In this post-Hurricane Sandy era, New York needs to maintain reliable power sources while strengthening its energy systems in a way that does not disrupt economic development, according to state Sen. Kevin Parker.
His comments, included in a March 15 letter to the state Public Service Commission (PSC), were in response to the proposal to require Consolidated Edison‘s (NYSE:ED) Consolidated Edison Company of New York (Con Edison) and other distribution utilities “to spend nearly $1bn of our ratepayer money to find a replacement for” Entergy’s (NYSE:ETR) Indian Point nuclear power plant.
“Con Edison’s share of that expense will amount to approximately $320m (as currently projected, exclusive of cost overruns,)” Parker said.
On March 15, the PSC ordered Con Edison and the New York Power Authority (NYPA) to issue a request for proposals for power supply to replace what might be lost to the grid if the nuclear plant fails to win U.S. Nuclear Regulatory Commission (NRC) license extensions. The PSC began a formal review process in November 2012 to look at the contingency planning needed if Indian Point, a 2,040-MW, two-unit plant, could not win NRC license extensions for each unit.
Con Edison and NYPA on Feb. 1 jointly submitted a filing that suggested an Indian Point contingency plan whereby Con Edison and NYPA would pursue the initial development of three transmission owner transmission solutions, while also soliciting generation and other transmission proposals through an RFP to be issued by NYPA. The filing further described an energy efficiency/demand reduction/combined heat and power (EE/DR/CHP) set-aside program through which at least 100 MW of the anticipated need would be met through EE/DR/CHP projects.
Separately, Con Edison in January filed for PSC approval of a $375m revenue increase to run the electric delivery system, representing an overall customer bill increase of 3.3%. For a typical monthly bill for a New York City resident using 300 kWh, that would mean an increase from $81.64 to $84.55.
For gas service, Con Edison requested a $25m revenue increase, resulting in an overall customer bill increase of 1.3%. The company also requested approval of a $5m revenue decrease for steam service, the company added.
In his letter, Parker said the proposed Indian Point contingency plan diverts funding needed to strengthen New York’s electric system to minimize the impact of anticipated future storms. “[I]t will increase the cost of energy in New York at a time when our economy is still fragile from the Great Recession, and when too many working families are struggling to pay their bills,” he said.
Parker noted that New York has the fourth highest electricity rates in the country, adding, “[I]f we continue to increase the cost of energy, at what point will the small businesses in our communities cease to thrive and create jobs within the community, and fail to be the energies of the economic recovery we all have been working toward?”
He requested that the contingency plan’s costs not be rate-based and that if the plan to replace the plant is commercially reasonable and prudent, then private capital should suffice.
State Sen. Timothy Kennedy, in a March 19 letter, urged the PSC to consider the cost implications to upstate ratepayers associated with the development and implementation of the contingency plan, which he said will amount to an $811m rate increase.
“While proposed rate increases typically only impact customers of the respective utility, the plan proposed by Con Edison and the New York Power Authority would impose the costs of the projects selected by the PSC on all state ratepayers,” he said, adding that the plan will burden upstate New York ratepayers with subsidizing projects that will solely benefit downstate customers.
State Assembly Member Joseph Morelle and state Sen. Mark Grisanti expressed similar concerns in their respective March 18 and March 6 letters to the PSC.
For instance, Grisanti said, “By mandating and fast-tracking the development and implementation of a contingency plan that will in all likelihood be deemed unnecessary since license renewal for Indian Point appears highly likely, the PSC is prioritizing what is essentially a political objective over smart energy planning.”
Con Edison response
In its March 12 reply comments, Con Edison said program costs will be collected in arrears and will cost between $150m to $300m.
In the plan, the company proposed a program price of $300m for the EE/DR program, but recognized that that cost estimate represents the high end of a range of program costs with the low end of the range being $150m.
To ensure that cost-effective projects are implemented, the cost of each project would be measured against the benefits of avoided energy, avoided line loss, avoided capacity, avoided environmental impacts and avoided transmission and distribution infrastructure, Con Edison added.
“[T]he plan provided for a fast track approach to having EE and DR program resources and transmission and generation projects in service by June 2016 … to meet the electricity needs that could arise from the closure of [Indian Point],” Con Edison said.
The company also said that it appropriately identified the impact from ongoing EE and CHP activities, and that the contingency EE/DR program targets incremental reductions in peak demand.
For instance, the plan identifies a need for 100 MW of permanent demand reduction by summer 2016 in addition to the 68 MW of reductions that were not included in the 2012 New York ISO reliability needs assessment.
Furthermore, the program will allow a clear market signal to develop that encourages peak demand reduction, Con Edison said, noting that it is proposing to offer “a straightforward customer incentive that encourages peak demand reduction through a project-level rebate.”