Entergy criticizes deal for Dunkirk coal-to-gas conversion project

Various nuclear subsidiaries of Entergy (NYSE: ETR) on April 7 told the New York State Public Service Commission that a term sheet covering a partial repowering of NRG Energy’s (NYSE: NRG) Dunkirk coal plant would harm wholesale power markets.

Entergy Nuclear FitzPatrick LLC, Entergy Nuclear Indian Point 2 LLC, Entergy Nuclear Indian Point 3 LLC and Entergy Nuclear Operations offered comments on the term sheet filed on Feb. 13 with the commission. The term sheet was based on a deal worked out last December by Dunkirk Power LLC, National Grid and New York officials. The term sheet provides for a partial coal-to-gas repowering of the Dunkirk plant, even though initially National Grid said it could make up for a full shutdown of Dunkirk with cheaper grid fixes. But New York officials are backing the partial continuance of Dunkirk due in large part to the plant’s impact on the local economy.

Any PSC approval of the term sheet “would constitute impermissible intrusion into an area over which the Federal Energy Regulatory Commission (‘FERC’) has exclusive jurisdiction,” the Entergy companies wrote. “Moreover, the Term Sheet, as currently proposed, will lead to artificially suppressed energy and capacity prices in the New York Independent System Operator, Inc.‘s (‘NYISO’) markets which will have a deleterious impact on their ongoing development. Thus, the proposed Term Sheet should not be accepted by any regulatory body in its current form.”

Over the past year, Dunkirk and National Grid submitted a number of filings in this proceeding which reflected the facts that the reliability need in the area was limited to 150 MW and that the transmission alternative was far less costly than any of Dunkirk’s identified repowering options, the Entergy companies noted.

“Notwithstanding the substantial, undisputed cost differential between these two identified alternatives, the Governor’s office subsequently issued a press release announcing that an agreement had been facilitated to repower the Dunkirk Facility and highlighting, inter alia, that such repowering would ‘bring lower electric supply costs to consumers.’ Per the terms of the proposed Term Sheet filed following the Governor’s announcement, Dunkirk must repower Units 2, 3 and 4 of the Dunkirk Facility (totaling 435 MW) by adding gas-fired capability and must keep all three units available as eligible energy and capacity providers in exchange for National Grid payments of $20.41 million per year for ten years.”

It is well-settled that, under the Federal Power Act (FPA) administered by FERC, contracts addressing rates, terms and conditions affecting wholesale electric sales fall within the FERC’s exclusive jurisdiction, Entergy said.

The provisions of the proposed term sheet are also flawed, Entergy added. It provides for a stream of payments that is well above expected clearing prices in this area of New York state which evidences the fact that repowering the Dunkirk facility is uneconomic, it said.

“While the State may have a host of reasons to support the continued operation of the otherwise uneconomic Dunkirk Facility, the ongoing viability of New York’s competitive markets should not be adversely affected,” Entergy wrote.

In comments also filed with the commission on April 7, NRG Energy said: “The Project will help meet reliability needs enabling National Grid to meet its objective of reliable electric service in western New York and will also help relieve congestion and support power flows, thereby enabling dispatch of western New York generation and economic imports from Ontario. The Project provides many other benefits. The Project will reduce plant emissions by using cleaner burning natural gas, reduce costs for consumers, preserve local jobs, create temporary construction jobs, provide a stabilized tax revenue for the local schools and government and improve quality of life and the local economy in the area. The Project also provides stabilization of the electric grid and will avoid the need for construction of certain incremental transmission upgrades that otherwise would have been needed for reliability and will facilitate the orderly planning and upgrading of other transmission facilities over a period of years, thus eliminating the need for National Grid to complete multiple projects in a compressed period of time.”

The New York ISO has stated that having Dunkirk Units 2, 3 and 4 on-line will provide greater operational flexibility at the Niagara Power Project and allow for more power imports from the Ontario control area. That in turn would provide the NYISO increased opportunity to call on these resources for economic or emergency energy during high load conditions, NRG Energy said. According to the NYISO, generation at Dunkirk relieves certain system constraints in western New York that otherwise limit the output of the New York Power Authority’s Niagara Power Project hydroelectric plant. With some relaxation of the system constraints, a greater proportion of the energy produced in NYISO Zone A is renewable, emissions-free hydropower than would not be the case if Dunkirk were not operating, NRG Energy argued.

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.