By William Opalka

The New York Public Service Commission on Thursday approved a temporary 5.2% rate surcharge on delivery charges for Rochester-area electric customers, while a final agreement to keep the R.E. Ginna nuclear plant operating is hammered out.

The commission approved the surcharge, effective Sept. 1, to prevent “rate shock” while the final price tag for a reliability support services agreement is negotiated between Rochester Gas & Electric and Constellation Energy Nuclear Group, the plant’s owner (14-E-0270).

The Rochester utility had sought the surcharge to avoid rate compression once the RSSA is approved. (See FERC Rejects Ginna Jurisdiction Challenge.)

Industrial customers, environmentalists and consumer advocates had opposed the surcharge, arguing that the need for an increase was hypothetical until the RSSA is finalized.

The PSC, which had ordered the agreement to keep the plant operating until transmission alternatives are built, rejected requests to wait until the final costs were determined.

“If the commission does nothing, the costs associated with the RSSA, if later approved, could build to … being more than a 20% increase,” said Doris Stout, director of accounting at the PSC.

PSC staff estimated the rate increase would be about 10.4% if collection was delayed until January. RG&E estimates that its deferred collection will reach approximately $39.3 million from the effective date of the RSSA through the end of this month and will continue to grow, with interest.

RG&E has a balance of about $155 million in rate credits, which opponents of the rate surcharge want to use. Stout said using too many of these credits would adversely affect RG&E’s credit. PSC staff recommended, and the commission approved, that customer credits would be used to make up the difference between the amount collected from the surcharge and the cost of the RSSA.

The 5.2% rate was chosen in part because it matches estimates of the first-year revenue requirement for the Ginna Retirement Transmission Alternative, a project that would eliminate transmission constraints preventing the delivery of more generation into the Rochester area. PSC staff estimate the project will cost almost $140 million, with an in-service date of May 2017.

“I think what the staff has proposed here today is an elegant solution to a difficult problem,” Commission Chair Audrey Zibelman said at the meeting, citing the need to avoid rate compression while preserving the RG&E’s financial stability.

“I thought it made a huge amount of sense to say let’s set the level of the surcharge at the expected level of the transmission replacement because that’s a cost we know will be a long-term cost for the company to incur,” she added later.

Stout noted that requests for temporary rate increases are rare, saying the last she recalls was in 1996 for Niagara Mohawk.

“Although the scope and nature of RG&E’s ultimate liability to Ginna is uncertain, given that the RSSA may not be approved in its current form or at all, the reasonable costs of the reliability service obligation that was imposed upon Ginna in November ultimately must be recovered in some fashion,” the commission wrote. “An important element of just and reasonable rates is price stability and the avoidance of rate shock to consumers from sudden, significant increases.”

The agreement, set to be retroactive to April 1 once approved, would cost about $175 million a year and be effective through late 2018. Constellation said it wants to retire Ginna, which it says it lost more than $150 million between 2011 and 2013.

Ginna Negotiators File Extension

Negotiators for Exelon and RG&E have asked for a second extension as they try to hammer out an agreement to keep the plant operating.

“We will be seeking another short-term extension to allow for continued negotiations. Exelon remains committed to working with RG&E and a number of stakeholders to reach an agreement that will allow Ginna to continue providing safe, reliable energy to the region,” Exelon spokeswoman Maria Hudson said.

Under the terms of the RSSA, Exelon could have ended negotiations and closed the plant this month. The companies had asked on July 31 for an extension that expired Monday.

The companies reported ongoing good-faith negotiations for the RSSA to resolve rate issues before the PSC and FERC. (See FERC Rejects Ginna Rates, Orders Settlement Proceeding.)

Rehearing Sought on ‘Price Suppression’

Meanwhile, a New York power plant owner asked FERC on Wednesday to rehear its complaint that the Ginna agreement is suppressing capacity market prices (ER15-1047).

TC Ravenswood said FERC erred in ruling that the effects on capacity prices were outside its review of the RSSA. (See FERC Rejects Ginna Jurisdiction Challenge.)

The company said Federal Power Act Section 205 gives FERC jurisdiction over the “price-suppressive” effects of the RSSA and that the commission misunderstood the company’s reasoning.

“The commission should grant rehearing because its failure to consider whether the RSSA is just and reasonable in light of the effect it will have on the rates the NYISO pays to suppliers in NYISO’s capacity market is in violation of the commission’s statutory duty, in contradiction of prior commission orders and judicial precedent, and is arbitrary, capricious and not based on substantial evidence,” the petition states.