Senator Schumer Misguided in Attempt to Short-Circuit FERC's Oversight of New York's Energy Markets
Attempt to disrupt the much-needed and properly functioning new capacity zone jeopardizes system reliability as demand for energy continues to grow
Albany, N.Y., 11/12/14 - Senator Charles Schumer's proposed legislation to hamstring the proper functioning of New York's energy markets undermines current and future investment in the State and jeopardizes system reliability. The Senator is wrongly attempting to defund the Federal Energy Regulatory Commission's (FERC) oversight of the State's Lower Hudson Valley capacity zone, which was appropriately adopted to ensure adequate generating resources are available to provide energy to the part of the State with the highest energy demands.
"The Senator seems to be blind to the fact that the new capacity zone is in place and functioning exactly as expected - generation resources are already responding to price signals and making the necessary investments to bring much-needed power to where it is needed most," said Gavin Donohue, President and CEO of the Independent Power Producers of New York, Inc. (IPPNY). "Because of the new capacity zone, two resources - Danskammer Generating Station and Bowline Unit 2 - have made investments in their facilities to bring hundreds of megawatts back online. As a result, energy demand will be met reliably, and, in 2015, the New York Independent System Operator is anticipating capacity prices will be reduced by approximately $400 million dollars."
Even though this area of the State is where the demand for energy is greatest, 1,700 MW of generation has retired or mothballed since 2011. This trend is due to the simple fact that the market design for years has provided insufficient prices for resources to develop, or even remain in operation, in this part of the State. Through an extensive regulatory process, a new zone was created and that trend was almost immediately reversed. As a result of resources returning to the market, capacity prices paid by consumers will actually decrease next year.
"It is as straightforward as the energy prices in that region were not supporting much needed generation. The new zone has corrected that problem, and we have already seen generating facilities make investment decisions to bring much needed power to that part of the state," said Donohue. "This is the market functioning properly to bring both economic and reliability benefits to consumers, despite the best efforts of some of our state's representatives."
At a FERC technical conference last week, Mr. Donohue emphasized that regulatory uncertainty is the greatest threat that investors face when deciding whether to invest in resources in New York.
"Senator Schumer's misguided meddling with the new zone in order to score a perceived short-term political victory at the expense of long-term system reliability is a glaring example of this threat of regulatory uncertainty in action," said Donohue. "Congressional interference in the market would set a horrible precedent and would send a signal to the market that investors cannot rely on correct prices. Not surprisingly, Senator Schumer is long on criticism but short on providing any actual solutions to the energy needs within the Lower Hudson Valley. Fortunately, FERC has acted in a manner that truly benefits New York."
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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.
