New York State Electric & Gas (NYSEG) has recommended that New York state regulators adopt a transmission reinforcement alternative, which includes a new 115-kV line, in relation to the proposed mothballing of AES Cayuga’s Cayuga Unit 1 and Cayuga Unit 2, or the Cayuga Generating Facility.
The state Public Service Commission (PSC) directed NYSEG in January to submit a report analyzing the facility’s repowering. NYSEG said in its May 17 report that the recommendations are preliminary given the unverified nature of the information underlying the four repowering options proposed by Cayuga Operating Company.
Also, the analysis and recommendations are based on assumptions about uncertain future variables, including the price of natural gas, the number of hours that the repowered generators would be called upon to run, the forward-looking price of electricity and capacity, construction and permitting uncertainties and financing risk.
“The report recommends that [NYSEG’s] transmission reinforcement alternative be adopted as the best available option,” NYSEG added. “Moreover, given the uncertainty inherent in a generation option, the report also recommends that transmission planning be continued for risk mitigation until such time as the generation is actually brought [online].”
The transmission reinforcement under consideration includes the new 14.5-mile, 115-kV line from National Grid USA’s Elbridge substation to NYSEG’s State Street substation with 1192.5kcmil ACSR conductor routed on existing National Grid right-of-way.
In addition, if the generating facility is going to be permanently retired from service, National Grid also proposed to rebuild the existing 14.5-mile, 115-kV line from the Elbridge substation to the State Street substation with 1192.5kcmil ACSR conductor. National Grid has proposed a lower cost alternative that would increase the capacity on National Grid’s 10.3-mile line section, which may become the preferred transmission solution.
Either way, NYSEG added, this transmission reinforcement option will eliminate the thermal overload problems in the Auburn, N.Y., area and will satisfy capacity and voltage requirements by creating a new transmission supply into the Auburn Division.
Among others, NYSEG said it identified a thermal overload of the 336 ACSR conductor in the Elbridge to State Street 115-kV line #972 under all facilities in-service system conditions at a local area load level of 135 MW, which is about 73% of the projected 2012 summer peak load.
NYSEG said it is pursuing the transmission project and intends to file an Article VII application by June. The proposed in-service date is the end of 2016 for the first phase.
NYSEG’s Phase 2 Auburn transmission project is scheduled for completion in mid-2017. The company redacted capital costs information for the project in its report.
In response to NYSEG’s February solicitation for repowering of the generating facility, Cayuga presented four repowering options. For instance, Option 1 would repower the two existing coal-fired boilers with natural gas while continuing to use the balance of the existing plant facilities to generate electricity.
In general, Option 1, as well as Option 2 and Unit 1 for Option 3 are designed to meet the reliability need, but due to the inefficiency of the designs, are not projected to run much based on New York ISO (NYISO) economics.
NYSEG also noted that Cayuga’s repowering options all require a levelized revenue stream from NYSEG’s customers. The precise revenue stream that Cayuga seeks is based, in part, on an assumed stream of market revenues that would be generated under each option. Consequently, NYSEG’s analysis of cost for each option calculated a fixed-price payment obligation to be borne by ratepayers, offset by the relevant market revenue stream resulting from the repowering.
NYSEG said it employed a standardized approach to identifying, assessing and evaluating mitigation strategies for project risks. Identified risks included project cost increases and project schedule delays. The report assessed each of the Cayuga repowering options along with the transmission alternative to help characterize the potential level of associated risk.
One critical risk to NYSEG’s ratepayers is electric market risk, the company said, noting that Cayuga’s proposals place on NYSEG the full market price risk, since NYSEG must make a fixed rate payment to Cayuga, while the market price revenues, which offset the flat rate payment to Cayuga, will fluctuate.
“Given the uncertainty in forward energy and capacity prices, NYSEG is concerned about its customers assuming the market price risk associated with the Cayuga repowering option,” NYSEG said, adding, “In general, the company’s risk assessment demonstrates that the transmission option would have a lower risk level for ratepayers than the Cayuga repowering options.”
The transmission option and any of the repowering options would result in a significant improvement in air emissions compared to continued coal-fired generation.
NYSEG also noted the transmission limitations in the Auburn area cause Cayuga to be called out of merit (OOM) to meet the local reliability need during those circumstances when the plant’s electric output is needed for reliability but is not economic in the NYISO market.
NYISO bills NYSEG the sub-zone load allocated share of the OOM cost incurred. By definition, NYSEG added, Cayuga OOM operation reduces economic efficiency and increases costs for customers in the sub-zone. The proposed transmission enhancements will eliminate the need for Cayuga OOM operation and therefore will have no impact on the economic dispatch of generation.
NYSEG said that should the PSC select a Cayuga repowering option or another option based on a full market solicitation, the company believes full recovery should be authorized for continuing with the transmission option until such time as the repowering option is either online or likely to be online in the near future.
NYSEG is a subsidiary of Iberdrola USA, which is a subsidiary of Iberdrola S.A. National Grid is a subsidiary of National Grid plc.