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Power landscape adds to region’s peril

Editor’s note: This is an open letter to U.S. Rep. Tom Reed.

I am writing to you today to bring your attention to a very serious problem with the state power markets. Due to the New York System Independent System Operator unfair market policy, we now find the Western and Central New York electric generators that use natural gas as their fuel source, in financial peril. We have already witnessed the mothballing of the NRG Dunkirk facility and soon the NRG Huntley facility in Tonawanda is closing.

The news outlets like to tell everyone this is happening due to cheap natural gas, but that is NOT the whole story. The NYISO and state tax policy are pushing in-state generation outside of the New York City area to the point of extinction. With the introduction of cheap, clean and abundant natural gas into the state from the Marcellus Shale, one would think natural gas generation would be the primary scheduled source of generation within the state. I am here to tell you, that is not the case. The NYISO likes to show you a neat little pie chart that shows percentages of each type of generation that makes up the operating grid every day. The part they don’t tell you is how much of the pie chart comes from sources from outside the state.

The NYISO has a policy in place to allow the import of as much power as possible via bilateral contracts from outside of the state. Much of this power is being brought in from states such as Pennsylvania or Ontario, which do not have to pay into the Regional Greenhouse Gas Initiative. This creates an unfair advantage for the non-initiative participant generators. This fact coupled with the constant meddling in the power markets by the Gov. Andrew Cuomo administration, has made the power markets an absolute mess. Special under the table deals done with the state’s nuclear facilities as well as a political appeasement deal with NRG Dunkirk have made doing business as an in-state generator virtually impossible.

National Grid has not helped the in-state generators either. They built a huge substation in Humphrey called the 5 Mile Substation. This substation was built under the guise of grid improvements to solve a low-voltage problem, only to hook it to a large transmission line (37 Line) that brings in power from Homer City, Pa. At rate-payer expense, National Grid built that substation way bigger than what was needed for the primary reason of obsoleting in state generation. So now, we have put our own coal plants out of business within New York, only to hook our grid into a mega coal plant in Homer City, Pa., also run by NRG.

The in-state generators are a vital piece of the state’s infrastructure. They pay an enormous amount of state and local property taxes and are essential to supporting the community’s economy where they are located no matter what type of fuel they burn. The people who work for these plants make a very good wage and are the best the state has to offer as far as skill and technical ability. The state should endeavor to try to bring more jobs like this, instead of trying to bankrupt them. We have enough fast-food restaurants and ice cream stands. Let’s keep some high-tech jobs in the state that someone can actually build a career on and live off of the wages.

A fair marketplace to offer an opportunity for each to survive should be our first priority. With all of the special deals being done by the Cuomo administration, soon there will not be a need for a power market. These special deals, such as the Ginna nuclear deal have caused huge damage to the markets. When plants of this size are run out of economic order, and coupled with all of the outside power flowing in, it causes severe price suppression in the Day Ahead and Real Time power markets. To be a safe and reliable grid, we need a blend of all different types of fuel sources, not just the ones with the cheapest fuel source or the ones that have political favor with the governor.

With so much meddling in the state’s power market, how does New York expect anyone to come into the state to build a new asset such as a power plant? One bad political decision could possibly obsolete such an investment and make it worthless. As it is right now, no one builds anything big outside of New York City, unless the state entices them with taxpayer money. There is a reason why companies are hesitant to do business here, unless it’s a fast food restaurant.

On the other side of the coin sits National Grid. They are not governed by the NYISO, but instead a political entity by the name of the Public Service Commission. The PSC goes to great lengths to keep National Grid financially whole and profitable every year. They are not allowed to lose money or compete in any way.

One could argue that all of the money the NYISO has saved the rate payers by starving the wholesale power generators, has been swallowed up by the PSC giving National Grid their cost adjustment rate hikes each year. Maybe we should go to one governing entity running the state’s power market, instead of two? Especially since they seem to have opposite objectives; one political and the other financial only.

When I first moved to New York in 1993, the state had some of the most state of the art generation assets for the time period. It also had a much more diverse selection of scheduled plants that had different fuel sources, not including wind power. With the implementation of the NYISO in 1998 and their unfair market practices, in state generation has suffered severely. Plants are going head to head with one another financially that burn different fuels sources. Now they are trying to survive against out of state generators with one hand tied behind their back with the Regional Greenhouse Gas Initiative. Power plants were never really meant to compete like that, since they were built for reliability and efficiency for the fuel source they were designed to burn.

The bottom line ends up being the plant with the cheapest fuel source is the winner every time, even though the other plant is needed in situations where the cheaper fuel source is scarce. The only thing the NYISO market has to offer the non-running generators is a meager capacity payment that the NYISO constantly finds ways to game that payment lower. Some of the in-state generation now is approaching Third World country technology, since there is absolutely no money available to upgrade and innovate. The life is being choked out of them by situations like the 5 Mile Substation create.

Can you look into these issues for the benefit of the in-state generators? Especially the smaller ones, which are struggling to survive. They pay good wages and benefits to their employees and are good neighbors to the communities where they are located.

Don Hittner is an Olean resident.

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