NRG, Grid reach deal

The terms have been filed. Now it is up to the New York State Public Service Commission to make a ruling on the repowering of the Dunkirk Power LLC coal-fired plant in Dunkirk.

In a filing with the New York State Public Service Commission dated Feb. 13, National Grid has indicated it has reached agreement with Dunkirk Power LLC, NRG Energy’s Dunkirk facility.

Carlos A. Gavilondo, Senior Counsel II for the Niagara Mohawk Power Corporation, doing business as National Grid, signed the documents which included a cover letter and filing the Proceeding to Examine Repowering Alternatives to Case 12-E-0577 Utility Transmission Reinforcements.

Under a final comments section, the filing lays the agreement out.

“The Term Sheet in Attachment 1 reflects an agreement that will enable National Grid to continue to provide reliable electric service in western New York. Refueling Dunkirk Units 2, 3 and 4 also provides additional reliability benefits relative to the Company’s transmission-only solution. Having Dunkirk on-line also increases the NYISO’s operational flexibility to call on NYPA hydropower resources as well as imports from Ontario for economic or emergency energy under high load conditions.

“In addition to direct reliability benefits, refueling Dunkirk Units 2, 3 and 4 would produce and retain significant local economic benefits consistent with State law, reduce statewide capacity costs and western New York transmission congestion, and have beneficial environmental effects. The benefits that result from refueling Dunkirk Units 2, 3 and 4 are projected to substantially outweigh the costs under the agreement.”

In its opening statement of support for the Term Sheet, National Grid lays out terms of the agreement.

National Grid will pay Dunkirk Power LLC $20.41 million per year for 10 years ($150 million net present value and Dunkirk will add gas-fired capability to electric generating units 2, 3 and 4 (nominally 435 MW) and operate such units for 10 years commencing approximately Sept. 1, 2015. The agreement will allow National Grid to continue to provide reliable electric service to customers in western New York, and would enable the creation and retention of significant economic benefits in the area.

Having generation operating at Dunkirk also is projected by the NYISO to mitigate future congestion in western New York and provide beneficial market price effects. Further, adding natural gas capability to Units 2, 3 and 4 could produce environmental benefits, including reducing constraints on production of renewable hydroelectric generation in western New York.

The term sheet provides the basis for the companies to work to complete a final contract. It also includes a Reliability Support Services Surcharge as part of the proposal, and in it Grid proposes a surcharge recovery of $45.2 million over 16 months for the current RSS agreement.

The term sheet was developed following a PSC notice of filing deadline issued Dec. 23 that required the companies to file the terms of the agreement announced Dec. 15 in Dunkirk by Gov. Andrew Cuomo.

National Grid Media Relations Manager Steve Brady said it still needs to be approved by the PSC.

“It’s important to note that this is a proposed agreement. It is now subject to review and decision by the New York Public Service Commission,” he added. “That said, it is in fact an agreement that we are prepared to support before the Commission.”

NRG spokesman David Gaier had a similar take.

“Both NRG and Grid have agreed on and filed the term sheet,” Gaier stated. “Per the PSC, the term sheet provided the terms of the proposed agreement, with documents detailing the costs and benefits of the repowering solution, taking into account the reliability, economic, and environmental benefits identified in the January 2013 order.”

The process started in March 2012 when Dunkirk Power’s parent company, NRG Energy Inc., filed notice with the PSC of its intent to mothball the Dunkirk facility by September 2012. Since then, proposals and counter proposals between the two companies were filed. A reliability need has kept one of Dunkirk’s generators in operation.

Local support for the repowering was helpful as well, including a turnout of more than 2,000 people at a PSC hearing held at SUNY Fredonia in July. That was followed by an August visit to the city pier by U.S. Sen. Charles Schumer to express his support. A rally at the Boardwalk Market by more than 400 people on a cold and windy Dec. 7 was followed eight days later by Cuomo’s visit in which he announced the deal.

The PSC is scheduled to meet Thursday at 10:30 a.m. in Albany for its regular monthly session. A review of the published agenda does not list the NRG-National Grid case, but the agenda announcement notes it is subject to change.

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