New York adopts clean energy standard, nuclear subsidy

Tuesday, August 2, 2016

This article first appeared in RTO.

The New York Public Service Commission on Monday unanimously approved its Clean Energy Standard, including a controversial plan to prop up struggling upstate nuclear power plants with a 12-year subsidy that opponents say could cost ratepayers $7.6 billion.

The order creates a zero-emission credit for nuclear plants similar to the way states incentivize renewable resources with an additional above-market payment. ZECs were a feature added earlier this year to the CES, which will require New York to derive 50% of its energy from renewable sources by 2030. Nuclear power, which currently provides 30% of the state’s electricity, is seen as a bridge for its carbon-free attributes until renewable energy can be produced at scale.
“If these plants close abruptly, they in all likelihood will be replaced by the attributes of expanded fossil fuel base generation,” PSC Chair Audrey Zibelman said at the meeting. “This will impair our ability to achieve our environmental goals.”
Zibelman also disputed the estimates of the plan’s price tag, saying that opponents of nuclear subsidies are presupposing that record-low natural prices will continue, highlighting the differential from the relatively higher prices for nuclear. “By not effectively pricing in the cost to our environment of our electric choices, we are, in fact, causing economic inefficiencies,” she said.

An overflow crowd of union members, environmentalists and pro- and anti-nuclear activists filled the PSC meeting room, necessitating the use of four supplemental hearing rooms for videoconferencing.

“We’re very supportive of every effort to support renewable energy,” Jessica Azulay, of the Syracuse-based Alliance for a Green Economy, said after the meeting. “But we’re very disappointed by the decision to subsidize nuclear power and prevent the closure of nuclear reactors.”

“We have a new power market here, and that’s going to reflect the societal price of carbon, so we can’t really call this an above-market contract,” Phil Wilcox, representing the International Brotherhood of Electrical Workers Local 97, based in Buffalo, said after the meeting.


PSC staff recently revised its calculation for ZECs to base their value on EPA’s social cost of carbon instead of a previous proposal to value them on the difference between the cost of service for nuclear plants minus wholesale power prices in the NYISO market. (See Commenters Laud, Blast New York’s Nuclear Subsidy Plan.)

The ZECs will be worth $17.48/MWh for the first two years of the program, or about $965 million. The order mandates that electric distribution companies purchase ZECs representing a proportion of their annual load, based on annual forecasts.

The state-owned New York Power Authority and the Long Island Power Authority are exempt under state law, but Zibelman said that officials at both entities indicated that they will voluntarily comply with the CES, including the ZEC payments.

The plan has been favored by legislators in western New York, where the plants are located, labor unions, economic development proponents and some environmentalists.

“Today’s implementation of the CES is a momentous day for the state of New York, and more specifically, the upstate communities that have waited anxiously for months for this moment,” the Upstate Energy Jobs Coalition said in a statement.

The other nuclear power plants in New York, Entergy’s Indian Point Units 2 and 3, are currently ineligible for the subsidies under the plan adopted Monday. However, under the staff’s revised proposal, Indian Point could become eligible for ZECs in the future if it could prove it was financially stressed. Gov. Andrew Cuomo has advocated the closure of Indian Point because of its proximity to New York City.

Zibelman said Indian Point was not excluded from possible eligibility so that the order would be “non-discriminatory.”

Exelon began a separate proceeding in the spring to seek cost-of-service-based compensation for its plants in the event that the PSC did not act in time to address its request to keep the nuclear plants viable. That proceeding was rolled into the larger CES case by the commission.

The subsidy was opposed by other environmentalists, large commercial and industrial customers, power generators and marketers, and elected officials from other parts of the state. Some environmentalists dispute the clean energy attributes of nuclear. Customers objected to the plan’s cost, and generators and marketers said the plan interfered with the competitive power market.

The plan opens the door for Exelon to become the sole owner of the four plants on Lake Ontario — R.E. Ginna, Nine Mile Point Units 1 and 2 and James A. FitzPatrick, which it is seeking to acquire from Entergy. (See Entergy in Talks to Sell FitzPatrick to Exelon.)

Entergy previously said it would close FitzPatrick early next year. Exelon said it would close Ginna and Nine Mile Point 1 in March if it did not have a contract with New York by the end of September. (See Exelon Threatens to Close Nine Mile Point 1.)

“This is one of the largest corporate bailouts in New York’s history and it will benefit only one company, Exelon Corp.,” a coalition of elected officials and environmental organizations argued last week

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