Professional Documents
Culture Documents
COMMISSIONERS PRESENT:
BY THE COMMISSION:
INTRODUCTION
Deliberations over the future of the Hudson Avenue
steam generating station have been underway for several years.
Much of the analysis has centered on the question of whether the
existing boilers should be replaced by new boilers or by a
cogeneration facility. Consolidated Edison Company of New York,
Inc. (“Con Edison” or “the Company”) plans to obtain permits to
install new steam boilers and to demolish the existing boilers.
Based on our review of the record, and subject to the conditions
described in this Order, we decline to order Con Edison to
pursue a cogeneration option.
CASE 09-S-0029
1
Case 05-S-1376, Order Determining Revenue Requirement and Rate
Design, September 22, 2006.
2
Case 07-S-1315, Order Establishing Rate Plan, September 22,
2008, Attachment 1, p. 29.
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3
The Company, in filing the Steam Resource Plan and Supplement,
redacted information regarding commodity pricing forecasts,
capital cost estimates, levelized cost calculations, and
Ravenswood Steam Station options. On February 17, 2009, the
Company filed its demonstration of why the redacted
information was entitled to an exemption from the disclosure
requirements of §87 of the Public Officers Law. Parties
replied on February 27, 2009. On March 6, 2009, the
administrative law judge issued a ruling that denied trade
secret protection to the cost estimate and levelized cost
projections that were included in the documents. The Ruling
found that commodity price forecasts used by the Company were
entitled to trade secret protection. The Ruling was appealed
by the Company, and affirmed on May 12, 2009.
4
Case 09-S-0029, Order Instituting Proceeding, January 15,
2009.
5
Id., p. 3.
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6
Statements of Position were filed by DPS Staff, Con Edison,
The City of New York, Independent Power Producers of New York,
Inc., Consumer Power Advocates, PSEG, Pace Energy and Climate
Center, Natural Resources Defense Council, NYS Department of
Environment Conservation, County of Westchester, Astoria
Generating Company, and New York Energy Consumers Council.
7
Comments were filed by DPS Staff, Con Edison, The City of New
York, and Independent Power Producers of New York, Inc. Prior
to filing comments, parties conducted discovery.
8
A Notice of Proposed Rulemaking related to the Hudson Avenue
facility was published in the State Register on April 29,
2009.
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capacity and energy payments. The fact that the NYISO has
determined that no regulated backstop electric generation will
be required at least through 2018 has a significant negative
impact on the expected electric revenues for a cogeneration
option.
The Company acknowledges that, outside of price
concerns, cogeneration options would address other energy
planning objectives of the City and State; these include
emission reductions and geographic diversification of electric
generating sites. All of the options produce significant
emission reductions when compared with the existing boilers at
Hudson Avenue, but cogeneration options produce additional
reductions due to increased system efficiency as well as backing
down older electric generation units. The 500 MW cogeneration
option, compared to a scenario with existing steam boilers at
Hudson Avenue and electric energy produced by existing steam
turbine generators, would result in fuel savings of
approximately 13 trillion BTU per year, and result in carbon
dioxide savings of 800,000 tons per year. Cogeneration would
also achieve significant reductions in SO2 and NOX emissions
compared to the boiler option. The cogeneration option might,
however, result in higher emissions of particulate matter at the
site, which in turn could cause a more complex permitting
process.
Operating a new 500 MW generating facility would
produce reductions in state-wide wholesale electricity costs. A
multi-area price simulation (MAPS), run by Con Edison for 2015,
found state-wide price reductions of $115 million, $63 million
of which would occur in Zone J.
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10
No significant impact on gas prices is projected.
11
The Company has not provided an annual total estimate for
capacity price reductions. Applying the estimated
$4.36/kW/month to approximately 6,000 MW of merchant
generation affected by the in-city demand curve, could produce
annual wholesale capacity cost reductions totaling
approximately $314 million. This represents an "all-else-
being-equal" snapshot and does not account for potential
buyer-side market power impacts and market participants’
behavioral responses.
12
See, New York Independent System Operator, Inc., Order
Conditionally Approving Proposal, 122 FERC 61,211, March 7,
2008, and Order on Rehearing and Further Order on Compliance
Tariff Sheets, 124 FERC 61,301, September 30, 2008.
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13
Staff focused its analysis on the choice between the boiler
option and a 500 MW cogeneration option.
14
Staff does not, however, reconcile the difference between the
SRP cost estimate and the much lower actual cost of the
Astoria plant.
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15
The Company states that it does not expect significant changes
in cost estimates due to the economic downturn.
16
The Company acknowledges that direct waterway access to the
Hudson Avenue site would provide some flexibility during
construction, but does not quantify the value of that access.
The City argues that Con Edison should be required to provide
further analysis of the potential cost savings related to
direct waterway access to the Hudson Avenue site.
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17
In order to accomplish this, an additional round of
environmental permits would be needed.
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18
The difficulty of relying on long-range forecasts is
highlighted by the October, 2009 natural gas price forecast of
the federal Energy Information Administration which predicts,
with a 68% confidence level, that gas prices in 2011 will be
somewhere between $5 and $11 per million Btu. The Company’s
consultant, in preparing the SPOS, employed four different
scenarios for future prices. Under the scenario with the
highest commodity prices, cogeneration options fared
relatively better than they did under low-price scenarios, due
to the increased fuel efficiency of the cogeneration option
and the increased value of electricity revenues.
19
IPPNY states only that its members have described the
estimates as “in the zone of reasonableness.”
20
To further complicate the analysis, the final cost of ERRP was
higher than original estimates by a wide margin.
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also excluded from the boiler option analysis in 2006; this does
not explain why the close difference in 2006 between a 117 MW
option and boilers became a large difference in 2008 between a
135 MW option and boilers.
21
This is due to three factors: the use of gas rather than oil,
the increased efficiency of modern equipment, and the
application of more stringent emission standards.
22
This figure is indicated by the estimated steam output from
Hudson Avenue, and confirmed by workpapers provided by the
Company.
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23
Assuming, for example, that an energy efficiency measure
scores higher than 1.0 on the Total Resource Cost test, then
the resulting carbon reduction comes at no net cost.
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24
Staff also questions whether the cogeneration option, as
currently configured, could be constructed without substantial
redesign, based on advice given to the Company from the
manufacturer.
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25
A plan for the construction of a cogeneration option, whether
it results from a New York City IDA proposal or from an
independent initiative of Con Edison’s, will raise numerous
issues that are not decided in this order and which will
require further consideration. These include questions of
utility ownership of electric generation, market power, and
cost allocation.
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26
A proposal should also be timely, i.e. should take into
account the Company’s need to make financial or other
commitments in implementing its current plan.
27
IPPNY observes that Con Edison’s capacity price forecast
represents the higher range of possible capacity prices and is
significantly higher than prices the market is currently
experiencing.
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28
New York Independent System Operator, Inc., ER-08-695-01,
Order on Rehearing and Further Order on Compliance Tariff
Sheets, 124 FERC 61,301 at 13 (September 30, 2008).
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29
See Case 07-M-0906, Joint Petition of Iberdrola S.A., Energy
East Corporation, RGS Energy, Group, Inc., Green Acquisition
Capital, Inc., NYSEG and RGE for Approval of the Acquisition
of Energy East Corporation by Iberdrola, S.A., Order
Authorizing Acquisition Subject to Conditions, January 6,
2009, p. 104; Case 06-M-0878, Joint Petition of National Grid
PLC and KeySpan Corporation for Approval of Stock Acquisition
and other Regulatory Authorizations, Order Authorizing
Acquisitions Subject to Conditions and Making Some Revenue
Requirement Determinations for KeySpan Energy Delivery New
York and KeySpan Energy Delivery Long Island, September 17,
2007, pp. 137-138; Case 96-E-0900, In the Matter of Orange and
Rockland Utilities, Inc.'s Plans for Electric
Rate/Restructuring Pursuant to Opinion No. 96-12, Appendix 1,
Statement of Policy Regarding Vertical Market Power, July 17,
1998, p. 1.
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30
NRG Astoria Gas Turbine Power LLC -- Repowering Project State
Environmental Quality Review (SEQR) Scoping Document for Draft
Environmental Impact Statement October 8, 2008
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CONCLUSION
31
If we did find that the construction of a cogeneration plant
under the current circumstances would be suboptimal from the
standpoint of energy markets, the issue would not be closed.
The functioning of energy markets must be balanced with
important policy concerns such as fuel efficiency and emission
reductions.
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32
Executive Order No. 24, issued August 8, 2009.
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By the Commission,
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