NYSEG Requests Conference On NUG Contracts
New York State Electric & Gas (NYSEG) has asked FERC and the
New York State Public Service Commission (PSC) to hold a joint
technical conference on utility power purchase agreements with
nonutility generators (NUGs) as soon as possible. Eight state
lawmakers sent a letter to FERC Chairman James Hoecker on the
matter last fall, but action was never taken, a NYSEG spokesman
"Saranac Power Partners (CalEnergy), Lockport Energy Associates
and Indeck Energy Services have already cost our customers more
than $750 million in excess of competitive market prices and
ultimately they will cost customers more than $2 billion. It's time
for all of us to put our heads together to find a way to right this
wrong," said NYSEG Chairman Wes von Schack.
In 1998, NYSEG's total cost of required power purchases from
NUGs exceeded $320 million. NYSEG spokesman Clayton Ellis said the
utility negotiated its power purchase agreements with the gas-fired
NUGs back in the late 1980s based on "long-run avoided costs," a
pricing scheme developed by the PSC and the utility that estimated
the cost of the utility providing its own power over a long term
with new plant construction or power purchases. "Those estimates we
made in the late-80s are way off today," he said. "We're paying
more than 7.5 cent/KWh, for example, while today the market price
is 2.5-3 cents. And to make it even worse, by the time the
contracts expire we're going to be paying those facilities more
than 12 cents/KWh for power."
Meanwhile, the federal laws that permitted development of NUGs
still stipulate that utilities and their customers should not pay
above-market prices for the electricity. "For our customers' sake
it's time to break the logjam," said von Schack.
"A technical conference will give all parties an opportunity to
discuss why our experience with NUGs has differed so sharply from
Congressional and regulatory intent and expectations."
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