Utility Ownership of Large-Scale Renewables Threatens Ratepayers & Historically Low Wholesale Electric Prices
IPPNY & Consumer/Energy Groups Call Upon the New York Public Service
Commission to Reject Utility Ownership Proposal
Albany, N.Y. - The Independent Power Producers of New York, Inc. (IPPNY), the Alliance for a Clean Energy New York (ACENY), the Electric Power Supply Association (EPSA) and the New York Affordable Reliable Electricity Alliance (NY AREA) call upon the New York Public Service Commission (PSC) to reject the New York State Energy Research and Development Authority's (NYSERDA) proposal to allow utility ownership of large-scale renewable energy projects. Fifteen years ago, New York made a revolutionary move away from a vertical market power structure where private investors could not compete with utility projects whose costs are guaranteed by captive ratepayers. IPPNY strongly opposes NYSERDA's proposal as it would be a major step backward from years of PSC policy protecting ratepayers by supporting robust competitive electricity markets through the prohibition of utility-owned generation facilities.
"New York cannot afford to overlook the benefits and tremendous successes of competitive wholesale energy markets by allowing utilities to once again put ratepayers directly on the hook for costly electricity investments - especially when the private sector has been successfully developing and operating large-scale renewable electric generation facilities for more than a decade," said Gavin Donohue, president & CEO of IPPNY. "New Yorkers have directly benefited from the innovative technologies private companies have used to dramatically reduce emissions and improve fuel efficiency by 30 percent, all while enhancing reliability. Best of all, when adjusted for inflation, consumers have seen wholesale electricity prices that were 34% lower in 2013 than in 2000 - a by-product of competition between private developers and an unthinkable outcome under the previous model."
"Since the creation of competitive markets, private developers have brought more than 11,000 megawatts of all types of electricity generation online," added Donohue. "Of that amount, more than 1,700 megawatts came from wind power - that's an increase of 3,500 percent from where we were in 2005 and enough electricity generation to power nearly half a million homes. To date, New York has 6,264 megawatts of renewable generation capacity, including hydro and wind resources."
In 1996, recognizing the inefficiencies of a system where utilities were guaranteed return on investment, paid for by captive ratepayers and regardless of the outcome of project, the PSC issued its seminal opinion introducing competitive wholesale electricity markets in New York State, determining that private developers would have a greater incentive to lower costs through competition than utilities would under a cost-of-service regulatory regime.
That same logic has been re-enforced very recently. The PSC, in its prominent Reforming the Energy Vision (REV) proceeding, has already restricted utility ownership of small-scale renewables to an extremely limited number of circumstances, ruling that the use of competitive markets and risk-based capital, as opposed to ratepayer funding, for asset development is a basic tenet underlying REV. It only makes sense that a similar conclusion should be reached concerning large-scale renewables.
"The best way to enhance New York's ability to attract renewable energy investment is a market-based large-scale renewables program designed to achieve the 50% goal, not one that backtracks on our progress with competitive markets," said Anne Reynolds, executive director of ACENY. "Independent developers of wind energy and other technologies have proven their ability to bring clean energy to market most efficiently and cost effectively. Allowing utilities to own and rate-base renewable generation would chill competition and discourage cost-effective investment."
"New York's reliance on multiple providers of electricity and competitive markets has worked well for over a decade," said John E. Shelk, president & CEO of EPSA. "Opening the doors for a limited number of utilities to re-enter the power production sector would be a costly mistake and misfortune for ratepayers as project costs shift back onto their shoulders."
"This proposal will drive electricity prices higher and undermine New York's well-functioning competitive markets, resulting in fewer capital investments and proposals," said Arthur "Jerry" Kremer, chairman of New York AREA. "New York's small businesses and consumers need a break, especially considering that taxes and subsidies-both direct and hidden-make up 25 percent of the typical electric bill."
If New York wants to continue a positive trend in large-scale renewable development and meet its ambitious energy goal of 50 percent renewable generation by 2030 as economically as possible, the PSC must remain consistent in the application of its fundamental principle that utilities should not own generation assets, especially when private developers have proven they are well positioned to deliver the most affordable and efficient solutions. There is no reason that ratepayers should have to bear the risks of project development when the private sector is capable and eager.
"Reverting back to the old monopolistic way of doing business would not only undermine future renewables investment by sending a signal to private investors that New York is not a level playing field," said Donohue, "but also would slow power sector innovation and harken back to the days where ratepayers funded utility projects through their monthly electricity bills."
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The Independent Power Producers of New York, Inc. (IPPNY) is an Albany-based trade association representing the competitive power supply industry in New York State. IPPNY Members generate over 75 percent of New York's electricity using a wide variety of generating technologies and fuels including hydro, nuclear, wind, coal, oil, natural gas and biomass. They have invested over $10 billion in their facilities and employ over 10,000 people. Annually, they pay over $600 million in taxes and have invested more than $55 million in their communities.
The Alliance for a Clean Energy New York's (ACENY) mission is to promote the use of clean, renewable electricity technologies and energy efficiency in New York State, in order to increase energy diversity and security, boost economic development, improve public health, and reduce air pollution.
The Electric Power Supply Association (EPSA) supports policies that give all suppliers an equal opportunity to compete and give all customers an equal opportunity to reap the benefits of competition. EPSA's members contribute jobs and economic strength: as of 2008, they own more than 480 electricity generation plants representing 200,000 megawatts of capacity in 40 states and the District of Columbia.
The New York Affordable Reliable Electricity Alliance (New York AREA) is a diverse coalition of New York business organizations, labor unions, independent energy experts, and community and environmental leaders. New York AREA's primary mission is to educate the general public, news media, and policy makers at all levels about New York's energy supply challenges, while simultaneously promoting sensible solutions that stimulate the economy, create jobs, and satisfy New York's growing demand for power.
