Assembly Resists Proposal to Shift Hydropower Benefits from Residential Customers

The New York State Assembly is resisting a push, in the last days of the legislative session, to approve a landmark change in the Public Authorities Law that for generations has assured that the benefit of much of the low cost Niagara River hydropower goes to “rural and domestic” customers. See N.Y. Senate passes cheap power for business, Assembly opposes benefit cuts to upstate homes, Journal News, June 23, 2010; Albany split on low-cost energy program, Rochester Democrat & Chronicle, June 23, 2010. The Assembly bill, instead of transferring hydro benefits from residential to business customers would give customers an option to keep their hydro benefits or trade it for long lasting energy efficiency measures.

The proponents of changing the law to reallocate hydropower benefits from residential to business customers do not adequately take into account the impact on residential customers, the higher electric bills they will face, and the adverse impact on the economy and jobs when very large numbers of customers have less to spend in the regional economy due to their increased bills for electricity.

The residential hydropower became even more coveted by business groups with the advent of the flawed NYISO deregulated power markets which failed to lower prices as promised. Rather than working to reform the deregulated power markets, New York’s large business groups are still giving lip service to deregulation while seeking subsidy through low cost hydropower benefits under the “Power for Jobs” slogan. According to the state Power Authority:

Power for Jobs has helped hundreds of companies make the transition to the newly deregulated electricity marketplace in New York State.

With low cost power subsidies to alleviate the high wholesale market prices, New York’s business groups have not been as vocal as those in other areas who are seeking reform of the deregulated power markets. Also, relatively low cost power once available from nuclear plants sold off by the Power Authority – previously available to end users on a cost of service basis – is now far more expensive because now it must be purchased from Entergy and Constellation at deregulated market rates. This shifted the value of low cost energy from consumers to merchant power producers, who are now showing increased profits:

Constellation reported margins separately for merchant generation, which increased in 2009 to $1,976 million from $1,919 million in 2008 (a $57 million increase), equal to $37.70 and $42.96 per mwh of wholesale generation in 2008 and 2009.20 Constellation attributes a significant part of the increase in the margin to “[h]igher energy prices for the output of our generating assets in the PJM and New York regions based on prices established at the end of 2007.”

2009 Financial Performance of Owners of Unregulated Generation: High Profits Earned in Restructured Wholesale Electricity Markets During the Recession, American Public Power Association, May 2010.

The proposed shift of longstanding residential hydropower benefits is opposed by consumer groups. See AARP, Consumers Union, and PULP Oppose Reallocation of Cheap Niagara Hydropower from Residential Customers, PULP Network, June 15, 2010. See also, Raiding Niagara, PULP Network, June 2, 2010.

Updates
Buffalo News Editorial, Save Upstate’s Power, Speaker Silver should put Assembly in accord with Senate and governor, Aug. 4, 2010, asserting that the existing allocation of residential hydropower is “minuscule” and “frittered away.”

Brian Amaral, Cuomo Pushes Low Cost Power Bill, Watertown Daily News, Feb. 3, 2011. “The new program would be twice the size of its predecessor, at 910 megawatts. It does so by taking 455 megawatts that are used to reduce electricity bills for residential energy bills upstate. The Buffalo News puts the discount at $2 to $4 a month for a household.”

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