By William Opalka

The Federal Energy Regulatory Commission last week ordered hearing and settlement procedures in a dispute over the costs of keeping NRG Energy’s Dunkirk, N.Y., generating plant online for reliability.

At issue are charges National Grid — whose subsidiary Niagara Mohawk Power serves the region — proposed adding to its transmission service rate to reflect its costs under a reliability support services agreement for the coal-fired generator.

The New York Association of Public Power, Allegheny Electric Cooperative and the Municipal Electric Utilities Association of New York (MEUA) protested the charges as excessive and said they should be shared by other users of the transmission system in western New York, such as New York State Electric and Gas.

Need for Fact Finding

In February 2014, the commission accepted National Grid’s proposed rates subject to refund and further order, saying it was not convinced the changes were just and reasonable.

FERC said last week that it needed to conduct fact finding to make a definitive ruling on the rate changes and underlying RSSA charges. It said a hearing would be conducted if National Grid and the protesters were unable to reach a settlement (ER14-543).

In a related order last week, FERC also denied a separate rehearing request by MEUA, which had challenged the commission’s decision to waive the 60-day prior notice requirement to permit National Grid’s filing to become effective July 1, 2013. The association had also objected to the commission’s decision not to impose a full five-month suspension period (ER14-543-001).

“National Grid’s customers were on notice that RSS-type costs were being incurred and were to begin to be passed through in [transmission service] charges beginning July 1, 2013, even though the exact costs would not be determined until a later time,” FERC wrote.

The orders followed the commission’s decision last month directing NYISO to draft standard rates and cost allocation provisions for reliability-must-run (RMR) services (EL15-37). (See FERC Orders NYISO to Standardize RMR Terms in Tariff.)

Entergy Suit

Meanwhile, a new front opened in the Dunkirk dispute last month when Entergy sued the New York Public Service Commission, alleging it interfered with FERC authority in regulating wholesale electricity markets in June 2014 by approving an agreement between NRG and Niagara Mohawk to repower the plant with natural gas, allowing it to continue operating through 2025 (5:15-CV-230).

“NYPSC issued an order … that will keep the uneconomic Dunkirk generator in the market for a decade (through 2025), propped up by subsidies from a local utility and from a state agency,” Entergy said in the complaint, filed in U.S. District Court for the Northern District of New York.

Dunkirk will receive out-of-market payments of $20.4 million per year from National Grid and a $15 million one-time subsidy from New York state.

Entergy, owner of the 838-MW James A. FitzPatrick nuclear plant in western New York, claims the agreement will suppress capacity auction clearing prices.

FERC last week rejected a similar “price suppression” argument by the Independent Power Producers of New York in a complaint over Dunkirk and a second generator receiving payments under RSSAs. (See related story, NY Generators’ ‘Price Suppression’ Complaint Dismissed.)

Entergy’s complaint raises constitutional challenges similar to those that led federal courts to void actions by regulators in New Jersey and Maryland to incentivize construction of new generation. (See Rebuffed by Courts, CPV Seeks FERC End-Around.)

(For a timeline of events surrounding the Dunkirk plant, see Dunkirk Plant Chronology.)