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Proposed Champlain Hudson Power Line is a Bad Deal for New York State

 

Proposed Champlain Hudson Power Line is a Bad Deal for New York State

IPPNY's Brief and Expert Testimony in PSC Hearing Show

Power Line Costs Significantly Trump its Benefits

Albany, N.Y., 9/7/12 - The Independent Power Producers of New York, Inc. (IPPNY) today filed with the New York State Public Service Commission (PSC) its final brief in opposition to Champlain Hudson Power Express, Inc.'s (CHPE) application for a Certificate of Environmental Compatibility and Public Need to construct a proposed transmission line from Canada to New York City. During the Project's Article VII Transmission Line Siting proceeding at the PSC, IPPNY has demonstrated critical pitfalls concerning the economics of the Project and the associated risk to New York State residents and businesses. New York's energy marketplace simply cannot provide sufficient revenues to support the unneeded and uneconomic transmission line, meaning the Project would require significant subsidies to be built and become operational.

The legal brief filed today details the trade association's concerns about the Project's uneconomic nature and how that will affect the State's competitive electricity market and, ultimately, its ratepayers. IPPNY's position is that new projects that are uneconomic and subsidized interfere with the well-functioning competitive market and could:

  • Suppress wholesale market clearing prices below efficient levels;
  • Force otherwise economic projects to retire prematurely;
  • Chill the investment climate in New York, making true merchant projects hesitant to enter into the New York market knowing that at any time discriminatory procurement of unneeded and uneconomic supplies could erode their market-derived revenues;
  • Raise the cost of true merchant entry and perhaps, over time, eliminate it altogether.

In testimony presented at the evidentiary hearing as part of the Article VII proceeding, IPPNY's expert, Mark D. Younger of Slater Consulting, demonstrated that the proposed Project is "grossly" uneconomic and that:

  • Although its sponsor, Transmission Developers, Inc.(TDI), claims that the proposed CHPE Project is merchant and will not be funded by ratepayers, the Project is so uneconomic that the only way it can be developed and operated profitably over the long term is through some form of subsidy.
  • The job creation benefits of the Project touted by the developer are substantially overstated, and they fail to account for the offsetting job losses at existing plants, which may be forced out of the market as a result of the Project's operation.
  • While the Project could be used to "wheel" power from upstate generators to New York City as the developers claim, this activity also is grossly uneconomic. The generators would be required to: pay to get their energy up into and across Canada; incur transmission costs to use the line; and suffer losses on the line − only to receive a slightly higher price in the New York City market, making this option undesirable and uneconomic.

Mr. Younger, whose career has been devoted to matters relating to electric generation and the development of the competitive electricity markets, has participated in a number of PSC proceedings involving the structure of, and factors affecting, New York's competitive markets. He noted that "My analyses demonstrate that the Project is so uneconomic that it most likely would require some form of out-of-market subsidy. Such subsidy could take many forms, including an out-of-market contract that either directly or indirectly subsidizes the Project or regulated cost-based rates to cover the costs of the Project. However, as established in my testimony, either way, New York consumers will be on the hook to pay for the very high costs of this Project."

IPPNY President & CEO Gavin J. Donohue echoed Mr. Younger's concerns, stating that "Our economic analysis shows that the proposed Champlain Hudson Project cannot be profitable unless it relies on subsidies. If that is the case, it is not truly a merchant project, as TDI suggests, and therefore it is not in the public interest. New York State already has adequate generation resources that do not rely on these kinds of subsidies and that can meet consumer demand safely and reliably well into the future. The entry of a subsidized transmission line will harm existing resources and impair the development of new non-subsidized resources. For all of these reasons, the PSC should not grant the Article VII certificate."

Additionally, Mr. Donohue stated that New York has been making strides in becoming more business-friendly to encourage investment in the State's infrastructure and improve the economy. Mr. Donohue underscored that "TDI's Champlain Hudson Project ignores New York's existing resources, including both traditional and renewable power, which already have invested millions of dollars to do business here."

 

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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 approximately 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.