PSEG Long Island, LIPA work on transition to more competitive power supply

PSEG Long Island LLC and the Long Island Power Authority on Jan. 30 filed with the New York State Public Service Commission a three-year Rate Plan that proposes modest increases of approximately 2% per year of aggregate electric revenues – increases that are below the expected rate of inflation for the years 2016-2018.

This Rate Plan does not include PSEG LI’s plans for Utility 2.0, which are being reviewed by the state Department of Public Service through a separate process. Consistent with the policies being pursued in the DPS’ Reforming the Energy Vision (REV) Proceeding, the Utility 2.0 projects are designed to enhance the customer experience, contribute to clean energy policy and deployment goals, and cost-effectively defer the need for power resources and transmission and distribution infrastructure, the rate application noted.

The Jan. 30 filing included joint testimony from: Paul Napoli, Vice President of Power Markets for PSEG Long Island; and James Wittine, Manager of Planning and Analysis for PSEG LI.

They wrote: “In preparing the three-year Rate Plan, PSEG LI has developed a baseline power supply plan that is designed to ensure that LIPA has access to power supplies that meet the planning and reliability standards established by the National Electric Reliability Council (‘NERC’), the New York State Reliability Council (‘NYSRC’), and the New York Independent System Operator (‘NYISO’), while also preserving all of LIPA’s existing options to develop new electric generation or transmission projects that are currently under evaluation. This plan generally assumes that all generation and transmission facilities currently included in LIPA’s resource base remain available to meet LIPA’s power supply requirements. At the same time, except as we describe more fully below with respect to certain projects, this plan does not reflect the addition of significant new power supply resources during the 2016-2018 period. Currently, we are undertaking a process that will enable us to make more definite assumptions about LIPA’s future power supply requirements by December 2015.”

LIPA’s transmission system is located in NYISO Zone K, which includes Suffolk and Nassau counties and the Far Rockaway peninsula. Due to transmission constraints, Zone K historically has been considered a “load pocket” requiring a high percentage of peak demand to be met with On-Island resources.

LIPA purchases its power supply from a variety of generation providers. LIPA also owns a tenant-in-common interest in the Nine Mile Point II nuclear facility. Almost all of LIPA’s power supply is under long term power purchase agreements (PPAs) with expiration dates ranging from 2015 to 2034. The majority of LIPA’s power supply is provided under the following long-term contracts:

  • Power Supply Agreement (PSA) – This tolling Agreement provides for the sale to LIPA by National Grid Generation LLC (NGG) of all of the capacity of the oil and gas-fueled generating plants that were formerly owned by the Long Island Lighting Co. (LILCO) prior to the acquisition of LILCO and its transmission and distribution assets by LIPA in 1998. The PSA provides about 60% of LIPA’s capacity and 26% of its annual energy requirements.
  • Caithness Energy Center – LIPA has a long term contract with the owner of this gas fired combined cycle plant that is located on Long Island. Under this tolling agreement LIPA procures approximately 286 MW of capacity. Caithness has produced about 10% of LIPA’s annual energy requirements since 2009.
  • Neptune Regional Transmission System – LIPA has a long term Firm Transmission Capacity Purchase Agreement (FTCPA) for this 660 MW High Voltage, Direct Current (HVDC) submarine cable. The FTCPA enables LIPA to procure about 10% of its On-Island capacity and about 20% of its annual energy requirements from the PJM Interconnection market. The On-Island capacity is from a long-term capacity purchase agreement LIPA has with the Marcus Hook facility (685 MW).
  • The Cross Sound Cable – This is a 330-MW HVDC submarine cable to New England that enables LIPA to procure On-Island capacity and energy from ISO New England. Currently LIPA procures approximately 100 MW of capacity qualified as On-Island capacity from Bear Swamp.

LIPA also currently purchases solar energy from a number of solar projects on Long Island as well as hydroelectric power from Brookfield. The baseline plan for 2016-2018 also includes plans for two additional, fully subscribed solar feed-in tariffs that are projected to provide approximately 150 MW of solar-powered electricity as well as an additional feed-in tariff for up to 20 MW of non- solar renewable power.

In addition, on Dec. 17, 2014 LIPA’s Trustees authorized conducting negotiations of individual 20-year PPAs for 11 different solar proposals which in aggregate constitute 122 MW. In addition, the Trustees authorized commencement of a supplemental solicitation to secure renewable energy of up to an additional 160 MW of renewable capacity commencing delivery on or before Dec. 31, 2020. Furthermore, the Trustees authorized PSEG LI working with LIPA staff and other stakeholders to develop an additional program, integrated with an intended integrated resource plan (IRP), for additional renewable energy beyond the 280 MW target of those two sets of additional renewable projects.

A number of power purchase agreements are due to expire

During the 2016-2018 period certain PPAs that LIPA has with suppliers will expire. It is currently expected that these facilities will continue to participate in the NYISO capacity and energy markets as On-Island resources. In addition, in 2015, it is expected that a 530-MW generating facility located in Danskammer, New York, will be reactivated, boosting capacity available to Zone K.

The IRP is to be written in 2015. Once those activities are completed, the parties will review the existing responses to various requests for proposals (RFPs) that have been issued by LIPA in the past few years and consider the various power supply options available to LIPA, including new generation and transmission solutions. They will also evaluate the impact of Utility 2.0 and the availability of capacity purchases using the Cross-Sound Cable.

Napoli and Wittine noted: “There is essentially no merchant power development activity and, effectively, no competitive wholesale power market in Zone K. This is largely due to the fact that LIPA has sufficient capacity and purchased power under contract. To encourage capacity development, LIPA has had to support new capacity by entering into long term PPAs. This tends to impede the viability of retail choice programs on Long Island. In PSEG LI’s view, it is in the best interest of LIPA and the consumers it serves to move to a more competitive generation market on Long Island, reflective of the competitive market that exists in the rest of New York State. We are proposing to establish a new proceeding in which interested parties will undertake a collaborative process to consider if it is feasible to enhance retail choice in LIPA’s service territory, and if so, what steps should be taken to do so.”

The PPAs due to expire out through 2018 are with:

  • Nassau Energy, TriGen, 46 MW, contract expires March 2016;
  • Nissequogue Cogen, Stonybrook, 10 MW, April 2015;
  • New York Power Authority, Gilboa, 50 MW, April 2015;
  • Covanta, Hempstead Resource Recovery, 72 MW, August 2017;
  • Covanta, Huntington Resource Recovery, 24 MW, October 2017;
  • Covanta, Babylon Resource Recovery, 14 MW, August 2017;
  • Town of Islip, Islip Resource Recovery, 9 MW, August 2017;
  • Entergy, Fitzpatrick (Energy Only), December 2017;
  • J-Power USA, Shoreham, 80 MW, August 2017;
  • J-Power USA, Edgewood, 92 MW, October 2018;
  • J-Power USA, EQUUS, 48 MW, June 2017;
  • NextEra (FPL), Jamaica Bay, 54 MW, July 2018; and
  • Hawkeye, Greenport, 52 MW, July 2018
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.