What’s behind the NRG connection costs?
I read with great concern Chautauqua County Executive George Borrello’s commentary “Grid authority casts a huge shadow” (June 10). The New York Independent System Operator (NYISO) understands the county executive’s interest in the future of NRG’s Dunkirk facility. The NYISO also understands and appreciates the importance of the plant to the local community. For that reason, it is especially important to correct the record with regard to the NYISO’s responsibilities and our role in the potential interconnection of the Dunkirk generating facility.
The NYISO is an independent, non-partisan, not-for-profit organization responsible for three critical functions: operating the New York state bulk electric system, administering competitive wholesale energy markets, and planning for future system needs. The NYISO’s top priority is maintaining the reliability of New York’s electric grid for all consumers in the state. We do so under the strictest reliability standards, reporting to multiple federal, state, and regional regulatory agencies. Another of the NYISO’s core responsibilities is to serve as a transparent and independent source of factual information on the state power system for policymakers, stakeholders and investors.
The commentary falsely claims that the “NYISO wants to eliminate fossil fuel plants in New York.” The NYISO is agnostic to fuel types with a core belief that wholesale electric markets should be fair, transparent, competitive, and open to all forms of energy supply. This approach fosters open competition and lower costs for New York consumers. It is especially important to note that the NYISO and its employees are prohibited from taking any financial interest in the wholesale markets or market participants.
New York’s competitive electricity markets have produced significant benefits for consumers, including $7.8 billion in fuel cost savings due to increases in the fuel efficiency of generation. Because markets drive improved performance in the generation fleet, another $612 million in savings has been realized from a reduction in energy reserve requirements. In addition, average annual wholesale electricity costs have hovered at or near record lows for several years. (The NYISO is responsible for only the wholesale commodity cost portion of an electric bill.)
Addressing the issue of the Dunkirk facility, the facts demonstrate that our comprehensive interconnection studies are firmly rooted in system engineering and reliability requirements. Any generator seeking to interconnect to the state transmission system must enter into the NYISO’s open and transparent interconnection study process. Requirements of the process are specified in Federal Energy Regulatory Commission-accepted tariffs and the NYISO’s policies and procedures.
Consistent with reliability requirements set by the North American Electric Reliability Corp., any adverse impact to the state transmission system or neighboring transmission systems caused by a generator interconnection must be mitigated to ensure reliability of the electric grid. The required mitigation is addressed through appropriate system upgrades. All U.S. grid operators are subject to such standards. The NYISO’s tariffs require system upgrade costs associated with a project to be borne by project developers rather than ratepayers. This approach places the risk of generation projects, and the impacts those projects may have to reliability, on investors rather than end-use electric customers.
The NYISO estimated that costs to interconnect the Dunkirk facility could be as low as $5 million or as high as $45 million, depending on the number of projects in the current study cycle that elect to move forward with development.
NRG is familiar with these studies, timelines, and responsibilities. It is important to note that had NRG reactivated the facility within three years following the company’s decision to deactivate the plant, it would not have been treated as a new facility and could have avoided the need for the system upgrades.
The NYISO’s tariff allows facilities to maintain interconnection rights to the grid for up to three years after deactivation. However, NRG made the business decision to keep the facility out of service to the point where their original interconnection rights expired. Further, because NRG Dunkirk decided to allow its original interconnection rights to expire, it is now subject to current reliability requirements, all of which were not applicable to the original facility. Had the facility reactivated prior the three-year deadline provided by the NYISO’s tariff, the facility would not have been subject to the interconnection studies at issue.
The NYISO’s federally accepted interconnection process has successfully facilitated the reliable integration of more than 11,800 MW of new generating capacity. The strict regulatory requirements we must follow when connecting resources to the grid ensure the reliability of the electric system and ensure that we remain independent and transparent. Quite simply, as the independent grid operator and market administrator, the NYISO has neither the ability nor any inclination to inject politics into these important decisions.
The NYISO is pleased to provide these important facts, and we look forward to working with local officials and keeping them informed as we move through the interconnection process.
Brad Jones is the president and CEO of the New York Independent System Operator, an independent, nonprofit company that operates New York’s high-voltage power grid and manages competitive wholesale electricity markets.