New York, in its burning desire to stem increasing natural gas use that is already cleaning its air, has forged an insane energy policy.
Our friend, Jim Willis, at Marcellus Drilling News just reported on something that reveals just how bad government has gotten in Governor Corruptocrat’s Empire State. It’s a story of cronyism, corporatism and corruption behind a facade of political correctness. His intro perfectly captures the essence of what’s happening:
New York Governor Andrew Cuomo…loves to pick winners and losers. Recently Cuomo launched an “ambitious” new Clean Energy Standard in which he puts his bets on nuclear energy. That is, he’s willing to transfer billions of New Yorker’s hard-earned taxpayer dollars out of their pockets and into the pockets of nuclear power companies. Why? In order to prop them up, make them “competitive” with much cheaper natural gas-powered electric plants. That is, Cuomo cheats. He wants to stack the deck. And New York’s natgas power generators are not having it. They’ve sued the state, challenging the Clean Energy Standard that steals money out of our pockets in order to prop up nuclear companies…
Intrigued, I decided to check out the lawsuit itself, which may be found here, and it relates just how insane New York energy policy really is today.
The case revolves what New York State is doing to ratepayers, through its Public Service Commission (PSC), to implement a Clean Energy Standard that will only distort the energy market to achieve what natural gas is accomplishing without the subsidies. Like most lawsuits, it’s filled with weeds of details and legal arguments that need to be gotten past to get to the point, so here are the important parts (emphasis added):
This case arises from unlawful New York Public Service Commission (“PSC”) regulations that intrude on the exclusive authority of the Federal Energy Regulatory Commission (“FERC”) over “the sale of electric energy at wholesale in interstate commerce”… FERC has determined that competitive market forces best set wholesale energy prices and thus has mandated and approved auction-based markets for wholesale electric energy in the New York region and other regions nationwide. Under FERC’s system, as the PSC has acknowledged the forces of competition “have benefited consumers but have impaired the financial viability of upstate nuclear plants, to the point where plant owners have announced the intention to close plants that are otherwise fully licensed and operational.”
Seeking to change the results of FERC’s market-based auction system, the PSC issued the ZEC Order to bail out four uneconomic upstate nuclear power plants and keep them in the market for at least twelve more years, via so-called Zero Emissions Credits (“ZECs”). Unless enjoined or eliminated, these credits will result in New York’s captive ratepayers paying the owners an estimated $7.6 billion over twelve years to the owners of these plants. Indeed, it appears that 100% of the ratepayer subsidies will go to a single company, which will own all of the subsidized plants. The actual dollar amount of the ZECs is tethered to the price of electricity in the FERC-regulated wholesale market. That is, particular nuclear generators are entitled to ZECs when the PSC finds that the wholesale market price is “insufficient to provide adequate compensation” to them…
At current wholesale prices, for every megawatt hour (“MWh”) of energy the upstate nuclear plants sell into the FERC-jurisdictional market, the nuclear units will receive a more than 80 percent premium from the ZECs. That is, for each MWh sold, they will receive the current locational price of energy ($19.71 per MWh for Ginna, for example, and $20.63 per MWh for FitzPatrick and Nine Mile2) plus a $17.48 ZEC payment subsidy, funded entirely by New York consumers. In other words, the FitzPatrick and Nine Mile plants will both receive $38.11 per MWh of energy produced, while a competing energy generator, located next door, would receive just $20.63 per MWh. If the wholesale price of electricity decreases over the next two years, the bonus payments to the subsidized nuclear plants will increase…
The prospect of these out-of-market payments has already caused three of the four affected nuclear plants to reverse their decisions to close, preventing the New York energy markets from reaching the efficient market equilibrium that the FERC-approved wholesale prices would have otherwise produced…
If the ZECs go into effect, New York’s retail ratepayers will be forced to fund an effort by the PSC to artificially depress wholesale market prices, which disrupts the FERC-approved auctions and market processes. The nuclear plants will not retire as scheduled, but will continue to bid into the wholesale market auctions, with the incentive and ability to offer their supply into the auctions at artificially lower prices (i.e., at prices that do not fully cover their costs). The result of these below-cost bids will be below market prices. This would harm other generators, including the Plaintiffs, because the lower auction prices will result in lower revenues. In the long term, with non-subsidized generators forced to exit the market, lower prices will deter potential new generators – including generators of renewable sources of energy – from entering the market. The result will be reduced supply and increased prices for local utilities, and thus for the homeowners and businesses that they serve.
These arguments lay out the case very simply. Governor Corruptocrat wants to prop up nuclear plants with subsidies to achieve what natural gas conversions are doing without them — reducing CO2 emissions. This makes it more difficult for gas and even Federally subsidized renewables to compete, which means still more subsidies required of ratepayers in the future. This is what happens when markets aren’t allowed to work and megalomaniacs like Corruptocrat decide they can do a better job by colluding with certain companies. A little more of this corporatism and New Yorkers will be well on their way to becoming Venuezuela.
Notice, too, all the massive subsidies will go to one company and not all nuclear facilities are included. Newer nuclear facilities that don’t need the subsidies won’t get them. Only the older less efficient models will get them, keeping them in business to avoid competition from new far more economical gas plants such as the one CPV is now building in Orange County:
Only nuclear plants specifically selected by the PSC are eligible to receive the ZEC subsidy. Other zero-carbon resources in New York receive no compensation for their zero-carbon attributes. Once the ZEC subsidy is taken into account, the uneconomic nuclear resources expect to receive a higher level of wholesale market compensation than nuclear generators operating in New York that are still profitable and that do not qualify for ZEC payments. Thus, the ZEC Order simply serves to keep the uneconomic capacity and energy from these specific units in the FERC-regulated wholesale markets, notwithstanding the fact that wholesale market price signals are indicating that these units should be retired…
Guess which older nuclear plant is not included, though? It’s the Westchester County Indian Point facility, of course, which Corruptocrat has forever promised to close but been unable to find a way. Now, through a unique form of cronyism, he’s found a way. Indian Point, too, will now to have face unfair competition from forced ratepayer subsidies to other nuclear facilities farther away from Corruptocrat’s Westchester County home.
The whole enterprise stinks of New York style corruption, of course, but it comes through most clearly in the comment of the toady Corruptocrat has installed as head of the PSC he now controls, Audrey Zibelman. She called the lawsuit frivolous and “right out of fossil fuel industry’s playbook to deny and thwart actions to combat climate change. The Supreme Court has repeatedly upheld the rights of states to protect their environment for the welfare to citizens.” What kind of public official in charge of a supposedly independent agency talks this way? She’s obviously the same sort of political hack with whom Corruptocrat likes to surround himself in Nixonian style. This matter isn’t about climate change or CO2 emissions or he wouldn’t be punishing gas and Federally subsidized renewables with 80% subsidized competition stolen from ratepayers. It’s just another corrupt Cuomo scam.