Cayuga objects to grid project that would stymie its repowering plans

Cayuga Operating Co. LLC, which has a coal-fired power plant that it wants to repower with gas technology, on Dec. 8 objected at the New York State Public Service Commission to a transmission project that would allow the plant to be shut instead.

Commission Administrative Law Judge Kevin Casutto has recommended approval of the transmission project.

In 2012, Cayuga filed a notice of intent with the commission to mothball its two-unit, 312-MW facility located in Lansing, New York, in New York State Electric and Gas Corp.’s (NYSEG) service territory. In 2013, the commission initiated a proceeding to examine repowering existing generation facilities, including the Cayuga Facility, as an alternative to constructing transmission reinforcements (the “Repowering Proceeding”).

Cayuga has filed two proposals to repower the Cayuga Facility, while NYSEG has filed a report recommending the construction of certain transmission reinforcements instead. Shortly after the NYSEG and Cayuga submitted their initial proposals in the Repowering Proceeding, NYSEG and Niagara Mohawk Power d/b/a National Grid filed a joint application in this proceeding for a Certificate of Environmental Compatibility and Public Need (CECPN) to construct the major utility transmission facilities that NYSEG has recommended in the Repowering Proceeding (individually, “Phase 1” and “Phase 2,” and together called the the “Auburn Transmission Project” or the “ATP”).

Cayuga said in its Dec. 8 objections that the utility applicants have not established the need for Phase 2 of the ATP to maintain electric system reliability or that it will serve the public interest, convenience, and necessity, particularly in light of the concurrent Repowering Proceeding that could result in the Cayuga Facility’s continued operation. Instead, the applicants rely on a single, demonstrably-flawed study (the “Updated Need Study”) that is inconsistent with normal transmission planning procedures to support their favored approach of constructing the ATP and thereby growing their respective transmission systems, said Cayuga.

Despite the application’s deficiency, the ALJ issued the recommended decision, which erroneously recommends granting a CECPN for both phases of the ATP, said Cayuga. Cayuga has two primary exceptions to the recommended decision.

  • First, it said the recommended decision incorrectly “credits the Applicants’ Updated Need Study and concludes that” Phase 2 is necessary for “NYSEG to satisfy its reliability planning criteria.”
  • Second, in concluding that “Phase 2 of the ATP is necessary even if the Cayuga units continue to operate,” the recommended decision improperly usurps the commission’s order in the Repowering Proceeding.

Cayuga said the commission should: deny a CECPN for Phase 2 of the ATP: accept Cayuga’s current repowering proposal (the “Revised Repowering Proposal”): and direct Cayuga and NYSEG to submit a term sheet or agreement incorporating the Revised Repowering Proposal for the commission’s subsequent review and acceptance.

In July 2012, Cayuga filed a notice of intent with the commission to mothball the facility by Jan. 16, 2013. A preliminary study directed by the commission and prepared by NYSEG and the New York Independent System Operator (NYISO) identified a need to retain both units at the Cayuga Facility as available and capable of being committed to maintain near-term electric system reliability. Following this study, Cayuga and NYSEG filed with the commission a Term Sheet pursuant to which Cayuga would continue to operate the facility and provide reliability support services to NYSEG for a period of one year in return for, among other things, monthly payments from NYSEG.

The commission approved the Term Sheet, and NYSEG and Cayuga subsequently executed a Reliability Support Services Agreement (called “RSSA1”) based on the Term Sheet. During the initial one-year term of RSSA1, NYSEG conducted a solicitation for alternatives to maintain system reliability. Of the numerous proposals received, NYSEG identified the continued operation of the Cayuga Facility as the best option to maintain system reliability. As a result, the Commission accepted a second RSSA (“RSSA2”) between the parties on Jan. 16, 2013. RSSA2’s term expires on June 30, 2017.

In January 2013, the commission initiated the Repowering Proceeding to examine repowering existing generation facilities as an alternative to transmission reinforcements. The commission directed NYSEG “to examine the relative costs and benefits of repowering the plants at their existing sites, and to compare those costs and benefits to the costs and benefits of alternative transmission upgrades over the long term.” To that end, the commission directed that NYSEG request a bid from Cayuga and, after analyzing the submission, submit a report of its repowering analysis that addressed the following factors: reliability, ratepayer costs, the environment, the economy, electric market competitiveness, and any other factors that the utilities believed should be considered in weighing the costs and benefits of repowering versus transmission upgrades.

In March 2013, Cayuga submitted an initial repowering bid/proposal pursuant to the Repowering Order. In May 2013, NYSEG submitted a Report on Repowering Options to the commission comparing Cayuga’s Initial Proposal to certain proposed alternative transmission reinforcements (i.e., the ATP). The Report states that, although Phase 1 of the ATP is required immediately, Phase 2 is only necessary “in the event that Cayuga Generating Facility is going to be permanently retired from service.”

On Feb. 6 of this year, Cayuga filed its “Revised Repowering Proposal.” It offers repowering Units 1 and 2 (each 150 MW net coal-fired boilers) to burn natural gas. After the repowering is complete, Units 1 and 2 will remain capable of generating approximately 300 MW in total. Notably, Unit 1 will retain its existing capabilities and will employ a highly-flexible design, such that the fuel source can be switched back and forth between natural gas and coal within 24 hours and, in most cases, while the unit is operating. This responsive dual-fuel capability provides significant reliability benefits during times when natural gas supplies are severely limited, which have been occurring at greater frequency in the past few years. Cayuga said it anticipates that repowering can be completed and commercial operation commenced on or about June 30, 2017.

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.