Sierra Club argues for quickest end to coal life for Cayuga plant

The Sierra Club and a group of New York ratepayers on Dec. 10 told the New York State Public Service Commission that there should be an emphasis on the quickest possible end of a life-support deal for the coal-fired Cayuga power plant.

They were commenting on a proposed Reliability Support Services Agreement (RSSA) between New York State Electric & Gas (NYSEG) and Cayuga Operating Co. LLC. This latest RSSA follows an initial one that has kept this power plant in operation, after Cayuga Operating said it wanted to shut the facility, so that NYSEG could buy time to make compensating grid upgrades.

The latest RSSA raises serious concerns that ratepayer interests are not being adequately protected and must therefore be modified to ensure that ratepayers are not saddled with unjust and unreasonable rates in violation of Public Service Law, said the intervenors.

“Under the proposed Agreement, NYSEG’s ratepayers are being once again asked to shoulder a major financial burden by supporting the continued operation of a facility that purports to be uneconomical,” they argued. “This burden is now being extended by at least three- and-a-half years and is being substantially increased. Not only would annual fixed payments rise by more than $4.2 million between 2013 and 2014 under RSSA II (from $29.1 million to $33.5 million), but the proposed Agreement would also require ratepayers to fund more than $42 million in capital expenditures at the Cayuga plant through July 2017, an expenditure rate nearly three times that of the original agreement.”

Moreover, not only does the agreement do little to clarify the nature of or need for these improvements, but based on the descriptions offered at least several appear to be expensive, unnecessary for the reliable and safe operation of the facility through the initial term, and more likely calculated to facilitate long-term operation of the facility as a merchant plant beyond the expiration of the RSSA, the intervenors wrote.

The Sierra Club and Ratepayer and Community Intervenors urged the commission to take various actions, including:

  • Limit the duration of the agreement by ensuring that the transmission upgrades previously identified as necessary to alleviate the reliability need for the Cayuga plant are moving forward expeditiously;
  • Require that a reliability analysis be conducted immediately for the retirement of a single Cayuga unit and ensure that this analysis is updated regularly as the transmission upgrades are implemented or other circumstances change that could alleviate the need for one of the units; 
  • Require that the agreement expressly authorize unilateral termination by NYSEG upon reasonable notice at any time once NYSEG determines that only a single unit is needed to maintain reliability;
  • Require that the agreement expressly authorize unilateral termination by NYSEG prior to the end of the initial term should subsequent reliability analysis determine that the reliability need for the Cayuga facility has been eliminated;
  • Modify the unit selection provision to clarify that if NYSEG limits the agreement to a single unit, such that Cayuga must keep operational the unit that will result in lower capital expenditures.

Existing support agreement due to expire Jan. 15

NYSEG currently purchases reliability support services under an agreement with Cayuga Operating executed in December 2012 (called “RSSA1”), which ends on Jan. 15, 2014. Given the upcoming expiration of RSSA1, NYSEG filed an unexecuted second agreement (called “RSSA2”) between NYSEG and Cayuga. As with RSSA1, RSSA2 contains the terms under which NYSEG will procure support services from Cayuga’s generating facility to maintain transmission system reliability in the Auburn, N.Y., area beginning Jan. 16, 2014, and ending June 30, 2017.

Cayuga and NYSEG modeled RSSA2 after RSSA1 containing many, if not all, of the same provisions. RSSA2 continues to provide for, among other things, Cayuga’s recovery of costs it would avoid by mothballing Units 1 and 2.

“RSSA2 continues to maintain transmission system reliability in the Auburn, New York area and is a reasonable compromise between NYSEG and Cayuga’s positions,” Cayuga Operating said in a Nov. 4 brief in support of RSSA2. “Acceptance of RSSA2, by the Commission, will allow for continued reliability of the transmission system in NYSEG’s territory until such time as more permanent solutions to system reliability concerns may be implemented. Cayuga respectfully requests that the Commission accept RSSA2 without modification.”

In a separate case, the PSC has directed Cayuga and NYSEG to file a revised repowering proposal for the Cayuga generating station, with the current deadline to file that proposal being Dec. 23. Cayuga has offered several options, including conversion of some of the coal capacity to gas, and brand-new gas-fired capacity, as the long-term future options for the plant site. Coal would be completely closed out as a fuel under all options. NYSEG has opposed any repowering, saying it can make up for the shutdown of Cayuga merely through cheaper grid fixes, with no new capacity at the site needed.

The existing Cayuga coal-fired station consists of two units; Unit 1, which has a 154 MW net capacity (winter); and Unit 2, which has a 158.7 MW net capacity (winter).

In July 2012, Cayuga submitted a notification to the PSC of its intent to mothball both Cayuga units by Jan. 16, 2013. NYSEG and NYISO decided that the plant was needed for a period of time for grid support and worked out the original RSSA deal.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.