Ginna Reliability Deal Draws Fire

The reliability support service agreement (RSSA) that would rescue the R.E. Ginna Nuclear Power Plant in western New York from an early retirement has come under fire from a group of about 60 large electricity customers-industrial, institutional, and commercial entities-who on Mar. 6 asked the Federal Energy Regulatory Commission (FERC) to reject the proposed deal, saying it will distort the market and subject ratepayers to millions in unnecessary costs.

Ginna has often topped lists of the most at-risk nuclear plants because its power purchase agreement with Rochester Gas & Electric (RG&E) ran out last June, and plant owner Exelon has stated that its costs of operation are well above market rates for electricity in western New York. Exelon has lost more than $100 million dollars on Ginna since 2012.

Despite the economic challenges, both RG&E and the New York Independent System Operator (NYISO) have stated that Ginna is needed to support reliability in the area. The proposed RSSA, which RG&E and Exelon announced on Feb. 13, would pay Exelon $17.5 million a month through Sept. 30, 2018, when a new transmission line that will allow RG&E to import the necessary replacement power is scheduled to go into service. RG&E would recover its costs under the RSSA from its ratepayers, who it says will see their bills rise about 4.2%.

The objectors raise two criticisms of the deal: it will result in "substantial out-of-market payments affecting the [NYISO] electricity markets" as well as "potentially-staggering rate impacts" to RG&E's customers. Neither is justified, they say, because Exelon has never definitively stated its intent to retire the plant, merely warned that its finances were unsustainable. Absent that clear intent, FERC cannot determine if out-of-market payments and a reliability must-run (RMR) contract are necessary, they say.

The objectors note that the New York Public Service Commission (NYPSC) in a 2014 action did find that Exelon's actions to date constituted effective notice of planned retirement. However, they argue that FERC has previously required clear statements of intent as a prerequisite for an RMR contract because of the need for transparency around such out-of-market payments.

The rate impacts, they also argue, will be greater than what RG&E suggests. The effect is "understated by a substantial amount because the utility's analysis includes commodity costs that are unaffected by the RSSA but mask the actual [increases]," which would be more than 20% on a delivery-rate only basis. In addition, averaging the increases over the entire deal hides front-loaded increases that will total more than 9% in 2015.

The NYPSC held a hearing on the RSSA on Mar. 10 but has not yet issued a decision.

-Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine)

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