Subsidiaries of NRG Energy (NYSE: NRG) told the New York State Public Service Commission on Nov. 17 that they are disappointed with a commission order that advances a plan to keep open the uneconomic R.E. Ginna nuclear plant.
On July 11, Exelon Corp. (NYSE: EXC) and its subsidiaries Constellation Energy Nuclear Group LLC (CENG) and R.E. Ginna Nuclear Power Plant LLC (GNPP) filed with the commission a “Petition for Initiation of Proceeding to Examine Proposal for Continued Operation of R.E. Ginna Nuclear Power Plant.” They are seeking an order from the commission: finding that the Additional Reliability Study commissioned by the Exelon companies establishes a need for the Ginna Facility's continued operation; and directing Rochester Gas & Electric (RG&E) and GNPP to negotiate and file by Dec. 1, 2014, a Reliability Support Services Agreement (RSSA) of an appropriate duration and with a commencement date of no earlier than Jan. 11, 2015.
A large number of parties from all sectors of the market with a number of different perspectives, including the NRG Companies, filed comments in response to GNPP's request. The NRG Companies said in their Nov. 17 filing: “Among the many views expressed, there was a common theme: the specific notice requirements that have been established as necessary steps before an RSSA is ripe for negotiation are important, and have a material impact on the ability of the market to respondwith potentially lower-cost alternatives. Specifically, the NRG Companies recommended that the Commission carry out its full obligations under those procedures, in the interest of transparency, cost-effectiveness and customer protection, by requiring the NYISO and RG&E to conduct a full evaluation of the reliability impacts of a retirement of the Ginna Facility, in both the short- and long-term, and directing those parties to conduct a solicitation and evaluation of alternatives to resolve any identified reliability needs.
“The NRG Companies are disappointed with the Commission's decision on November 13, 2014 directing RG&E to negotiate, and file by January 15, 2015, an RSSA with GNPP. In addition to the Commission's disregard for the very real concerns raised by multiple commenters about the process, the NRG Companies were very surprised to learn that one of the material bases for the Commission's decision was a request for proposals (‘RFP') that RG&E is conducting, seeking alternatives to the Ginna Facility to be submitted by the end of November. To the NRG Companies' knowledge, RG&E did not post the RFP on its website or provide notice of the RFP to all parties on the service list in this proceeding.
“All interested respondents should have a fair opportunity to meaningfully reply to the RFP. The RFP requests solicitation responses by November 21, 2014. This simply is not sufficient time to evaluate and develop the reliability proposals requested therein. The NRG Companies urge the Commission to reconsider the decision to direct negotiation of an RSSA at this time, and instead direct that GNPP issue a notice of intent to retire, and that the Commission and all parties act on that notice according to the established procedures in the Generation Retirement Order. Failing that, the NRG Companies urge the Commission to require a short-term RSSA to provide time for the development of more fulsome alternatives similar to the initial 9 month contract between Dunkirk and National Grid (Case 12-E-0136) which provided time for additional evaluation. Further, the NRG Companies request that the Commission direct RG&E to
provide its RFP documents to all active parties to this proceeding who have not yet been provided the documents, and to extend the deadline for responses to the RFP for a reasonable period to allow parties that have just received or have not yet received the documents to formulate and submit alternative proposals so that ratepayers are assured the most economically beneficial option.”
Exelon: Ginna underwater financially after power contract expiration
Ginna is a 581-MW, single-unit pressurized water reactor located along the south shores of Lake Ontario, in Ontario, New York, approximately 20 miles northeast of Rochester, New York. In 2004, the Nuclear Regulatory Commission extended the facility's license to operate to September 2029.
R.E. Ginna, a subsidiary of Constellation Energy Nuclear Group, sold a majority of the facility's output to RG&E under a purchase power agreement (PPA) until that agreement expired on June 30, 2014. Since then, Ginna has operated as a merchant generator selling into the wholesale markets that the New York Independent System Operator manages.
“Ginna alleges that revenues the Facility has earned in recent years have been insufficient to cover the costs of its operation, and it forecasts that expected revenues will remain below the continuing costs of operation into the foreseeable future,” said the PSC order directing the negotiation of the RSSA. “As a result of these economic circumstances, Ginna reports, it met separately with individual Commissioners, Department of Public Service Staff (Staff), RG&E, and the NYISO to discuss its evaluation of the economic forces it perceives as driving its Facility into retirement. On February 21, 2014, Ginna, RG&E, and the NYISO entered into a reliability study agreement, and in conformance with that agreement, the NYISO produced the 2014 Reliability Study on May 12, 2014, where it found that the retirement of Ginna would result in bulk transmission system and non-bulk local distribution system reliability violations in 2015 and 2018, the two years studied.”
R.E. Ginna said that no alternatives have been identified to replace the full electricity output of the Ginna facility until at least October 2018, when the Rochester Area Reliability Project (RARP) transmission work is scheduled for completion.
The commission said that Ginna has justified entry into RSSA negotiations because retention of its facility is necessary for the preservation of electric system reliability. Moreover, by affidavit dated Oct. 23, Ginna now certifies that the revenues it expects from the sale of capacity and energy into NYISO markets will not be sufficient to cover the costs of continued operation, which includes new capital investments that must be made. “This affirmation buttresses the conclusion that the commencement of negotiations over an RSSA for the Ginna Facility is warranted,” the commission ruled.
The commission added that the RFP must be coordinated with the RSSA work. “To the extent that alternatives proposed through the RFP might affect entry into an RSSA, or the period for which the RSSA remains in effect, RG&E, in consultation with Staff, would evaluate if viable, cost effective substitutes for the Facility, including generation, transmission, and other resources, would be available and could commence operations in a timely fashion. If it is determined that alternatives could affect negotiation of the RSSA, RG&E should redirect the RSSA negotiations to accommodate the alternatives. For example, an alternative might reduce the time period for which the Ginna Facility is needed, resulting in a shorter term for the RSSA.”