Dunkirk coal-to-gas refueling looks less likely as events unfold

Rep. Tom Reed, R-N.Y., said May 31 that any move by the New York State Public Service Commission to terminate a 10-year power contract between NRG Energy (NYSE: NRG) and National Grid that would support a refuel of NRG’s Dunkirk coal plant would be a mistake.

The agreement would have kept the plant in Dunkirk operating. Now Chautauqua County and City of Dunkirk taxpayers will be left holding the bag with an idle power plant, Reed said. 

“It’s very frustrating that this NRG plant will close due to the extreme anti-natural gas agenda in Albany,” said Reed. “The result is jobs lost, higher electric rates, and higher property taxes – directly harming our community. Our entire region will suffer the negative consequences of a weaker economy – all because of extremists in Albany who are opposed to natural gas telling those of us in places like Dunkirk and Chautauqua County that they know better than we do. … We will continue exploring new options to obtain federal help for communities directly impacted by coal plant closures and to encourage use of our domestic energy resources such as wind, solar, natural gas and clean coal rather than depending on Middle Eastern oil.”

The PSC is out for comment until June 3 on the status of its June 2014 approval of a Term Sheet agreement between National Grid and Dunkirk Power LLC, a subsidiary of NRG Energy, that authorized National Grid to recover the costs that would be incurred under the Term Sheet. The Term Sheet contemplated the addition of natural gas capability for refueling the coal-fired Dunkirk generating facility, and that commercial operation of NRG’s refueled Dunkirk facility would commence on or about Sept. 1, 2015.

The commission is taking comments on whether National Grid should still be authorized to recover costs under the Term Sheet given various intervening events subsequent to the commission’s approval. In particular, NRG/Dunkirk mothballed the Dunkirk facility in January 2016, and has not taken the actions necessary to add natural gas firing capability at the Dunkirk facility by Sept. 1, 2015, or otherwise. Meanwhile, National Grid has completed certain transmission upgrades that it previously could defer and avoid, in contemplation of the refueled Dunkirk facility being available.

Moreover, the New York PSC pointed out that on April 19, 2016, the U.S. Supreme Court issued a decision with respect to preemption of a state-ordered contract for the sale of electric generation capacity, which may impact the Dunkirk/National Grid Term Sheet. That was in a case involving a power plant incentive program created by the state of Maryland.

NRG’s Dunkirk Power owns and operates a coal-fired station in Dunkirk, New York, made up of a (nameplate) 100-MW Unit 1, a 100-MW Unit 2, a 217.6-MW Unit 3, and a 217.6-MW Unit 4.

NRG said about the matter in its May 5 Form 10-Q financial report: “On February 13, 2014, Dunkirk Power LLC 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 on June 13, 2014. On February 27, 2015, Entergy filed a complaint in the U.S. District 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 March 7, 2016, the U.S. District Court denied a motion to dismiss filed by the NYSPSC. The Company is weighing its legal options in light of the recent decision by the U.S. Supreme Court in Hughes v. Talen Energy Marketing.”

That is the legal case involving the Maryland power plant program.

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.