Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

The Electric Competition Debate in...New York

Fortnightly Magazine - May 15 1998

to collect, fund and pay nuclear plant decommissioning costs should remain with the entity that owns the regulated transmission and distribution network. If the auction wouldn't fly, the staff would fall back on an administrative solution whereby the PSC would hold all so-called "to-go" nuclear plant costs (an undefined term but equated by some to "running costs") to a market-determined generation price. (PSC Cases 94-e-9052, 98-e-0405, March 20, 1998.)

Further complicating the nuclear situation, the four entities in New York that operate nuclear power plants (New York Power Authority, Con Edison, NiMo and Rochester Gas & Electric) have formed NYNOC, the New York Nuclear Operating Company, a new company put together to operate and manage but not own the state's six nuclear plants.

(As recently as 1996, New York's six nuclear plants accounted for almost one-fourth of the state's electric generation, according to the PSC. Two plants, about 1,780 megawatts, are owned by NYPA. The remaining four, with a total capacity of about 3,210 MW, are owned by the investor-owned utilities.)

Other issues remain as well. Helmer, for one, has advocated legislative reform on the issue of gross-receipts taxes. As the law now stands, she believes that in-state generators will be disadvantaged to out-of-state ones: "We've already seen on the gas side that companies are locating out of state."

A Unique Case: Niagara Mohawk

The most recent and controversial decision at the PSC on electric restructuring: Niagara Mohawk Power Corp. The plan, approved by the PSC in outline form on Feb. 24, and spelled out in greater detail in a decision issued March 30 would restructure the company's expensive purchased power contracts with independent power producers and qualifying cogeneration facilities.

Speaking in February, William F. Edwards, senior vice president and CFO of Niagara Mohawk noted that NiMo had entered the 1990s among the lowest-cost providers in the state. But that situation eroded as payments to QFs escalated from $200 million a year in 1990 to nearly $1 billion a year in 1995. The crises led to the filing in 1995 of a PowerChoice proposal with PSC. The linchpin was a reduction in IPP contract payments. But discussions with IPPs failed to progress.

Late in 1996, the utility decided a different approach was needed. In July 1997, it signed its Master Restructuring Agreement with the IPPs. As approved by the PSC, the MRA will terminate, restate or amend some 29 purchased power contracts with 16 IPPs, in exchange for a payment of $3.6 billion in cash, 46 million shares of NiMo common stock (about 25 percent of common outstanding) and a portfolio of financial and physical delivery contracts. Initially, the MRA will reduce NiMo's purchases from the 16 IPPs by about 5,000 gigawatt-hours per year, making that electricity available for purchase in an open market. More than one-half the capacity under IPP contracts will terminate (em about 1,800 megawatts (em which Edwards predicted would become the merchant plants of the future. The restructuring should reduce the utility's energy payments by about $600 million a year over the next decade.

The PSC commented on