R.E. Ginna Nuclear Power Plant LLC on May 14 filed with the Federal Energy Regulatory Commission proposed revisions to a Reliability Support Services Agreement (RSSA) that would support operation of the company’s endangered nuclear plant in New York State.
Following expiration of a long-tem power sales contract, the Ginna plant is losing money and needs this deal to stay in operation, said R.E. Ginna parent Exelon Corp. (NYSE: EXC).
On Feb. 13, R.E. Ginna filed with FERC an executed Reliability Support Services Agreement with Rochester Gas and Electric (RG&E). Pursuant to the RSSA, Ginna would provide Reliability Support Service from Ginna’s R.E. Ginna Nuclear Power Plant to RG&E in order to preserve grid reliability in the Rochester, New York, area.
The RSSA provided for Ginna to be compensated for the reliability support service that the Ginna Facility would provide at a cost-justified rate that would enable Ginna to cover the costs of its continued operation, which continued operation was required by the New York Public Service Commission (NYPSC). Under the RSSA, Ginna would receive a monthly fixed charge, as well as a 15% share of market revenues from Ginna’s sales into the New York Independent System Operator (NYISO) energy and capacity markets (called the “15% Mechanism”). Between them, these two sources of revenue were part of a “black box” settlement expected to provide Ginna with revenues over the term of the RSSA of about $835 million, or about two thirds of Ginna’s full cost of service for the same period of $1,276 million. The RSSA also provided that RG&E could elect to extend the term of the agreement beyond the initial term if the Ginna Facility’s continued operation was necessary to maintain reliability.
The federal commission accepted the RSSA in part subject to compliance and refund, rejected it in part, and set for hearing and settlement whether the RSSA rate was just and reasonable. The commission directed that, in the compliance filing, Ginna modify the RSSA. Those modifications are what was filed with the commission on May 14.
The R.E. Ginna Nuclear Power Plant filed with both the Federal Energy Regulatory Commission and the New York PSC on Feb. 13 what could be a life saving agreement for this nuclear plant. R.E. Ginna had opened a proceeding last year at the New York PSC where it said that due to the expiration in 2014 of a long-term power sales deal, its nuclear plant couldn’t survive on the low-priced New York power market. So it wanted to work out the RSSA reliability deal with local utility Rochester Gas & Electric that would keep the plant operating for the next few years for grid reliability needs.
Ginna is a 581-MW, single-unit pressurized water reactor located along the south shores of Lake Ontario, in Ontario, New York, approximately 20 miles northeast of Rochester, New York. In 2004, the Nuclear Regulatory Commission extended the facility’s license to operate to September 2029.
From 2004 until the expiration of a power purchase agreement (PPA) with RG&E on June 30, 2014, RG&E purchased 90% of the generation output of the Ginna Facility. Since the expiration of the RG&E PPA, the Ginna Facility has been operating as a fully merchant generator in the wholesale power market administered by the New York ISO.
New York PSC going over its own issues related to the Ginna RSSA
In the meantime, the New York PSC on May 14 issued a document outlining the issues it is looking at in terms of the Ginna RSSA. In an order issued Nov. 14, 2014, the state commission determined that the continued operation of the Ginna plant was necessary to preserve the reliability of the New York bulk electric transmission system and the local Rochester electric distribution system, and it directed RG&E to negotiate the RSSA.
In its petition, RG&E acknowledges that the estimated amounts it would collect from its customers through the proposed surcharge would constitute a major change in rates and so a hearing is required to assess the propriety of such a change. In order to define the scope of the issues to be examined in such a hearing, the PSC held a procedural conference on March 10 to hear the preliminary views of the parties. It authorized the parties to engage in discovery and issued a ruling setting the dates for the parties to submit statements of material issues of fact requiring hearing.
On April 22, issue statements were filed by parties including: RG&E; R.E. Ginna; trial staff of the Department of Public Service; and various Entergy Corp. (NYSE: ETR) subsidiaries that are involved in the New York power market, including Entergy Nuclear FitzPatrick LLC. Replies were filed on April 29 by several of the parties.
“We have considered the arguments of the parties made during the procedural conference, and in the issue statements and replies filed,” said the May 14 PSC document. “Based on that review, we define in this ruling the scope of the issues to be addressed at the evidentiary hearing.”
RG&E argues that, because the Federal Energy Regulatory Commission has recently asserted jurisdiction over contracts like the RSSA, this state proceeding should be limited to: whether it was reasonable for RG&E to enter into the RSSA given the factual circumstances facing RG&E at the time it signed the RSSA; and whether the specific rate design of RG&E’s proposed surcharge recovery mechanism will result in just and reasonable rates.
R.E. Ginna similarly asserts that “the rate to be charged under the RSSA is…not before the Commission. It is before FERC.” This proceeding, R.E. Ginna contends, should be limited to: whether RG&E’s decision to enter into the RSSA was “appropriate in light of the reliability determination made by the commission and given available alternatives”; and whether RG&E’s mechanism for recovering RSSA costs, and the allocation of those costs to the rate classes, is appropriate.
Staff argues that FERC’s recent decision does not limit the issues in this state proceeding because FERC wrongly asserted jurisdiction over a contract that provides recovery for a reliability service through distribution rates. Jurisdiction over such matters, staff argues, is specifically preserved by federal statute to the states.
Said the PSC’s May 14 document: “We have no intention of injecting ourselves into an ongoing debate over the precise location of the boundary between state and federal jurisdiction under the Federal Power Act (FPA). In the November Order the Commission directly considered the federal preemption question and concluded that it was ‘acting within the sphere accorded to it under the FPA’ when considering an RSSA to address a reliability issue bearing on the provision of safe and adequate electric service. No party sought rehearing of that order. It remains in full force and effect, and is binding on us. We, therefore, decline to exclude any issue related to the terms of the RSSA based on the contention that its consideration is pre-empted by FERC under the FPA.”