Wednesday, March 20, 2019

FERC Accepts Ginna Settlement

By William Opalka

FERC on Tuesday approved New York regulators’ plan to keep the Ginna nuclear power plant operating but objected to elements that it said encroached on its jurisdiction over wholesale power markets (ER15-1047).

R.E. Ginna nuclear plant, near Rochester, N.Y. (Source: Exelon)

R.E. Ginna nuclear plant Source: Exelon

The commission ruled that the reliability support services agreement between the R.E. Ginna nuclear plant and Rochester Gas & Electric approved Feb. 23 by the New York Public Service Commission was just and reasonable. (See NYPSC OKs Ginna Deal.)

The RSSA is between distribution utility RG&E and Exelon’s Constellation Energy Group, which had threatened to close Ginna because it was losing money. RG&E will charge ratepayers $425 million to $510 million to cover Ginna’s full cost of service, with the final amount determined by Ginna’s revenues from the NYISO wholesale market. The utility also will apply $110 million in customer credits to the contract, making the total price tag as high as $620 million.

A parallel proceeding at FERC reviewed elements of the settlement, but it was suspended in January when it was apparent that most contested items were resolved in the state docket. However, one remaining issue was whether there was a sufficient disincentive for Ginna to prevent it from re-entering the market after the RSSA ended on March 31, 2017.

The environmental group Alliance for a Green Economy (AGREE) had contested that part of the settlement as inadequate.

AGREE says the $20.1 million capital recovery balance Ginna would have to repay if it re-enters the NYISO markets should be netted against RG&E’s one-time settlement payment of almost $11.5 million to Ginna, meaning the plant’s penalty would be only $8.6 million over two years, or 2% of the plant’s revenue.

FERC disagreed.

“The settlement payment represents costs that Ginna will have incurred during the settlement RSSA’s term, but, due to timing, Ginna will not yet have recovered those costs from RG&E by the end of the settlement RSSA’s term,” FERC said. “Therefore, we are not persuaded that Ginna’s recovery of those costs … should be netted against the capital recovery balance in assessing whether the capital recovery balance provides an adequate disincentive for Ginna to return to the NYISO markets.”

The commission ordered changes to elements of the settlement agreement and RSSA that it said could infringe on FERC’s jurisdiction because they allow the New York PSC to approve all aspects of the RSSA, “including the wholesale aspects of the settlement RSSA, and potentially reduce a wholesale rate in the settlement RSSA.”

Under Supreme Court precedent, the commission said, “once [FERC] approves a wholesale rate, a state commission must allow 100% of the wholesale rate to be passed through to customers in the utility’s retail rate design.”

FERC also ordered removal of language related to a reliability-must-run agreement that state officials may approve after the RSSA expires. NYISO is in a separate proceeding before the commission to address RMR concerns in New York. (See FERC Orders NYISO to Standardize RMR Terms in Tariff.)

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