By Michael Kuser

SARATOGA SPRINGS, N.Y. — New York’s top regulator last week assured the state’s power producers that he would offer a steady hand in a time of dramatic change for the electricity sector.

“With me, you should expect a policy of continuity — continuity with the state’s energy policies,” New York Public Service Commission Chair John Rhodes said at the fall conference of the Independent Power Producers of New York.

It was his first time speaking before the group since being appointed to the PSC by Gov. Andrew Cuomo in June.

IPPNY CEO Gavin Donohue introduced Rhodes by saying his group’s members are “very concerned” about New York’s natural gas infrastructure.

“The siting of natural gas pipelines is FERC’s jurisdiction, but the DEC [New York State Department of Environmental Conservation] has developed a pattern of denying water quality certificates for projects, most recently evidenced by the decision on the Millennium Pipeline,” Donohue said. (On Friday, FERC overruled the DEC, saying that by failing to act within the one-year time frame required by the Clean Water Act, it had waived its authority to issue or deny a water quality certification (CP16-17)).

Rhodes responded that his commission continues to support programs that lead to more gas customers.

“We support programs that encourage customer conversions from carbon-intensive petroleum products such as No. 6 heating oil,” he said, and when gas distribution projects “are economically and environmentally sensible, we clearly give the green light, and we have a track record of doing that.”

While about 38,000 New York customers are converting to natural gas each year, the commission doesn’t “have a lot to do with gas transmission,” Rhodes said. “That is a sister agency, principally the [DEC], but I’ll just note for the record, and it is in the record, that the state in all its agencies has been consistent in delivering … on all project proposals. Each project is based on specific circumstances and characteristics and is assessed on a series of clear, unambiguous, sometimes strict standards, appropriately strict standards having to do with environmental health and safety.”

Rational Actors

Rhodes cited the commission’s work on the Reforming the Energy Vision proceeding, the Clean Energy Standard and “the continuous matter of rate cases.”

“One could look at them as separate bundles of things … but also recognize that there is a commonality to them and to how we are dealing with them,” he said. “We’re seeking in all of these to achieve a cleaner, more cost-effective and reliable energy system.”

To achieve the state’s clean energy goals requires market actors “to commit one basic act … [to] make an investment decision,” Rhodes said. “It’s up to us — and this is the commonality, it’s up to us as the Public Service Commission … to set things up … so that those investments also serve our policy goals.”

Rhodes said that regulators can trust market actors “to act rationally … and our role is to keep the picture whole,” and that getting the transmission right is a way of harnessing the ability of the market to move toward the grid of the future.

The CES is “up and running” and the first request for proposals has been released, which, in combination with an RFP by the New York Power Authority, represents the largest procurement in New York and U.S. history, Rhodes said.

“These projects will generate 2.5 million MWh of electricity a yea r… and the response so far has been … robust,” he said.

Carbon Pricing and REV

The state has taken important first steps in pricing carbon into the wholesale energy market, Rhodes said.

“I’m told that it’s an elegant idea by certain editorial writers,” Rhodes said. “We kind of agree. The future carbon pricing policy can and must be a really effective instrument for achieving New York’s policy goals: a cleaner, more affordable energy system for the ratepayer. If we can harmonize the operations and rules of the wholesale energy markets with the state’s policy goals, we can decarbonize the state’s energy system in a better way.” (See NYISO Stakeholders Talk Details of Carbon Charge.)

PSEG Power’s Howard Fromer asked about the connection between carbon pricing and reform to the capacity market, a subject touched on slightly in the preface to the Brattle Report signed by Rhodes and NYISO CEO Brad Jones. (See NYISO Study Sees Little Cost Impact from Carbon Charge.)

The reference in the preface was intended to acknowledge that a carbon charge has consequences that “may go beyond another layer in the price tag,” Rhodes said. “We’ve got a system that works. If you perturb it, it’s going to be a different system. Make sure it works in the future, too. That’s just ordinary good housekeeping.”

John Reese of Eastern Generation asked about the many levels of REV, from the “umbrella level” to the core of the program.

“As a non-utility company without limitless resources, tracking the 46 REV-specific activities, the paper that comes through, and moving from the weeds back up a level to, ‘What does it mean in synthesis?’ … How can you help synthesize the information? … I mean, my REV reading list is waist-high,” Reese said.

“What did you do with the rest of it?” Rhodes joked, referring to the reading list. “REV’s outcome is simple. We want a system that’s more cost-effective, smarter investments, cleaner. We know it’s going to be more distributive because that’s what technology is telling us.”

REV’s regulatory proceedings “are many and complex, so there’s a complicated machine, but it’s aimed at some fairly direct, simple outcomes,” Rhodes said.

He said a “regulatorily naïve observer,” thinking about investment decisions and wanting to know where to focus attention, will eventually see a clearer picture emerge.

“I think we’re going to start getting the operational outcomes increasingly over time. … It’s on a conveyor belt that’s about to start coming out,” he said.

Indian Point and Transmission

Donohue asked Rhodes how the PSC will integrate NYISO’s study on the retirement of Entergy’s Indian Point nuclear plant into the work of the New York State Energy and Research Development Agency’s task force on the issue.

“That’s a complicated question and I’m going to give an over-simplistic answer,” Rhodes said. “The task force obviously has a broad remit, but the issues that it’s going to focus on … are relevant to the communities around the plant, so they have to do with taxes and economic development. They have to do with the site.”

NYISO’s Brad Jones addressed the issue of Indian Point’s closing from the ISO’s perspective.

“We have not yet received a completed notice of deactivation for the plant, yet we decided on Aug. 1 to go ahead and begin our reliability assessment,” said Jones. “And we do that somewhat outside our normal process for doing a reliability assessment … but we believe that, because of the significance of this unit, it’s important to study that now.”

NYISO hopes to complete the assessment by the end of this year, Jones said.

“There are a number of factors that continue to move, and we have to make assumptions, and we will have to do several sensitivity analyses around the report to get something that each of you will be comfortable with what you see,” he said.

Jones also said NYISO is wrapping up its role in developing the western New York public policy transmission line. If the grid operator’s board in October approves selection of NextEra Energy’s Empire State Line, the project will move into the state’s Article VII siting approval process. (See Public Policy Tx Project Wins Key NYISO Endorsement.)

Jones said the ISO’s work on the proposal for the AC transmission project proposed to run from upstate to load centers in New York City and Long Island will likely run into next year.

“We’re steadily in [the] process of moving the AC forward, and that’s also a significant project for the health of New York and the ability to move renewable generation around the state,” he said.