By William Opalka
Cheryl LaFleur has won plaudits for her leadership since taking over as acting chair of the Federal Energy Regulatory Commission in November and won 90 votes for her renomination to a second five-year term on Tuesday. But she did it without any help from the Democratic senators from New York.
Charles Schumer and Kirsten Gillibrand were among seven senators to vote against LaFleur, along with Democrats Ben Cardin and Barbara Mikulski of Maryland, Democrat John E. Walsh of Montana and Republicans Jerry Moran and Pat Roberts of Kansas.
The New York senators are angry over LaFleur’s support for the New York ISO’s creation of a capacity zone in the Lower Hudson Valley that has led to increases in prices. The zone took effect May 1, following FERC’s unanimous approval last August.
The issue spilled into the Senate’s confirmation debate as Majority Leader Harry Reid (D-Nev.) referred to a Wall Street Journal editorial the day before that characterized the capacity zone plan as “a federal takeover of New York’s electric grid.”
“I’ve spoken to both nominees and they’ll take a hard look at that. When [the editorial] came out yesterday I directed attention to that and that will be addressed by both of them and they have said so,” Reid said.
In March, Schumer wrote to LaFleur, saying FERC’s approval of the new zone is “unacceptable to me, the New York Public Service Commission and to residents and businesses throughout the Hudson Valley who feel aggrieved for having to pay immediate rate hikes after a record winter of high energy costs.”
“As we both know, this winter has brought extreme low temperatures, and consequently high energy costs, to everyone in New York,” Schumer told LaFleur. “Imposing an additional cost increase on Hudson Valley residents is unfair and will place an undue burden on many of my constituents.”
However, FERC in late May denied a rehearing requested by Schumer and various New York agencies, political leaders and utilities. The matter is now pending before the U.S. District Court of Appeals for the Second Circuit.
FERC acknowledges that electricity costs will rise in the short run but says that higher price signals are needed to encourage construction of generation and transmission to serve New York City and the nine counties to its north. FERC said the congestion issue has been discussed since 2006 without a solution. Consumers have been shielded from higher prices since that time, it noted.
Previously, the Lower Hudson Valley was paying capacity prices set for the areas of New York outside of the city and Westchester County. The FERC order combines the Hudson Valley with the City/Westchester zone, whose capacity prices have historically been much higher.
The New York Power Authority claims the zone pricing only creates a windfall for power generators that will total more than $1 billion over the next three years.
Central Hudson Gas & Electric, which serves the Poughkeepsie area, says that capacity revenues from auctions in May and June more than doubled from the same months a year ago. That will increase monthly bills by 6% for residential customers and 10% for large industrials, the company said.
In its petition to FERC, NYISO said that the transmission bottleneck threatened reliability in and around New York City. The FERC order requires utilities to buy at least 88% of their capacity from generators within the zone.
State officials opposing the zone say that two large transmission projects are being planned to eliminate the bottleneck and that locally based generation is not needed. One transmission project would create a corridor from the Canadian border to New York City, making renewable energy generation from upstate more readily available.
FERC maintains the projects are not guaranteed to be built and, at best, are years from completion.
FERC also rejected a proposed phase-in of the zone. It said any delay would impair the market’s ability to send more efficient investment price signals.
The United States Court of Appeals expedited the appeal process when it required opening briefs filed by June 27. A ruling is anticipated in the fall.