By William Opalka
The Federal Energy Regulatory Commission on Tuesday rejected the rate schedule proposed for a struggling nuclear power plant needed for reliability in western New York and ordered hearing and settlement proceedings (ER15-1047).
The commission approved only part of the reliability support services agreement for the R.E. Ginna nuclear plant between Rochester Gas & Electric and Exelon’s Constellation Energy Nuclear Group, the plant’s owner, which is also under review by the New York Public Service Commission.
The commission rejected the proposal that Ginna receive 15% of its NYISO market revenues, saying it “does not comport with the general principle that rates under [a reliability-must-run] agreement must be cost-based.”
“A compensation structure that provides for both a cost-based monthly fixed rate (whether going-forward costs at the low end, or a full cost of service at the upper end) and a share of market revenues does not meet this principle, as the revenue-sharing provision is not cost-based and may allow for Ginna to earn more than its full cost of service,” FERC wrote.
The commission approved a provision that would require Ginna to repay capital investment costs it recovers under the RSSA if it were to return to the market after the agreement’s expiration.
The capital recovery balance would range between $20.1 million and $65.3 million depending on when it was invoked, “a sufficient disincentive” to dissuade Ginna from “toggling” between compensation under the RSSA and the NYISO markets, the commission said.
FERC thus excluded the issue of toggling from the hearing but said it may address whether the amounts in the capital recovery balance are just and reasonable.
FERC said it would allow about 45 days for settlement discussions before scheduling a hearing.
The RSSA was ordered by state officials and is scheduled to be retroactive to April 1, once approved by regulators. The agreement would cost about $175 million a year and be effective through late 2018. Ginna says it lost more than $150 million between 2011 and 2013.
The immediate effect of FERC’s order is that a procedural case before administrative law judges of the PSC has been slightly delayed. The PSC ordered initial “issue statements” by April 15 in a review of the rate impact on consumers, but that has been pushed back until April 22. (See NYPSC Rejects Opponents’ Request for More Time in Ginna Rate Review.)
FERC has ordered NYISO to standardize its procedures for RMR agreements, of which the proposed Ginna deal is the most recent. (See FERC Orders NYISO to Standardize RMR Terms in Tariff.)
As a result, Tuesday’s order also struck a provision allowing an extension of the agreement beyond 2018. “If there is a future reliability need for the RSSA beyond its initial term, Ginna will be subject to the procedures that NYISO establishes, and the commission approves, in response to the NYISO RMR order,” FERC wrote.