Is Cuomo’s fix against Indian Point already in?

Dunkirk coal fired power station

Dunkirk coal-fired power station

Governor Andrew Cuomo has never tried to hide the fact that he wants to follow in his father’s footsteps.

Like Mario, Andrew became Governor of New York.

Like Mario, Andrew has established political and financial alliances with well-heeled donors that do not like nuclear energy.

Like Mario, Andrew would like to be remembered as a governor who succeeded in “protecting the safety” of a densely-populated area by closing an operable nuclear power plant.

For Mario, it was the 800 MWe Shoreham nuclear power station on Long Island that was finally completed and tested after nearly 20 years worth of controversial and poorly managed construction effort; for Andrew, it is the 2,200 MWe Indian Point facility that has been cleanly and reliably supplying 25% of New York City’s electricity for the past 40 years.

Like Mario, Andrew would prefer not to be remembered as a governor who saddled large numbers of electricity customers, all of whom are both taxpayers and voters, with several billions of dollars in costs associated with the closure.

Aside: There are, of course, many potential donors who clearly understand double entry accounting systems — something that is on the “expense” side for taxpayers is on the “revenue” side for entities like banks, underwriters, advisors, constructors, and fuel suppliers. End Aside.

Like Mario, Andrew would like to be remembered as a governor who is concerned about the environment, not as someone who is directly responsible for the millions of tons of CO2 and other more noxious air pollutants that will be the inevitable result of producing approximately 14 billion kilowatt hours of reliable electricity each year by any fuel source other than uranium.

Even though Andrew has been openly campaigning against Indian Point since his first attempt at running for governor in 2001, he recently denied that he is pursuing a planned and well-coordinated effort to follow through on his promises. Here is a quote from an October 2013 article describing a project that would add more transmission lines from northern New York into the more densely populated metropolitan areas near New York City.

Cuomo isn’t himself in a position to put Indian Point out of business. What he can do, as governor, is help make the state less reliant on the power it produces. The lines are a step in that direction.

On Wednesday, Cuomo reiterated his desire to see the closure of Indian Point, though he denied that the power line increase was part of an effort to close the plant.

“If there was a conspiracy, I would probably know,” he said.

As a fairly typical New York politician, however, he would probably feel no obligation to admit to his crucial participation in the planned effort — aka conspiracy — to take property from Entergy shareholders without appropriate compensation. The indicators are clear. Cuomo wants Indian Point to shut down.

He and his political allies are making plans to provide alternative power sources that will enable continued electricity supply, and they are expending funds, creating long-term obligations, and using state-controlled levers to force a closure decision.

Some observers are even beginning to talk about Indian Point’s demise as a done deal.

For example, Energywire, one of the subscription news services I follow, recently published an article titled NRG gets OK to restart upstate N.Y. power plant with gas. It describes how New York regulators gave NRG Energy Inc. permission to convert the Dunkirk power station from coal to natural gas. That article includes a couple of paragraphs that caught my eye.

The New York Public Service Commission approved NRG’s plan for bringing the upstate Dunkirk plant back to life, despite pleas from environmentalists to focus on transmission upgrades rather than bringing back older plants to the grid.

But the PSC is under pressure to line up power generation in New York due to the expected loss of 2,000 MW from the Indian Point nuclear facility and a federal capacity zone rule that has increased the cost of electricity in the downstate region to spur more generation.

That sounded more certain than most of the stories I’ve read about the scheming and maneuvering. Up until I read that intriguing statement, I knew nothing about the Dunkirk generating station, but it wasn’t hard to find plenty of material about the plant and its supporters.

Even though Dunkirk is a long way from New York City, its steady power output can enable more electricity to flow from Niagara Falls and Canada. It is also in a good location to take advantage of the growing supply of natural gas from hydraulic fracturing of the Marcellus Shale formation.

The Public Service Commission decision about Dunkirk was the latest step in a continuing saga that illustrates some of the complex interests and alignments that get involved in big energy-related decisions.

NRG shut most of the plant down in 2012, claiming it was no longer economical to operate due to the effect of low natural gas prices on wholesale electricity prices. NRG was probably also facing additional capital expenses associated with tightening emissions standards associated with burning coal.

The specific decision that the Public Service Commission made was to approve an agreement between National Grid and NRG. National Grid will pay NRG $20.41 million per year for ten years. In return, NRG will construct a natural gas pipeline from at least one of two local pipeline systems located within 6 miles of the Dunkirk power station and will convert the existing boilers to allow them to burn natural gas as well as coal. Though the payments will total $204 million, the PSC and the governor have reported the cost of the arrangement as $150 million since that is the computed net present value of the payments after factoring the time value of money at an assumed interest rate.

That payment is only for reliability-related capacity to produce electricity. It is not an agreement to purchase any electricity or the fuel required to produce electricity. That statement was explicitly made on page 39 of the PSC decision record since wholesale electricity markets are under the jurisdiction of the Federal Energy Regulatory Commission. (The document recording the decision can be found by going to the PSC document site and searching for case number 12-E-0577.)

It is unclear what recourse National Grid or its customers have if NRG determines that both coal and natural gas are too expensive in relation to the wholesale market price for electricity. It is difficult to understand how customers obtain the reliability that they will pay for if the company owning the facility decides it cannot afford to operate the plant due to market conditions.

By mid 2015, NRG will be the owner of a 55-65 year-old three-unit steam plant capable of producing 435 MWe burning natural gas or coal at a heat rate of approximately 10,000 BTU/kw-hr. That plant will provide approximately $8 million in annual revenue split between the host city, the host county and the local school board. That money is classified as “payment-in-lieu of taxes.”

The governor’s press release describing the project provided contradictory information; it stated that the project would “preserve permanent jobs at the site” and that it would “maintain the existing 68 jobs at least through mid-2015.” Since mid-2015 is just a year away, I was curious about what the governor was really saying, so I sent a query to NRG’s listed press contact. He informed me that Dunkirk would employ 46 people after the conversion.

That is one more step down in a sustained process of eliminating people from the process of producing power; when NRG purchased Dunkirk from Niagara Mohawk it employed about 230 people. I suspect it is not the final step in the workforce reduction effort. I also suspect that there will be substantial future expenditures in the process of extending the life of the Dunkirk facility to help enable the closure of the substantially younger, cleaner and more advantageously-located Indian Point.

The proposed plant at the conclusion of the dual fuel installation makes little or no sense from an economic point of view. Even when natural gas is “cheap,” it costs twice as much per unit of heat as the delivered price of Powder River Basin coal. In a dual-fuel-capable boiler, natural gas is burned with almost exactly the same efficiency as the coal alternative. The plant will require the same payroll expenditure whether it is burning coal or natural gas.

Natural gas can be an economically competitive fuel source, but only if it is burned in a modern, highly-efficient combined cycle plant that has the latest in automated controls that enable a bare-bones operating staff and its substantially reduced payroll expense. Combined cycle plants are also more valued if they can provide rapid response to changing power demand and to changes in power supplied by unreliable sources like wind and solar.

Buried in the governor’s press release is a single line that provides the clue to the destination configuration for the Dunkirk plant.

The project also will provide an opportunity to convert the plant to an advanced combined cycle facility if future market conditions warrant.

Once National Grid’s customers have paid the costs of supplying natural gas to the Dunkirk site, the next logical step will be for NRG to obtain sufficiently lucrative power purchase agreements to enable project finance for its already planned conversion of the site to a modern combined cycle gas turbine (CCGT) unit. That CCGT unit will produce at least 600 MWe using two modern gas turbines and a heat recovery steam generator to power one of the remaining steam turbines. That conversion will cost approximately $1,200 per kilowatt of capacity. It will take between 30-36 months and employ about 500 construction workers. When it is complete, the operating employee head count will be reduced once more to about 26 people.

I’m not really clairvoyant. That plan is clearly documented and available as NRG’s response to a request for information associated with Governor Cuomo’s Energy Highway initiative.

Similar Northeast antinuclear/pro-fossil fuel activism

There is a rather depressing similarity between the way that state and local officials reacted to the news that Dunkirk, New York’s roughly 600 MWe, 55-65 year old coal fired steam plant will be given another ten — or more year — lease on life and the way that some state and local officials reacted to the news that Vernon, Vermont’s 620 MWe 42 year-old nuclear heated steam plant will be closed at the end of this year. In both cases, celebrations occurred.

Here is a quote from NRG Power Plant to stay open, setting off glee in Dunkirk.

he atmosphere was absolutely electric as hundreds of people crowded into a banquet room in the Clarion Hotel on Sunday to cheer Gov. Andrew M. Cuomo’s announcement that the nearby NRG Power Plant would not be closing.

Over the previous objections of some competitors and environmentalists, but with the support of nearly everyone else, the aging coal-fired facility on Dunkirk Harbor will be converted to burn natural gas, solving the two biggest problems facing owner NRG Energy: the cost of its fuel and the significant pollution that it causes.

State Sen. Catharine M. Young, R-Olean, who helped rewrite the factors the PSC must consider when making energy decisions – including the economics of the community, system stability and effects on the environment – was exuberant over the outcome of what she described as a “sometimes traumatic journey.”

“We couldn’t let it happen. We would lose our tax base, we would lose our jobs, we would lose our future,” she said. “This agreement saves us. It gives us a foundation on which to build our economy. It gives us hope. This is our community’s Christmas miracle!”

Cuomo noted that the generating plant has a 10-year guarantee for the energy it produces. Also, he said, “The New York Power Authority will be providing $15 million to the project, because this adds to the reliability and stability of the entire power system.”

I almost forgot to mention that direct subsidy provided by other New York taxpayers/ratepayers.

And here is a quote from Vermont Yankee Nuclear Plant To Close. (Note: The section of the quote involving Governor Shumlin is transcribed from the audio interview provided on the story page.)

Anti-nuclear power activists are celebrating today’s announcement that Vermont Yankee will close, with the decommissioning process beginning late next year.

But despite a legal battle with the state and nearly constant protests since it opened in 1972, the the plant’s owner, Entergy, says activists can’t take all the credit; costly regulations and an aging facility played a part in the shut-down decision.

Sacha Pfeiffer – Joining me now to talk about what the plant’s closure means for New England is Vermont Governor Peter Shumlin. Welcome to Radio Boston.

Gov. Peter Shumlin – Thank you. It’s great to be with you.

Sacha Pfeiffer – And Governor, you are a prominent opponent of the plant. You have been for years. How did you feel when you got this news?

Gov. Peter Shumlin – Well, Entergy’s making the right decision for Vermont, the right decision for Massachusetts, the right decision for New Hampshire and the region. You know that plant is old and tired, and I have believed for a long time that it should have been retired on schedule in 2012. That’s when it was designed to be shut down. So they’ve made the right decision. I applaud the new leadership at Entergy for facing the music on this one and now our object will be to work together with Governor Patrick and Governor Hassan in New Hampshire to find the 650 employees some great employment in our region and we can move forward.

Instead of gifts from the state, Vermont Yankee owners kept getting hit with additional fees, taxes, revenue sharing and special assessments. Perhaps someone from Entergy will provide a concise list of those additional operational disincentives over just the past couple of years before the decision to close the plant due to “poor economics.”

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