How will subsidies for Upstate NY nuclear plants affect your electric bill?
New surcharges will appear on NY utility bills starting in April to subsidize three Upstate nuclear plants, including the reactors at Nine Mile Point on the shore of Lake Ontario. (Mike Greenlar)
SYRACUSE, N.Y. - Residential customers will start paying an extra $1.50 to $3 a month in April as utility companies begin collecting a controversial state-mandated surcharge to keep three Upstate nuclear plants running.
The dollar amount is based on a customer's electricity consumption. A hospital could pay a monthly surcharge of $4,000 or so. A large factory could pay as much as $10,000. Onondaga County likely will face increased costs of more than $25,000 a month, judging from the county's historical energy usage.
State regulators ordered utilities to begin collecting the money next month to cover $462 million in annual subsidies the state will pay. The money goes to the Nine Mile Point, FitzPatrick and Ginna nuclear plants in return for producing low-carbon power. The Public Service Commission said sustaining the nukes will save jobs and prevent greenhouse gas emissions from increasing.
Thanks to the extra revenue, the once money-losing nuclear plants are now expected to add millions to the profits of parent company Exelon Corp. Exelon owns Nine Mile Point and Ginna, and expects to complete the purchase of FitzPatrick from Entergy Corp. this spring.
The subsidies are popular in Oswego County, where three of the four affected reactors employ more than 1,500 people in high-paying jobs. But the surcharges also have sparked outrage from a variety of critics and are being challenged in state and federal court.
Here's a status update:
The new surcharge
New York utilities will file tariffs this month detailing the rates they will charge to collect the nuclear subsidy payments. There will be minor variations among utilities, but the rates should all be close to $0.0033 per kilowatt-hour (KWH), regulators say. That's one-third of one cent per KWH.
For a residential customer using 600 kilowatt-hours per month, the surcharge will add about $2. Use 900 KWH per month, and the charge grows to $3.
Large commercial and industrial customers will pay much more. A typical large hospital uses more than 1 million KWH per month. Onondaga County, with facilities ranging from a jail to a sewage treatment plant, used more than 10 million KWH per month in 2012, according to the county's climate action plan.
Each utility will turn over what it collects to the New York State Energy Research and Development Authority, which then pays the plant owners. NYSERDA signed contracts with each of the three nuke plants to buy their "zero emission credits," or ZECs, as compensation for producing electricity without carbon emissions.
For the first two years, the ZECs will be priced at roughly 1.75 cents per kilowatt-hour of power produced. The prices will be recalculated every two years after that. The amount of the subsidies will decrease if wholesale power prices increase.
Nuclear profits rise
Exelon told investors last month that its cash flow and profit outlook have improved thanks to the New York nuclear subsidies and a similar program adopted in Illinois.
In December, four months after New York regulators created ZECs to subsidize struggling Upstate nuclear plants, Illinois passed a law creating ZECs to bail out two nuclear plants that Exelon had threatened to close in that state. Beginning in June, Exelon will receive $235 million in annual ZEC payments for the Clinton and Quad Cities plants.
In a conference call with investors, Exelon executives said the ZEC programs in New York and Illinois are expected to boost the company's gross margin (revenues minus fuel and purchased power costs) by $400 million this year and by $600 million in 2019.
The legal challenges
The New York nuclear subsidies face a legal challenge in federal court in Manhattan, where a group of non-nuclear generating companies has sued the Public Service Commission, claiming the subsidies interfere with wholesale markets. The lawsuit is attracting national attention from industry watchers.
An expert who is under contract to monitor wholesale markets for the grid operator in Pennsylvania, New Jersey and Maryland filed a brief in the case warning that the nuclear subsidies could distort markets even beyond New York state. But two environmental groups, National Resources Defense Council and Environmental Protection Fund, filed briefs defending the subsidies as a legitimate effort to control carbon emissions.
Last week, a Harvard University energy expert asked the judge to provide an audio feed to courtroom hearings so that anyone could dial in and listen. U.S. District Judge Valerie Caproni has not yet responded to the request.
If the case goes to trial, it probably will not be resolved before summer, after the subsidies take effect, according to the transcript of a conference between the judge and lawyers.
A second lawsuit filed in state Supreme Court in Albany also aims to overturn the nuclear subsidy program. The state lawsuit was filed by environmental group Hudson River Sloop Clearwater and organic farm Goshen Green Farms. They claim the PSC failed to follow correct procedures by approving the subsidies too hastily and by adopting regulations that were "arbitrary and capricious.''
That lawsuit is pending.