Laura Incalcaterra

lincalca@lohud.com

Electricity bills to rise as new capacity zone is created to spur new power plants.

Surplus of power upstate; demand is highest downstate

Existing transmission system bottlenecks

New zone allows increased price to be charged to ensure capacity for summer's hottest days

Think winter's power bills were high?

Get ready to fork over at least 5 percent more when summer arrives thanks to a payment plan designed to attract new power plants by boosting the amounts companies can charge for peak-use electricity.

Starting Thursday, the Lower Hudson Valley will be joined with New York City into a new zone that the New York Independent System Operator, or NYISO, hopes will encourage power generators to add new capacity in the region.

Details of the new capacity zone, including exactly how much more the power producers can charge, are a moving target as opponents — such as the state Public Service Commission, Rep. Sean Patrick Maloney of Cold Spring and Sen. Charles Schumer — scramble to convince regulatory agencies that the new plan should be rejected.

New York has plenty of electricity but the majority of it is produced upstate while the biggest users are in the downstate areas of Long Island, New York City and the Hudson Valley.

The power moves south via transmission lines but there are constraints on the system and concern is growing that because the lines aren't large enough, they will be unable to carry the amount of power needed on peak-use days, NYISO said.

How zones work

NYISO wants new power plants to be built in the downstate area, below the bottleneck. The Federal Energy Regulatory Commission, which oversees the nation's power structure, has approved NYISO's request to create the new zone.

Energy retailers like Consolidated Edison, Central Hudson Gas and Electric Corp. and Orange and Rockland Utilities Inc. buy supply and deliver it to homes and businesses daily. But they also are required to have capacity agreements that ensure they'll have access to additional power for peak use on the hottest summer days.

The retailers sign agreements with power producers, such as Entergy Nuclear Northeast, the operator of Indian Point in Buchanan, and NRG Energy, which currently operates Bowline Point in Haverstraw only on peak-use days.

The new capacity zone will allow the prices the producers can charge when they sign those agreements to rise by millions. FERC's decision, which covers the next three years, estimates the capacity increase will net producers an additional $230 million in revenue.

Retailers and the PSC, which oversees utilities in New York, say the increases would be far more dramatic than FERC's ruling shows and could result in bill increases well above 5 percent for homeowners and 10 percent for businesses.

Consumers in the Lower Hudson Valley will see a $280 million annual increase in electricity bills, 22 percent more than what was predicted just a few weeks ago, the PSC said Monday in a letter to FERC.

Schumer, D-N.Y., said Tuesday that NYISO had agreed to seek an increase for just one year and drop it for the other two. He said the increase would drop from 10 percent down to 4 percent, with revenue to increase by about $198 million.

New York City is not expected to see increases due to the new capacity zone.

Some say no need

Opponents, including PSC Chairwoman Audrey Zibelman, say there's no need for the new zone. FERC fails to recognize that actions are already in play to address the bottleneck, she wrote in a Monday letter to FERC. The new zone benefits existing power producers, not consumers, she said.

Projects that could be built as part of Gov. Andrew Cuomo's Energy Highway Blueprint, designed to modernize the state's power system, will address many of the concerns cited as reasons for the new zone, the PSC said. The blueprint calls for spending $1 billion on projects to bring 1,000 megawatts of new transmission into the region in response to the constraint issue.

NYISO says 1,000 new megawatts can't keep up with demand that is growing by 250 megawatts to 300 megawatts yearly.

Central Hudson's John Maserjian said the company opposed the new capacity zone because the price increase will hit consumers too hard.

Maserjian said four projects have been submitted to the state by New York Transmission Owners, a group that includes Central Hudson, that would bring new transmission into the picture.

There are also three additional projects pitched by private companies, he said.

Improving transmission would improve the bottleneck, he said. Power plants, on the other hand, can take years to site and build — all the while consumers will be paying for capacity.

Local plants would benefit

The new capacity zone will require retailers to secure 88 percent of their capacity from within the zone, so existing plants like Indian Point and Bowline stand to benefit strongly from the new setup.

In recent years, both plants at Lovett Generating Station in Stony Point were dismantled, two plants at Bowline Point became peak-use generators and the Danskammer plant in Newburgh was knocked offline by Superstorm Sandy damage. But Danskammer's new owners, Houston-based Helios Power Capital, submitted proposals in April to the PSC to get the 530-megawatt plant operating again.

Bowline's current owner, NRG Energy, wrote to FERC on Monday to back the new capacity zone, stating it was preparing to add generation at the plant because of the new zone and its price guarantee.

Twitter: @LauraInc15