NRG says Grid plan flawed

The final word on whether a combined-cycle natural gas power generator will be built in Dunkirk is a ways off – and that word may be delayed a little longer. NRG Energy Inc. has filed a request with the state’s Public Service Commission for an additional two weeks, until June 5, to file a response to National Grid’s recently filed conclusion that upgrading transmission lines was the best way to insure reliability needs for the next 10 years.

PSC Case 12-E-0577 required both companies to submit proposals on examining repowering alternatives to utility transmission reinforcements.

“NRG’s review of the National Grid Report reveals that many aspects of the analysis and conclusions are flawed and devoid of logic such that a thorough rebuttal is warranted. … The record before the Commission would be enhanced by NRG’s analysis because, in comparing its own proposed solution to NRG’s competing options, National Grid clearly slanted its analysis to favor the Transmission System Reinforcements option,” wrote Bradley Kranz, vice president, wholesale regulatory.

“While this may not be entirely surprising given National Grid’s economic incentive to add to rate base, it is disappointing that National Grid did not conduct an accurate and unbiased review as directed by the Commission.”

Included in Kranz’s letter were concerns about Grid’s reliability, ratepayer costs, environmental, economic and electric market competitiveness findings.

“National Grid has made numerous assertions and conclusions that are unsupported and speculative in nature which NRG will address in its response,” Kranz stated.

However the issue turns out, the PSC is the final decision maker. Jon Baylor, senior director of development for NRG, said that is a good thing.

“The PSC is going to be the independent evaluator of these two bids and ultimately the decision maker as to what makes the most sense to state ratepayers, and National Grid ratepayers as part of that,” Baylor stated. “We’re pleased that the PSC is taking this approach. We believe that it is fair. … National Grid is a competitor in this process. They are proposing a transmission solution as an alternative to a generation solution.

“These two projects are mutually exclusive, one or the other will go forward to address reliability in the Southern Tier in New York.”

Baylor said National Grid was asking for a reliability solution from 2015 to 2025 and NRG’s repowering plan would be at least a 30-year solution. He added Grid’s plan submitted to the PSC on May 17 contained transmission solutions, at a cost of $66 million, good through 2021. Baylor stated the cost for 2021 to 2025 could run 200 percent over the $66 million figure for the first six years and Grid’s analysis was based on the $66 million figure.

“Their obvious incentive is to make their cost look as small as possible compared to the combined cycle so it looks attractive as possible, but ultimately when they go to build it there is no constraint. What we are proposing to do is build a plant for a specific cost and any cost overruns, NRG bears the risk of that,” Baylor explained. “In the transmission solution that is not at all the case, the ratepayers bear the risk of that. … The other piece of the cost issue is even when you build the wires you still have to get the energy from somewhere. The question becomes where are you buying your energy from and how are you mitigating your exposure to the volatility of the energy market. If they contract with the combined cycle plant then you have long-term certainty around the cost of energy there, moreso than if you’re buying in the market everyday.”

Baylor stated New York, according to a New York Independent Systems Operator report, imports an average of 572 megawatts an hour from out-of-state. He said Grid’s report assumes power from a combined-cycle plant in Dunkirk would be exported to Pennsylvania, a state that imports to New York.

“It doesn’t make any sense, especially because today New York state is a net importer of power. They make no assumption whatsoever that we are going to be offsetting the imports into New York state,” Baylor explained. “They’re just assuming that all the benefits flow out of the state. It’s faulty assumption.”

Baylor added that just like NRG’s current plant, a new facility’s output would be bid into New York state on a daily basis as is done now.

“Utilities go to ISO every day and say this is how much power we need and then ISO goes to all the plants and on a daily basis all the plants bid into the ISO,” he explained. “Then the ISO says OK, we know in each region how much power we need and they match that up with the generators in the state and then they tell people how much they need to run.”

Baylor added ISO tries to maximize ratepayers’ benefits and the other states have the same setup since deregulation in the ’90s.

“If there are clear demonstrated ratepayer benefits then it makes it much more difficult for them to make an economic argument for their transmission solution,” Baylor said of National Grid. “If they make an assumption that basically this becomes a generator for Pennsylvania located in New York state, then it makes it so much easier because then they can make the claim that there are no benefits for New York state.”

Baylor added shipping power from a low-cost unit out of state would be contrary to the way NYISO operates but saying that is what would happen benefits National Grid’s case.

“It just significantly skews the impact of a combined-cycle way into the negative and it’s illogical and flawed from the outset,” he stated. “There are going to be very clear benefits for New York state because this is the way the market operates. The ISO would not give those benefits to another market.”

Another advantage to NRG’s repowering plan is it is better for the ratepayers.

“We will deliver the project at a certain cost and we will take all the cost risks, finance it ourselves, we will take all the financing risks and we will maintain and run the project,” Baylor explained. “The model in the utility world is different. It’s that we will build to the standard until we’re satisfied and what we spend we spend, the ratepayers just bear the cost. There’s really a significant cost overrun risk that is not being captured in this report.”

While National Grid identified negligible environmental benefits from NRG’s plan, Baylor pointed out natural gas is the cleanest, most efficient fuel.

“You’re going to have significant emission reductions from a combined-cycle unit than you would from just a transmission solution and just buying your power elsewhere,” he stated. “National Grid’s consultant identified very clear emissions reductions in their report with the combined cycle report, and again, whenever National Grid did their writeup they ignored them. … We want to make sure that people understand that there are serious flaws here and our project has clear ratepayer benefits. … We think ultimately the PSC is going to see that and they’re going to have findings that reflect what our findings are.”

Steve Brady, National Grid media relations manager, was contacted by email and replied that National Grid had no comment to make.

Time, and the PSC, will tell.

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