Coalition for Competitive Electricity et al v. Zibelman et al, U.S. District Court, Southern District of New York, No. 16-08164.
(Reporting by Jonathan Stempel in New York; editing by Grant McCool)