The New York State Public Service Commission, in a decision made on May 14 and issued on May 18, has agreed to extend a grid reliability deal for the coal-fired Dunkirk power plant of NRG Energy (NYSE: NRG) for another seven months.
On March 2, Niagara Mohawk Power d/b/a National Grid had submitted a request seeking approval for a seven-month extension to its Reliability Support Service Agreement (RSSA) with Dunkirk Power LLC, which was previously approved in May 2013 (called the “2013 RSSA”). National Grid also requested authorization to recover the costs incurred under the 2013 RSSA extension under its approved tariff surcharge mechanism that is currently used to recover RSSA expenses. National Grid advised that the initial term of the 2013 RSSA ends on May 31, 2015, while reliability needs expected after that date necessitate the continued availability of the Dunkirk facility.
National Grid reports that it determined the reliability need will continue beyond May 31, 2015, because Dunkirk remains necessary to maintaining the reliability of the transmission system in western New York. Absent an extension of the 2013 RSSA, National Grid concluded that the state of the transmission system in the area would not meet applicable reliability requirements, and would place service to customers at risk. Accordingly, National Grid sought a seven-month extension of the agreement from May 31, 2015, to Dec. 31, 2015, while it works to complete on-going system reinforcements.
The extended agreement gives National Grid the unilateral right to terminate the RSSA prior to Dec. 31, 2015, in the event Dunkirk completes the coal-to- natural gas conversion provided for under a separate repowering agreement, which was approved by the commission in June 2014. This provision is designed to ensure National Grid would not be obligated to make simultaneous payments to Dunkirk under the RSSA and the repowering agreement.
Affiliates of Entergy Corp. (NYSE: ETR), called the “Entergy Entities,” had argued that National Grid may not involve the 2013 RSSA to support a “Necessary Extension.” According to Entergy Entities, National Grid failed to provide the requisite notice, by Jan. 1, 2015, that a reliability need existed beyond May 31, 2015. They further contended that National Grid failed to attribute the need for an extension to a delay in completing the planned transmission upgrades, and therefore the Commission should reject the Petition.
The commission responded: “Contrary to Entergy Entities’ claims, the record reflects that National Grid provided sufficient notice to Dunkirk, in a letter dated October 29, 2014 prior to the deadline. Pursuant to that letter, National Grid advised Dunkirk’s parent company, NRG Energy, Inc., that due to the ‘project schedule for the transmission upgrades,’ ‘one Dunkirk unit connected at the 115 kV system will be required to remain operational after May 31, 2015 to ensure reliability in western New York.’ Therefore, as required under the 2013 RSSA, National Grid clearly provided timely notice to Dunkirk, and provided its reasoning that the extension is attributable to delays in completing its work. Moreover, Dunkirk has expressed its support for invoking the ‘Necessary Extension’ provision in the 2013 RSSA, demonstrating that it believes it was properly notified.”
The commission added: “Entergy Entities assert that the Commission lacks authority to approve the RSSA or an extension thereto. They claim the RSSA must be filed with the Federal Energy Regulatory Commission (FERC) because it has exclusive jurisdiction to regulate the rates, terms and conditions governing wholesale power markets pursuant to the Federal Power Act (FPA). Entergy Entities cite to recent FERC orders where FERC has asserted jurisdiction over agreements similar to the 2013 RSSA. The Commission previously addressed similar arguments of Entergy Entities in the context of the Dunkirk repowering proceeding. As set forth there, State law authority to authorize the recovery of costs incurred by a retail electric utility such as National Grid for reliability services is not preempted under the FPA. The FPA expressly reserves the Commission’s authority to take steps to preserve system reliability, which may include accepting utility agreements with generators needed for reliability.”