Power Giant Says NY Is Costing It $841 Million

(CN) - New York is letting one electric generator reap $35.4 million per year until 2025, while others will lose about $841 million, the owner of the Indian Point nuclear power plant told a federal judge.

Mississippi-based Entergy Nuclear Operations Inc. and two subsidiaries brought the federal complaint on Feb. 27 in Syracuse against the chair and commissioners of the New York Public Service Commission.

Entergy says the state body unlawfully interfered with the Federal Energy Regulatory Commission's "exclusive authority" over wholesale electric energy.

Of particular harm to Entergy, it says, is New York's approval of an auction-based market to ensure that the "lowest-cost generators" supply adequate capacity.

In March 2012, NRG Energy, Inc., the owner of Dunkirk - a higher-cost generator in western New York - "announced that 'it intended to "mothball" the Dunkirk facility due to presently unfavorable economic conditions,'" the complaint states. "And through most of 2013, National Grid, a local utility that purchases energy and capacity on the interstate wholesale market and resells it to homeowners and businesses in western New York, similarly resisted the idea of keeping the uneconomic Dunkirk plant in operation."

But on Dec. 15, 2013, Gov. Andrew Cuomo announced "that Dunkirk and National Grid had reached an agreement to keep Dunkirk in the market, 'repowered' as a natural gas-fired (rather than coal-fired) plant," Entergy says (parentheses in original).

As approved by the commissioners on June, 13, 2014, the agreement gives Dunkirk "out-of-market payments of $20.4 million per year from National Grid and a $15 million one-time subsidy from a New York State agency," in exchange for Dunkirk's commitment to participate in the region's wholesale energy and capacity markets through 2025.

Entergy says Dunkirk will thus "bid below its actual costs in the capacity auction, and will cause the auction market to 'clear' at a lower price than otherwise would have resulted."

"Because all generators whose offers are accepted in the auction are paid that same clearing price, all of these generators will receive lower capacity revenues than they otherwise would have received," the complaint states.

Indeed, a National Grid-commissioned study says these other generators' losses total about $841 million, Entergy says.

In addition to the harm competing generators face from artificially suppressed market prices in the short term, Entergy says "generators that had lower actual costs than Dunkirk (and that would have survived but for the artificially suppressed prices) will exit the market." (Parentheses in original.)

The move also deters any investors that would have committed capital to construct new generators with lower actual costs than Dunkirk.

Claiming that the term sheet artificially suppresses the wholesale market price, Entergy wants a federal judge to find it pre-empted by the Federal Power Act and the commerce clause of the U.S. Constitution.

The named defendants are Public Service Commission Chair Audrey Zibelman and commissioners Patricia Acampora, Diane Burman and Gregg Sayre.

The plaintiffs are represented by Kathleen Sullivan et al. of Quinn, Emanuel, Urquhart, & Sullivan in Manhattan; Scott Barbour of Mcnamee, Lochner, Titus, & Williams in Albany; and Douglas Green of Steptoe & Johnson in Washington, D.C.

The two subsidiaries named as plaintiffs are Entergy Nuclear FitzPatrick LLC, a Scriba, N.Y. generator, and its marketing agent.

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