NYC weighs in on upstate power plants

• New York City weighed in against a request from a Wayne County power plant to keep the plant running
• The Cayuga Power Plant in Lansing and another in Chautauqua County face similar circumstances
• NYC questioned why electric utilities haven't done more to prepare for the closure of aging plants

ALBANY – What does New York City — the state and nation's most populous city — care about an aging upstate power plant in a county just a fraction of its size some 300 miles away on the shore of Lake Ontario?

The answer lies in a little-noticed, highly technical document filed in August with the state Public Service Commission.

Within its 13 pages, a branch of New York City Mayor Bill de Blasio's office weighed in against a request from the R.E. Ginna Nuclear Power Plant in Wayne County to force an electric utility — Rochester Gas & Electric — to negotiate a payment plan to keep the plant running and the Rochester-area power grid reliable. The filing also points to the Cayuga Power Plant in Lansing and another in Chautauqua County, citing similar circumstances.

Essentially, the city asks: If Ginna gets approval for a survival package that will likely be paid for by RG&E ratepayers, what's keeping other power plants from holding other utilities and their customers "hostage?"

"If the commission allows such conduct in this case, it should expect other generators to follow suit," according to the filing, which was written by Michael Delaney, director of energy regulatory affairs for the New York City Office of Long-Term Planning and Sustainability, and Kevin Lang, an Albany-based attorney retained by the city.

The debate centers on what's known in regulatory parlance as a Reliability Support Services Agreement, or an RSSA.

It works like this: If a power plant is losing money and planning to shut down, it files a notice with the Public Service Commission alerting the board of its intentions. From there, it's determined whether or not taking the power plant off of the grid will result in any blackouts or service issues for customers in a particular region.

If shutting down the plant would cause problems for the grid, the plant's owners can request a temporary RSSA — monthly payments from an electric utility, usually paid for via a surcharge on customer bills, which are meant to keep the plant running and able to generate power while a long-term solution is figured out.

Since 2012, two such arrangements have been approved: One for the Cayuga plant, which provides much of the power for the Ithaca area; and another for an NRG Energy Inc.-owned plant in Dunkirk, Chautauqua County, which has since received approval to switch from coal to natural gas.

The payments are significant: Under the Cayuga plant's latest deal, New York State Electric & Gas will pay the facility's owners between $2 million and $2.8 million a month through June 2017, along with up to $42 million in one-time capital costs. NYSEG is owned by the same parent company as RG&E.

Cayuga, which first opened in 1955, gets to keep the first $5 million in net revenue each year, while anything over that is split 50/50 with NYSEG. The electric utility then places a surcharge on its customers' bills to recover the costs, ranging from about $1 a month for a small residence to more than $1,600 a month for a large industrial customer.

Ginna's owner, Chicago-based Exelon Corp., is seeking a similar arrangement. The town of Ontario plant employs about 700 people and is the largest taxpayer in Wayne County.

According to documents the company filed with the state, the 44-year-old plant — which can produce power for 400,000 homes in the Rochester area — has lost more than $100 million in the previous three years. It's in large part because the wholesale price of natural gas has dropped significantly in recent years and driven down costs for its competitors.

The plant took a step closer to a reprieve earlier this month, when the Public Service Commission ordered RG&E, the electric utility, to begin negotiations.

New York City strongly opposed the state board's eventual move.

In its August filing, the city warned that allowing Ginna's request could lead to power plants having the upper hand over Consolidated Edison, the major electric utility downstate, and eventually lead to more-expensive bills.

The city questioned why electric utilities haven't done more to prepare for the closure of the aging plants — specifically citing Cayuga and Dunkirk — and took issue with Ginna failing to cite a specific closure date if an agreement isn't approved.

"In New York City, it is possible that the loss of any baseload generating facility could cause a reliability problem," according to the city's filing. "Thus, any New York City generator could hold (Con Ed), the commission, and New York City ratepayers hostage to threats of retirement without publicly stating any intention to retire and without the commission knowing whether the threat is real."

The city didn't make specific mention of any particular downstate power plants. But the Indian Point Energy Center, a nuclear plant in Buchanan, Westchester County, produces about 25 percent of the electricity used in New York City and Westchester.

The Public Service Commission ultimately sided with Ginna. Since the plant is nuclear-based instead of coal or some other fuel, it makes it more difficult to publicly declare a closure date, the board ruled. It would be difficult to retain in-demand nuclear engineers if they know a plant is slated to close, according to the board's order.

"Selecting a specific retirement date would also have an adverse impact on the local community," the board wrote. "As the public comments establish, the Ginna facility and its employees are the linchpin of the economic health of the local Wayne County community, and its economic benefits are felt throughout the Rochester region."

Audrey Zibelman, the chair of the Public Service Commission, stressed that the board's decision to start negotiations between Ginna and RG&E isn't the final word.

The commission will still have to approve any final agreement that's reached. At the same time, RG&E is soliciting proposals to potentially replace the 580 megawatts the plant can produce, which could give the state commission other options to consider before making a determination.

"We've already started the process with the Rochester utility to look for the alternative, whether it's a transmission alternative or other alternatives," Zibelman said. "Even in the case of Rochester, we're looking to see if there's an interim alternative. The objective is to maintain reliability at the lowest possible price to consumers."

Ginna's owner and RG&E have until Jan. 15 to reach an agreement, though the deadline can be easily extended.

Daniel Hucko, a spokesman for RG&E, said it would be "premature" to say what it may cost ratepayers.

"We will work in the best interests of our customers with considerations of cost at the forefront, while recognizing the importance of continued network reliability and reaching reasonable terms for all parties," Hucko said in a statement.

A spokeswoman for Exelon Corp., Maria Hudson, said the company will continue to negotiate a deal with RG&E that "allows the documented reliability need to be addressed."

Meanwhile, the RSSA previously approved in 2012 for the Dunkirk plant was trumped by a separate, $150 million agreement that will allow the plant to convert from coal to natural gas. The deal was approved earlier this year by the Public Service Commission.

The Cayuga plant has sought a similar deal, petitioning the state commission to also make the switch to natural gas. But the commission last year ordered the plant to negotiate a compromise with NYSEG, which favors upgrading transmission lines and taking the plant offline. The two sides face a Dec. 1 deadline to come to an agreement.

The plant's plan, however, has been criticized by some local lawmakers and groups opposed to hydraulic fracturing, the much-debated method to help extract gas from underground shale formations. They've called on the Public Service Commission to reject the proposal and focus more on renewable energy.

Jon Campbell is a reporter in Gannett's Albany Bureau. Follow him on Twitter at @JonCampbellGAN