Friday, July 17, 2015
In 1978, Congress passed the Public Utilities Regulatory Policies Act, that included that Non-Utility Generators - or NUG's, must be allowed to compete with utility generators provided their cost would be lower than "avoided costs", meaning cheaper than what it cost utilities to produce. That made sense; however, in a desire to stimulate construction of these facilities, NYS passed a "six cent law" that mandated that minimum six cent purchase price, when many utility generators could produce at 1/3 that cost. After a massive spike in electric rates over the next decade, a special US Senate Energy Hearing was conducted February 1st, 1988, and then Senate Energy Chair J. Bennett Johnson concluded "PURPA has exceeded all expectations in producing non-utility generation, and we are now coming to grips with problems arising from that fact. In some instances, states have encouraged the over - development of qualifying facilities under PURPA by setting the price for power bought under the statute too high and by requiring utilities to buy power they do not need."
The above is important to note as we embrace a ramp up of renewable energy in an effort to mitigate greenhouse gases. In NYS, two critical initiatives are at play, and the outcomes will have a significant impact and be positive if done correctly. One is an absolute need to invest in infrastructure, both natural gas and electric transmission, where the latter has sat delayed at the NYS PSC since the conclusion of Governor Cuomo's Energy Highway Blueprint initiative in 2012. The other, is the Reforming the Energy Vision - or REV initiative, whose cornerstone is the introduction and advancement of "distributed generation"; smaller, more localized power generation powered by fossil or renewable fuels. The rules of this initiative are under development, and several lessons can be learned from States and countries that have been pro-active in advancing renewable energy and GHG mitigation.
In Germany, nuclear power has been abandoned and generous subsidies established to advance renewable energy that requires utilities to purchase unlimited quantities resulting in current German electric rates near triple that of the US average. The lesson from Germany is reminiscent of our NYS six cent law and the emergency US Senate Hearing of 1988 where utilities were obligated to purchase more power than they need at above market rates. In Germany, the intermittent nature of solar and wind required the ramp up of coal fired power - in the absence of GHG free nuclear power - to stabilize the grid resulting in a net increase in GHG. This is not a model we should be considering.
Moving forward, we must consider rates and avoid expensive mistakes, starting with but not limited to:
- Expediting identified transmission work that will address safety and reliability concerns, along with alleviating billions of dollars in "congestion costs" paid by power hungry downstate regions. Existing clean, upstate resources, along with hundreds of megawatts of new wind and other renewable energy projects are held hostage by delays in transmission investments.
- Apply reasonable incentives to hydropower that is commensurate with those provided to wind, solar and storage, with intent to expand existing NYS based hydropower projects, primarily upstate, in particular in Northern NY - additionally impeded by transmission delays.
- Preserve critical fuel diversity provided by existing baseload generation, particularly safely licensed GHG free nuclear generation. Advance environmentally compliant and cost effective distributed generation through REV when market prices adjust to leveling of rates through transmission upgrades, as we pursue the noble objectives of the brand new NYS Energy Plan.
An Opinion Editoriol from Ted Skerpon,Chair of the IBEW Utility Labor Council of NYS and Business Manager of IBEW Local 97
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