Issues related to life, and conversion, of the Dunkirk coal plant being fought out

Matters related to continued operation of the coal-fired Dunkirk power plant in New York State while a coal-to-gas conversion plan is executed continue to be fought out in various venues, plant owner NRG Energy (NYSE: NRG) said in its May 8 Form 10-Q quarterly report.

In March 2012, NRG’s Dunkirk Power filed a notice with the New York State Public Service Commission (NYSPSC) of its intent to mothball the Dunkirk Station no later than September 2012. The effects of the mothball on electric system reliability were reviewed by Niagara Mohawk Power d/b/a National Grid. National Grid determined that the mothball of the Dunkirk Station would have a negative impact on the reliability of the New York transmission system and that portions of the Dunkirk Station may be retained for reliability purposes via a non-market compensation arrangement.

In July 2012, National Grid and Dunkirk Power agreed on the material terms for a bilateral Reliability Support Services Agreement (RSSA) and submitted those terms to the NYSPSC for rate recovery in National Grid’s rates. In August 2012, the NYSPSC approved terms, allowing Dunkirk Power and National Grid to ente into the RSSA that began in September 2012, and expired in May 2013. In late 2012, National Grid issued a request for proposals with respect to its reliability need in the Dunkirk area for the two years beginning June 1, 2014. Dunkirk Power submitted a proposal and signed a second, two-year contract in March 2013, pursuant to which one unit (Unit 2) at Dunkirk will continue operating through May 31, 2015. The contract was submitted to the NYSPSC in March 2013 and approved in May 2013. On March 2 of this year, National Grid filed a request for NYSPSC approval of a seven-month extension of the RSSA with Dunkirk (to Dec. 31, 2015).  The matter is pending before the NYSPSC.

In July 2012, Dunkirk Power filed a reliability must run (RMR) agreement with the Federal Energy Regulatory Commission to protect the company’s interests in the event National Grid and Dunkirk Power could not come to terms on a bilateral agreement for reliability support services (RSS). On Feb. 19 of this year, FERC rejected the RMR agreement as unnecessary and clarified in a related docket that it was not intending to review either RSS agreement.

On Feb. 19 of this year, pursuant to Section 206 of the Federal Power Act, FERC found the New York ISO‘s tariff to be unjust and unreasonable because it does not contain provisions governing the retention of and compensation to generating units for reliability. FERC ordered NYISO to adopt tariff provisions containing a proposed RMR rate schedule and pro forma RMR agreement within 120 days of the date of the FERC’s order. However, FERC clarified that NYISO’s RMR proposal will not require Dunkirk to enter into new pro forma agreements for the 2012 and 2013 RSSAs. On March 23, the NYSPSC filed a request for rehearing at FERC and a group of New York transmission owners filed a request for clarification.

In February 2014, Dunkirk Power and National Grid agreed to a term sheet for a 10-year agreement to govern the addition of natural gas-burning capabilities to the Dunkirk facility. This term sheet, known as the DNG Agreement Term Sheet, was approved by the NYSPSC in June 2014.  On Feb. 27 of this year, Entergy filed a complaint in a court for the Northern District of New York alleging that the NYSPSC’s approval of the DNG Agreement Term Sheet represents an impermissible interference with FERC’s exclusive jurisdiction over the wholesale markets. On April 20, Dunkirk Power filed an unopposed motion to become a party to the proceeding. Briefing is ongoing.

In May 2013, the Independent Power Producers of New York (IPPNY) trade group filed a complaint at FERC against the NYISO. It asked FERC to direct the NYISO to require that capacity from existing generation resources that would have exited the market but for out-of-market payments under RMR type agreements be excluded from the capacity market altogether or be offered at levels no lower than the resources’ going-forward costs. The complaints point to the recent reliability services agreements entered into between the NYSPSC and generators, including Dunkirk Power, as evidence that capacity market prices are being influenced by non-market considerations. The complainants seek to prevent below-cost offers from artificially suppressing prices in the New York Control Area Installed Capacity Spot Market Auction.

In March 2014, IPPNY filed an Amended Complaint against the NYISO in light of the executed term sheet between National Grid and Dunkirk Power, which was filed at NYPSC in February 2014. Under the term sheet, National Grid and Dunkirk Power are to enter into a definitive agreement pursuant to which Dunkirk Power will undertake a gas addition project to enable Units 2-4 to run on natural gas in exchange for payments from National Grid over a 10-year term.

On March 19 of this year, FERC denied IPPNY’s complaint and directed NYISO to establish a stakeholder process to consider whether there are circumstances that warrant the adoption of buyer-side mitigation rules in the rest-of-state, and whether mitigation measures would need to be in place to address any price suppressing effects of repowering agreements.

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.