New York Consumers Seeing Cost Increase on Electric Bills
3 min readBack in 2012, during the New York State of the State address, Governor Cuomo announced an initiative, the New York Energy Highway Blueprint, to modernize the state’s electric power system. The plan identified 13 actions to improve and expand the state’s power system, costing upwards of $5.7 billion. These actions include everything from clean power generation to transmission framework improvements, with other projects being financed through a mix of both private and public sector investments.
One of the key components of the plan, mentioned above, aims to improve and replace outdated transmission infrastructure in the state. This is being implemented to help ease existing congestion and plan for future power plant retirements.
Resulting Projects from the Plan
In late 2014, New York investor-owned utilities (IOUs) such as Central Hudson, Con Edison, National Grid, New York State Electric & Gas, Orange & Rockland Utilities and Rochester Gas & Electric formed a statewide transmission entity called the New York Transco (NY Transco). The company’s purpose is to construct and maintain transmission facilities, as well as identify a portfolio of transmission upgrade projects for existing systems in the state to address public policy needs defined by the New York Public Service Commission (PSC).
Key projects the NY Transco has started to meet the New York Energy Highway objectives were ordered by the PSC to address the Indian Point Energy Center (IPEC) Reliability Contingency Plan. These projects are referred to as Transmission Owner Transmission Solution (TOTS) projects. They include:
- The Ramapo to Rock Tavern (RTT) transmission line
- Staten Island Unbottling (SIU) project
- Marcy South Series Compensation project
A Deeper Dive Into TOTS Projects
NY Transco is committed to completion of development, construction and commission of the projects to improve system reliability, lower energy costs and enable renewables to be incorporated into the grid.
As you might imagine, these infrastructure build-outs and upgrades come at a cost. In December 2014, the New York Independent System Operator (NYISO) submitted a filing to the Federal Energy Regulatory Commission (FERC) to establish project approval and a means for project cost recovery. In addition to project approval, the filing sought to establish:
- A cost of service formula rate
- Transmission rate incentives
- A base return on investment (ROE)
- A cost allocation methodology for project costs
A settlement was negotiated with parties to the case and submitted last year. It was approved by FERC on March 17, 2016. Several of the projects have since been completed and have come into service this month.
As a result, NY Transco and the IOUs began collecting costs linked to the TOTS projects from market participants through a NYISO change in law on June 1, 2016 as approved by the FERC filing. The total cost linked to these projects is about $240M. This is to be collected over 30-40 years, with the majority of costs collected over the first three years. Rates will be set on an annual basis to cover NY Transco’s revenue requirements associated with the TOTS projects.
What Does This Mean for Your Business?
Based on FERC’s approval of these projects and the cost recovery tools, TOTS projects affect all electricity providers. Consumers should anticipate paying these cost increases regardless of whether they purchase supply from the utility or an energy service company (ESCO).
It’s important to develop an energy strategy that helps balance risks and helps achieve budget certainty amidst an unpredictable environment. Reach out to your Business Development Manager to discuss the best option for your business.
