Federal plan will hike rates for local customers

Gibson SQIt’s a familiar scenario. Warning about shortages, the state’s electrical utilities are pushing for greater energy supplies. Environmentally aware citizens’ groups are arguing for alternative energy sources and conservation. Seeking its own middle course, state government is favoring improvements in the system of power transmission from Upstate to Downstate. And a federal regulatory agency has promulgated regulations without conducting adequate hearings.

The Federal Energy Regulatory Commission (FERC) intends on May 1 to create a New Capacity Zone (NCZ) which would extend the capacity price of electricity in high-demand New York City to the Hudson Valley. The NCZ, meant to ease the crunch in electricity supply in the New York metropolitan area, will result in a big price hike to Hudson Valley customers by being included. The state Public Service Commission (PSC) is arguing against the NCZ, wanting to upgrade aging transmission lines instead.

Under the NCZ plan, proposed by the state Independent System Operator (NYISO) and accepted by FERC, the state will be divided into only three capacity zones, consisting of Central Hudson’s service area and New York City (where wholesale energy prices are highest), Long Island, and the rest of the state. At present there are eleven zones in the state, including three in the Hudson Valley.


Federal law requires each zone to have a sufficient reserve of supply to ensure a backup of power during peak demand times, such as a heat spell. The capacity price is the cost of maintaining those extra power plants, which is highest in New York City. Unlike the Big Apple, the Hudson Valley can presently source its backup power from other areas upstate, helping to reduce the cost. That will change under the NCZ, which will require the expanded zone to provide 88 percent of its capacity from within its region.

NYISO issues real-time prices for the marginal cost of energy, that is, from its cheapest sources, in its present eleven zones. At 10:14 a.m. Tuesday, April 8, for instance, the marginal cost of energy on Long Island was highest at $109.94. It was $78 in New York City and $72.20 in the largest zone in the Hudson Valley. Marginal cost in the Capital Area was $40.19 and ranged from $34.50 to $38.32 in the other upstate zones.

In this snapshot in time, it was clearly more advantageous to be upstate than downstate. People in Shandaken, which is served by NYS Electric & Gas and not to be included in the New Capacity Zone, were at that moment paying the Mohawk Valley price of $38.32 for the marginal cost of their energy. Meanwhile, the citizens of next-door Olive, served by Central Hudson-Fortis, were paying $72.20.

Under the FERC edict, all Central Hudson customers will be paying the blended city prices, at that time, just under $78, while Shandaken customers a blended rate of around $37 or $38. Olive customers, in other words, would pay more than twice as much as Shandaken customers would.

For real-time price differentials, Google NYISO and click on “Zone Maps.”

Providing more power plants?

For Central Hudson-Fortis customers, the new NCZ will result not only in higher rates but also in possible construction of massive new towers in the existing electrical right-of-way in Dutchess County. Besides expressing support for an alternative that would do neither, members of Citizens for Local Power (CLP), which hosted a meeting in the Ulster County office building late last month, told state electricity officials that the state was making a mistake in continuing to rely on gas-fired power plants rather that adopting a policy of encouraging greater use of renewables and greater energy efficiency.

The immediate problem facing state electrical officials, two of whom were present to explain the capacity crunch and the plan to upgrade the aging transmission lines, was a bottleneck in the transmission lines coming south through the Hudson Valley to the New York City market. Cheaply produced electricity from upstate, including wind farms in the north, can’t get to where it’s most needed. The capacity constraints are putting the reliability of supply of electricity into the New York metropolitan area at risk.

FERC reasons that the best way to solve the crunch is to lure new power plants to the area by increasing the capacity price, boosting potential profits. But that also means Central Hudson-Fortis customers will pay higher rates because they will now be in the same zone as New York City. Central Hudson-Fortis estimates the NCZ will result in a rate increase of 6.5 percent. The New York State Public Service Commission (PSC), which regulates the state’s electricity industry, predicts it could be as high as 25 percent.

“Right now we are on the path for dependence on natural gas, but we need to rely on a portfolio of diverse sources,” argued CLP member and co-founder Jennifer Metzger at the meeting, which attracted an overflow crowd. “We need to consider whether these plans will help us reach the goal of achieving a clean, less vulnerable and more reliant energy system.”

Metzger noted the hardships caused by the price volatility of fossil fuels and the skyrocketing price of natural gas this past winter. For example, she said, the utility bill for a restaurant in Rosendale had shot up from $600 to over $1300.