By Carol Chock and Irene Weiser
The investors in the obsolete, coal-burning Cayuga power plant are getting a pretty sweet deal at the expense of NYSEG customers. Thanks to the state, NYSEG customers will guarantee that the owners of this inefficient, money-losing facility won’t suffer operating losses for the next three years. But should they make a profit, they get to keep it.The agreement — negotiated by NYSEG and Cayuga, then approved by the state Public Service Commission — requires NYSEG customers to pay up to $154 million over the next 3.5 years ($112 million in operating costs, plus up to $42 million in capital improvements) to keep the unprofitable power plant operating.
This agreement is not a decision about whether to convert the plant to burn gas. Rather, this agreement keeps the plant burning dirty coal for the next 3.5 years to meet a “reliability need” during 500 hours per year of peak demand until a decision to convert or upgrade the transmission lines is made and implemented.
However, this reliability services agreement does not restrict Cayuga to operating during the 500 peak demand hours. They can operate every day and sell their power on the open market while NYSEG customers — not J.P. Morgan and other Cayuga bondholders — foot the bill for Cayuga’s labor, materials, local taxes, depreciation and capital improvements costs.
What’s more, Cayuga is allowed to keep the first $5 million they make in profits each year plus 50 percent of all profits thereafter; the other 50 percent is paid to NYSEG. While there will be some ratepayer reimbursement, the details about the amount and timing are not specified. With a deal like this, is it any wonder that Cayuga and NYSEG keep asking for extensions rather than reaching a decision to repower with gas or upgrade transmission lines?
NYSEG has known since 1998 that the transmission lines needed to be upgraded. During deregulation proceedings, they estimated the cost at $35 million to $40 million and promised upgrades within the next 10 years. Had they kept that promise, there would not be reliability problems today and Cayuga would be able to retire at no cost to ratepayers.
Instead, 15 years later, NYSEG finally held the first public hearing about the proposed transmission upgrades this past December. They say it will take two to three years to complete the work, which is needed whether or not the Cayuga plant is converted to burn gas. The estimated cost for the upgrade is now $55 million, plus the $154 million in the reliability services agreement.The promise of deregulation was that by separating electricity generation from transmission, market competition would be increased such that industry would hold itself accountable and customers would benefit from lower costs.
Yet now, when market competition has rendered a 55-year-old power plant unprofitable, NYSEG customers are required to pay — on top of their regular electric bill — an additional $154 million over the next 3.5 years to keep the lights on at the Cayuga plant, while Cayuga investors pocket the profits and NYSEG finally begins the work it should have finished years ago. No wonder New York’s electric rates are the second highest in the nation.
Chock is a Tompkins County legislator; Weiser is a council member in the Town of Caroline. Together, they lead the Ratepayers and Community Intervenors group: ratepayersgroup.org.