Wednesday, August 16, 2006

ALJs Warn of Federal Override for Proposed NYRI Transmission Line

PSC Administrative Law Judges on August 14 issued a procedural ruling warning parties objecting to the controversial proposal of New York Regional Interconnect (NYRI) to build a new transmission line:
“should this case get dragged out by interminable motions or otherwise, the decisions regarding the best interests of New York State may simply be made in Washington, D.C. * * * * [I]t seems clear that this case must be run efficiently, especially in light of the recent National Electric Transmission Congestion Study (US Dept. of Energy, August, 2006) concerning the designation of a transmission corridor of national interest in New York. Our failure to do so may result in the decision being preempted by the federal government.”
The NYRI situation illustrates how in the absence of concrete plans of the state, utilities, or the Power Authority, major decisions affecting the state for decades may be made by new specialized federally regulated utilities with narrow interests or the federal government.

The New York PSC comments to the U.S. Department of Energy earlier this year pointed out that a broader societal benefit test should be used to assess whether the federal government should preempt states to implement proposed merchant transmission company projects. Also, transmission "congestion" that thwarts some long distance sales of energy to areas where far higher prices can be obtained under FERC's deregulated wholesale electric market rate system can be alleviated by means other than construction of new transmission lines. The New York PSC stated:
"carefully sited generation facilities or investments in demand reduction can offset the need for transmission investments. While there may be congestion at certain points of the transmission system, mitigating that congestion does not necessarily require investments in transmission. It may include investments in generation, or demand reduction, or both."
The PSC also stated that the interjection of federal siting of transmission lines without coordination with states "may cause developers of bona fide generation or demand-response projects to decide against going forward with their proposals due to the possibility that the proposed projects will be supplanted by a NIETC transmission facility." The PSC asked DOE to wait for the "NYISO’s Final Comprehensive Reliability Planning Process Report, scheduled to be completed in June, 2006." That report has not yet emerged, and appears to be overdue.

A March 2006 report of a multi agency "State Energy Coordination Working Group" indicates that a number of New York state approved power plants are still not being built, presumably because utilities that asked for the permits are now unwilling to make the investment to build the plants:
"As of January 1, 2006, 13 projects, totaling about 7,300 MW of net capacity, had obtained such Certificates. Five of those projects, about 2,380 MW of net capacity, are now in commercial operation and one additional 500 MW project is under construction. Two of the projects awarded Certificates, about 1,240 MW of capacity, were subsequently cancelled. Six projects, about 4,000 MW, were cancelled before receiving Certificates and five projects, about 3,600 MW, are still in the application review phase."
The New York ISO, the private utility that manages the grid in New York and which operates spot markets where sellers can sell electricity at market rates, in December, 2005 issued a Reliability Needs Assessment and then issued a letter to downstate utilities asking them to propose both market based and regulatory solutions, including their building of power plants or transmission lines. Apparently that was unsuccessful and the NYISO in March issued another call to the downstate New York utiltities to come forward voluntarily with backstop regulatory solutions in the event of continued market failures to avoid impending reliability concerns in their area. To date, if there are such solutions, they have not been publicly announced.

With a better articulated energy policy, the state would not be simply in the role of waiting for the NYISO to issue plans it lacks authority to implement, of for lightly regulated utilities to build merchant power plants or merchant transmission lines on routes that may not be optimal. The absence of clear state electricity planning was criticized recently in the Utica Observer Dispatch and the Gannett papers. For more information see PULP's web page on the NYRI proposal.

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