Explaining the shock with electric rates
Electric rates for Westfield electric customers have remained unchanged since 1999, yet consumers have noticed an increase in their monthly electric bills.
There are three major factors that have contributed toward the increased charges. The first is the Purchase Power Adjustment (PPA). The PPA charge on your bill has been in place for many years and is explained in the next paragraph. In addition, there are two major costs that have been imposed by New York state over the past few years; clean energy surcharges in the form of Zero Emission Credits (ZEC’s) and Renewable Energy Credits (RECs), as well as massive increases in congestion charges in the power transmission grid in NY, and in particular Western New York. In this article, we have provided an explanation of these charges, and how the Village is required to collect these funds. Unfortunately, these surcharges provide no financial benefit to the Village and are passed directly on to other agencies.
Westfield electric customers are fortunate to enjoy an allocation of hydroelectric power from the New York Power Authority. The power we purchase while staying within this allocation is some of the cheapest available. When we as a system exceed this allocation, we are forced to buy that additional power elsewhere. Due to our low rates, we have a high percentage of rate payers who heat their homes with electric heat. This is the reason we see usage, and therefore PPA charges rise during the colder months. This power is purchased through the New York Municipal Power Agency. Westfield is a member of NYMPA, along with 34 other municipalities. NYMPA has been able to lower rates significantly to provide some relief.
The village of Westfield Electric Department incurs a cost for the transmission of the power we use to get from the point of generation to our consumers. Part of that cost is based on the congestion of the transmission system. In simple terms, congestion is when a portion or line segment of the transmission grid becomes overloaded with electric power. In the recent years, New York State has seen a number of power plants close, and notably two coal fueled plants in Western New York. The Huntley Plant in Tonawanda and closer to home, the NRG Dunkirk Plant have shut down. Without these two facilities generating power, transmission congestion costs in Western New York have gone through the roof. Most people in Chautauqua County are familiar with the NRG Dunkirk Plant closing. There were several attempts made to keep the plant open using natural gas instead of coal. In the end, the NYS Public Service Commission forced the plant to close permanently. They said at the time that a new transmission line would be built by 2018 that would eliminate any impact on the bulk power grid from the plant closing. At this point, construction has not even begun on this new line. For ten years, Westfield had enjoyed favorable pricing for the congestion due to a locked in price for what are called Transmission Congestion Contracts (TCC’s). These contracts allow a utility to pay for their congestion costs at a fixed price for the amount of mega-watts (MW) of power offered. Through the New York Municipal Power Agency (NYMPA), Westfield has purchased 8 MW every year over the 10 year term. This shielded our rate payers from the volatility of the market. These are administered by NYMPA as part of the Congestion Mitigation Program that benefits all 35 member communities. When the 10 year term ended in 2018, the NYISO decided to continue to offer TCC’s, but at a yearly variable cost. Due to the increased congestion in WNY over the original 10 year period of the TCC’s, 2019 prices for the TCC’s skyrocketed in Zone A, which is Western New York. The original 10 year price was $1,036 per MW, which amounted to a total of $8,288 per year for the Village. The spring 2019 auction price for a 1 MW TCC cost to $40,370. For Westfield to purchase 8 TCC’s, the cost was $322,960! That is an increase of $314,672 per year!
Unfortunately, costs rose slightly again in 2020. If we had not purchased the TCC’s, even at this higher amount, our transmission costs would have been even higher due to the growing amount of congestion in WNY. We must collect the money to pay for this every month on a per KWH basis, and pass this on to the NYISO. We are hopeful that the planned upgrades to the transmission system in WNY, as promised by the PSC, will alleviate this problem in the future.
As part of the Clean Energy Standard that was approved by the state Public Service Commission in August of 2016, state utilities are being charged zero-emission credits to support the three nuclear power plants. The Clean Energy Standard calls for New York to acquire 50 percent of its energy from low-carbon resources by 2030. The Village of Westfield pays around $250,000 annually toward the zero-emission credits. It represents a $2 a month increase for the average residential customer. Customers are also required to pay toward renewable energy credits. The cost is about $50,000 per year total for the Village of Westfield but will be increasing in future years. These funds are to be allocated toward incentives for renewable energy projects.
Please know that we are always doing everything we can to keep our rates as stable as possible, as evidenced by the fact we have not increased our rates in 22 years. We also continue to make every effort to reduce usage through energy efficiency, which results in lower costs for all of us. We understand the concern over the increased cost for electric power we have all experienced.
Michael VandeVelde is the mayor of the village of Westfield.