New York State Electric &amp Gas (NYSEG) has asked FERC and theNew York State Public Service Commission (PSC) to hold a jointtechnical conference on utility power purchase agreements withnonutility generators (NUGs) as soon as possible. Eight statelawmakers sent a letter to FERC Chairman James Hoecker on thematter last fall, but action was never taken, a NYSEG spokesmannoted.

“Saranac Power Partners (CalEnergy), Lockport Energy Associatesand Indeck Energy Services have already cost our customers morethan $750 million in excess of competitive market prices andultimately they will cost customers more than $2 billion. It’s timefor all of us to put our heads together to find a way to right thiswrong,” said NYSEG Chairman Wes von Schack.

In 1998, NYSEG’s total cost of required power purchases fromNUGs exceeded $320 million. NYSEG spokesman Clayton Ellis said theutility negotiated its power purchase agreements with the gas-firedNUGs back in the late 1980s based on “long-run avoided costs,” apricing scheme developed by the PSC and the utility that estimatedthe cost of the utility providing its own power over a long termwith new plant construction or power purchases. “Those estimates wemade in the late-80s are way off today,” he said. “We’re payingmore than 7.5 cent/KWh, for example, while today the market priceis 2.5-3 cents. And to make it even worse, by the time thecontracts expire we’re going to be paying those facilities morethan 12 cents/KWh for power.”

Meanwhile, the federal laws that permitted development of NUGsstill stipulate that utilities and their customers should not payabove-market prices for the electricity. “For our customers’ sakeit’s time to break the logjam,” said von Schack.

“A technical conference will give all parties an opportunity todiscuss why our experience with NUGs has differed so sharply fromCongressional and regulatory intent and expectations.”

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