The New York State Public Service Commission (“PSC” or “Commission”) recently petitioned the U.S. Court of Appeals for the Second Circuit to force the Federal Energy Regulatory Commission (“FERC”) to respond to the PSC’s pending requests for rehearing of FERC’s decisions to create a new capacity zone (“NCZ”) in the lower Hudson Valley. The PSC states that as a result of the NCZ, residential customers using 600 kWh/month in the lower Hudson Valley would experience increases in their total electric bill of between six percent to thirteen percent and industrial customers could experience a ten percent increase, causing unnecessary and unreasonable electricity price increases in the lower Hudson Valley.
Pending full judicial review of FERC’s decisions, the PSC has filed an emergency motion asking the Court to issue a stay of FERC’s decisions implementing the upcoming capacity auctions in the NCZ and ensure consumers are not harmed further. However, in previous pleadings, the New York ISO (“NYISO”) states that the NCZ Study determined that the Upstate New York/Southeast New York (UPNY/SENY) Highway interface into Load Zones G and H was constrained because it was bottling 849.2 MW of generation from Load Zones A through F, and therefore, NYISO is required to create a new capacity zone.
Entergy Nuclear also supports the creation of the new capacity zone and asserts that the erosion of the electric system in the lower Hudson Valley over time provides proof of the harm that results when inaccurate price signals fail to adequately value capacity in a region. It states that the capacity price signal for the lower Hudson Valley zones was suppressed by the excess capacity levels in the remainder of the Rest-of-State region that cleared against the NYCA curve, but were not deliverable to the lower Hudson Valley zones due to the UPNY/SENY constrained interface.
FERC has stated it does not believe the new capacity zone will result in unjust and unreasonable rates. Higher capacity prices in the new capacity zone will help to encourage the development of new generation and/or transmission capacity to help alleviate the constraint NYISO has demonstrated. FERC’s position is that the price changes promote efficient decisions and are not unreasonable. The NCZ capacity auctions have begun and the PSC has filed a Petition for a Writ of Mandamus and Emergency Motion for Stay to prevent what it believes is irreparable harm to customers in the lower Hudson Valley:
Because FERC has not acted prior to the implementation of the NCZ capacity auctions, New York electricity ratepayers face the possibility of paying an additional $158 million for electricity in the summer of 2014, without realizing a corresponding benefit. If the Court reverses FERC it will be difficult, if not impossible, to rerun the auctions to reflect whatever relief the Court provides.
– PSC Petition and Motion page 10
These are interesting grid management issues. The industry will be watching the Second Circuit.