The Sierra Club is urging New York state regulators to ensure that New York State Electric & Gas (NYSEG) has a plan to expeditiously, cost-effectively and permanently eliminate the reliability need for the Cayuga power plant (Case 12-E-0400).
If it does not have a plan, NYSEG, a regulated utility of Iberdrola S.A., should engage in a competitive solicitation for reliability services to address the reliability need created by the mothballing of the Cayuga plant and that such competitive solicitation considers all sources on a level playing field – transmission, generation, as well as non-transmission alternatives and demand response, the organization said in comments filed with the state Public Service Commission (PSC) on Nov. 13.
The filing was in response to the PSC’s September request for comments regarding Cayuga Operating Co.’s plan to mothball two coal-fired units at the Cayuga plant.
Cayuga Operating filed a notice in July with the PSC saying that it intends to mothball the two units, located in Lansing, N.Y., by Jan. 16, 2013.
According to NYSEG’s Oct. 29 statement in support of the term sheet regarding Cayuga Operating’s provision of reliability support services (RSS) to NYSEG for an interim period, Iberdrola USA filed a letter with the PSC noting that NYSEG’s studies found that both units at the Cayuga generating facility need to be available and capable of being committed to maintain system reliability.
Iberdrola USA is a subsidiary of Iberdrola S.A.
To resolve local reliability constraints on its system, Iberdrola USA identified certain transmission reinforcement to the Auburn area (Phase 1), including a new 14.5-mile, 115-kV line from Niagara Mohawk Power’s d/b/a National Grid USA‘s, Elbridge substation to NYSEG’s State Street substation.
“While Phase 1 helps system reliability, it does not resolve all system reliability issues while the Cayuga generating facility is mothballed, or should the facility be permanently retired from service,” NYSEG said.
NYSEG also said there is a need for a coordinated study among NYSEG, the New York ISO and National Grid, which is a National Grid plc subsidiary, to further analyze transmission enhancements needed to resolve the reliability needs of the local and bulk power system upon the mothballing of the Cayuga generating facility. That study and potential long-term solutions for a wider study area are expected to be complete by the end of January 2013.
Among other things, NYSEG said the term sheet provides for Cayuga to provide RSS by deferring any mothballing actions on the Cayuga generating facility – Units 1 and 2 – and to keep them available during the term of the agreement, from Jan. 16, 2013 through Jan. 15, 2014, or the “initial term.”
Under the term sheet, NYSEG would pay Cayuga a monthly fixed-price of about $2.4m per month for RSS, totaling about $29.2m over the initial term.
In its Nov. 13 filing, the Sierra Club said the PSC is being asked to approve the proposed term sheet for RSS agreement between NYSEG and Cayuga Operating that will require ratepayers to spend more than $30m over the next year – and likely similar amounts in subsequent years – to subsidize the continued operation of an uneconomic power plant.
The Sierra Club also said that NYSEG’s filings indicate that the utility lacks a fully developed plan to expeditiously, cost-effectively and permanently eliminate the need for the Cayuga plant, adding that none of NYSEG’s filings indicate that it has looked into alternatives other than the lengthy two-step process of transmission upgrades identified previously.
“Unless NYSEG can clearly establish that it has a fully developed plan for eliminating local and bulk reliability concerns and that this plan minimizes the length of the need for RSS from Cayuga and protects ratepayers, the PSC should require NYSEG to engage in a competitive solicitation for alternative reliability solutions,” the Sierra Club said.
The organization also said it continues to believe that requiring detailed reliability analyses for each New York coal plant to proactively identify needed transmission upgrades will help obviate the need for future out-of-market reliability payments and protect New York ratepayers from unjust and unreasonable rate increases.
The indicated transmission owners – that is, Central Hudson Gas & Electric, whose holding company is CH Energy Group (NYSE:CHG); Consolidated Edison (NYSE:ED) subsidiaries Consolidated Edison Company of New York and Orange and Rockland Utilities; the Long Island Power Authority; and the New York Power Authority – also filed comments with the PSC.
In their Nov. 13 filing, they said that given the structure of the state’s electric grid, it is possible that generators that submit a notice of intent to retire or mothball may be needed in order to maintain system reliability, which may lead to other requests to the PSC for out-of-market compensation.
“[T]he indicated transmission owners respectfully request that the commission expressly acknowledge in its final order that the term sheet and the specific treatment accorded to Cayuga Operating…in this proceeding are not precedential and that the commission will consider alternative approaches to any future request for out-of-market compensation in order to maintain system reliability in a just and reasonable way by taking into consideration the specific facts and circumstances surrounding any such future request for compensation,” they said.