NYC fears deal for upstate nuclear plant

Nov 24 - Yellowbrix

What does New York City care about an aging upstate power plant in a county just a fraction of the city's size some 300 miles away on the shore of Lake Ontario ?

The answer lies in a little-noticed, highly technical document filed in August with the state Public Service Commission .

In its 13 pages, a branch of New York Mayor Bill de Blasio's office weighed in against a request from R.E. Ginna Nuclear Power Plant in Wayne County to force an electric utility, Rochester Gas & Electric , to negotiate a payment plan to keep the plant running and the Rochester-area power grid reliable. The filing also points to Cayuga Power Plant in Lansing , Tompkins County , and another in Chautauqua County , citing similar circumstances.

Essentially, the city asks: If Ginna gets approval for a survival package that likely would be paid for by RG&E ratepayers, what keeps other power plants from holding other utilities and their customers hostage?

If the commission allows such conduct in this case, it should expect other generators to follow suit, said the filing, written by Michael Delaney , director of energy regulatory affairs for the New York City Office of Long-Term Planning and Sustainability , and Kevin Lang , an Albany -based attorney retained by the city.

The debate centers on what's known in regulatory parlance as a Reliability Support Services Agreement, or an RSSA. It works like this: If a power plant is losing money and planning to shut down, it files a notice with the Public Service Commission alerting the board of its intention. From there, it's determined whether taking the plant off the grid will result in blackouts or service issues for customers in a particular region.

If shutting the plant would cause problems for the grid, the plant's owners can request a temporary RSSA —monthly payments from an electric utility, usually paid for via a surcharge on customer bills, which are meant to keep the plant running and able to generate power while a long-term solution is found.

Since 2012, two such arrangements have been approved: one for the Cayuga plant, which provides much of the power for the Ithaca area; and another for an NRG Energy Inc. -owned plant in Dunkirk , Chautauqua County , which has since received approval to switch from coal to natural gas.

Under the Cayuga plant's latest deal, New York State Electric & Gas will pay the facility's owners $2 million to $2.8 million a month through June 2017 , along with up to $42 million in one-time capital costs. NYSEG is owned by the same company as RG&E. Cayuga , which opened in 1955, keeps the first $5 million in net revenue each year while anything over that is split 50/50 with NYSEG. The electric utility then places a surcharge on its customers' bills to recover the costs, ranging from about $1 a month for a small residence to $1,600 a month for a large industrial customer.

Ginna's owner, Chicago -based Exelon Corp. , is seeking a similar arrangement. The town of Ontario plant employs about 700 people and is Wayne County's largest taxpayer. According to documents the company filed with the state, the 44-year-old plant — which can produce power for 400,000 homes in the Rochester area — has lost more than $100 million in the previous three years, largely because the wholesale price of natural gas has dropped in recent years and driven down costs for its competitors.

The plant took a step closer to a reprieve this month when the Public Service Commission ordered RG&E to begin negotiations.

New York City strongly opposed the state board's eventual move. In its August filing, the city warned that allowing Ginna's request could give power plants the upper hand over Consolidated Edison , the major electric utility downstate, and eventually lead to costlier bills. The city questioned why electric utilities haven't done more to prepare for the closure of the aging plants — specifically citing Cayuga and Dunkirk — and took issue with Ginna failing to cite a specific closure date if an agreement isn't approved.

In New York City , it is possible that the loss of any baseload generating facility could cause a reliability problem, the city's filing said. Thus, any New York City generator could hold ( Con Ed ), the commission, and New York City ratepayers hostage to threats of retirement without publicly stating any intention to retire and without the commission knowing whether the threat is real.

The city didn't mention any particular downstate plants. But Indian Point Energy Center, a nuclear plant in Westchester County , produces about 25 percent of the electricity used in New York City and Westchester .

The PSC sided with Ginna. Since the plant is nuclear-based instead of coal or some other fuel, it's tougher to publicly declare a closure date, the board ruled. It would be difficult to retain in-demand nuclear engineers if they know a plant is slated to close, the board's order said.

Selecting a specific retirement date would also have an adverse impact on the local community, the board wrote. As the public comments establish, the Ginna facility and its employees are the linchpin of the economic health of the local Wayne County community, and its economic benefits are felt throughout the Rochester region.

PSC chair Audrey Zibelman stressed that the board's decision to start negotiations between Ginna and RG&E isn't the final word. The commission still will have to approve any agreement reached. RG&E also is soliciting proposals to potentially replace the 580 megawatts the plant can produce, which could give the PSC other options to consider before making a determination.

We've already started the process with the Rochester utility to look for the alternative, whether it's a transmission alternative or other alternatives, Zibelman said. Even in the case of Rochester, we're looking to see if there's an interim alternative. The objective is to maintain reliability at the lowest possible price to consumers.

Ginna's owner and RG&E have until Jan. 15 to reach a deal, though the deadline can be easily extended.

RG&E spokesman Daniel Hucko said it would be premature to say what it may cost ratepayers.

We will work in the best interests of our customers with considerations of cost at the forefront, while recognizing the importance of continued network reliability and reaching reasonable terms for all parties, he said.

Exelon Corp. spokeswoman Maria Hudson said the company will continue to negotiate a deal with RG&E that allows the documented reliability need to be addressed.

The RSSA approved in 2012 for the Dunkirk plant was trumped by a separate, $150 million agreement that will let the plant convert from coal to natural gas. The deal was approved this year by the PSC.

The Cayuga plant has sought a similar deal, petitioning the PSC also to make the switch to natural gas. But the commission last year ordered the plant to negotiate a compromise with NYSEG, which favors upgrading transmission lines and taking the plant offline. The two sides face a Dec. 1 deadline to reach a deal.

The plant's plan, however, has been criticized by some local lawmakers and groups opposed to hydraulic fracturing, the much-debated method to help extract gas from underground shale formations. They've called on the Public Service Commission to reject the proposal and focus more on renewable energy.

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