The New York Public Service Commission has told Consolidated Edison and the New York Power Authority to develop a backup plan in case the Indian Point nuclear power plant in Westchester County is no longer running in 2016. The proposed plan calls for ramped-up energy efficiency, transmission upgrades and possible new generation, with an estimated price tag of at least $800 million.
Where is the money coming from?
You, the ratepayer. Your bill will go up, simply to fund just-in-case projects that will be needed only if the Federal Nuclear Regulatory Commission decides not to renew Indian Point's license. The state is hijacking your money to fund projects that may not even be needed.
Con Ed is urging the PSC to put the plan into effect and start spending ratepayer money on these projects as early as this month, despite the fact that Indian Point is in the process of obtaining a renewed certificate of operation from the NRC and is not scheduled to retire.
But wouldn't only those in the downstate area affected by the potential closure of Indian Point have to pay?
All New York ratepayers — from Albany to Buffalo — will see the costs of these projects reflected in their electricity bills – but the generation and transmission benefits will be seen only downstate. Upstate Sens. George Maziarz, R-Newfane, and Ted O'Brien, D-Irondequoit, have spoken out against the plan for this reason.
But if Indian Point is still running, we're off the hook, right?
No. Even if Indian Point remains in operation and additional power or transmission is not needed for system reliability, ratepayers still will be responsible for these projects.
As the generators of more than 75 percent of the state's electric power, Independent Power Producers understands the critical role of system reliability and scenario planning. But the proposed backup plan was hastily and poorly conceived. The plan fails to leverage the benefits of a successful competitive marketplace, in which the private sector has been able to step up to fulfill reliability needs without government intervention or a subsidy from ratepayers. The whole idea of a competitive market was to relieve the ratepayers from unnecessary costs and transfer the financial risk to private companies. However, the proposed plan shifts the risks back onto ratepayers.
By hastily ordering projects to be built with a guarantee of cost recovery, the state removes any incentive for private investors to compete to provide new electric resources. Instead, the company selected by the government receives a guaranteed profit.
Competition in New York's wholesale electric market has been a great success over the past decade. To the benefit of our state and electric customers, the financial risk of constructing key power projects has been transferred to private investors. Further, the average wholesale electric energy price for 2012 was the lowest in more than a decade. The proposed backup plan takes us in the wrong direction, forcing ratepayers to bear the additional costs for government-selected projects, the costs of which will be covered by the state's ratepayers even if they are not needed.
Whether it is advanced as a proposed solution to a transmission need driven by public policy or by concerns of system reliability, the proposed backup plan suffers from fatal flaws that affect power producers and ratepayers alike. Instead of moving ahead with the plan as written, the PSC, in collaboration with the private sector, should determine the most efficient and economic way to make certain the New York power grid remains robust and reliable under a variety of scenarios, including future economic growth.
Any other approach would pointlessly burden residential and business ratepayers with close to $1 billion in costs that could have been avoided.
Gavin J. Donohue is the president & CEO of the Independent Power Producers of New York Inc.