New York's Billion Dollar Bogus Bailout

David Williams

September 7, 2016

When the political class sets lofty, but unrealistic goals it’s time to hold onto your wallet.

That’s sound advice for New York energy consumers who must now foot the bill for a renewable energy scheme that will cost $1 billion in it’s first two years alone and go into effect beginning in April 2017. That’s when all of the state’s utilities and other energy suppliers will be required to cover the cost of carbon-free emissions from nuclear power plants by purchasing Zero-Emission Credits also known as ZECs.

Just a few weeks ago, Governor Andrew Cuomo’s energy regulators approved a statewide Clean Energy Standard that says New York must get 50 percent of its electricity from renewable sources while implementing a 40 percent cut in greenhouse gases by 2030. That’s a tall order to fill in just 12 years. The Zero Emission Credits for struggling nuclear power plants are particularly controversial because the cost of the subsidy will fall on New York energy consumers whether or not they receive electricity from the power plants. All told, the nuclear part of the plan is expected to cost about $1 billion in its first two years. For the average ratepayer, this works out to $2 per month, according to the state’s Energy Research Development Authority.  But in the end, what the actual costs turn out to be will depend largely on wholesale electricity prices and how many reactors are actually up and running.

New York’s nuclear energy bailout, which is a first in the nation, has been criticized by industry representatives who say government officials have vastly understated the long-term costs. The Business Council of New York State, for instance, has expressed concern that the more energy intensive businesses would be put at a disadvantage by the costs of the subsidies. Even so, the council also made it clear that it is not opposed to preserving nuclear power. For that matter, a number of environmentalists have also stepped up to tout the supposed benefits of a carbon free energy source. However, it should be noted that the views of the environmental community are not monolithic when it comes to nuclear power. Some green groups have predictably criticized the state plan for not offering up more in the way of subsidies to wind and solar power.

The State Public Service Commission, which is appointed by the governor, approved the massive bailout on August 1 in a 4-0 vote before a packed room of onlookers at its Albany headquarters. Four overflow rooms were added after the 106 seat meeting room was filled. Yet, critics charge that the approval process was rushed through without sufficient openness and transparency. The commission took public comments for just two weeks.

The clean-energy plan adopted establishes three tiers of credits for electric utilities and other similar outfits. Shunning the free market and best prices scenarios, utilities are required to purchase a certain amount of their load from both renewable and nuclear sources. The nuclear subsidy will be directed primarily toward Exelon Corp., which owns the Ginna plant near Rochester and the Nine Mile Point facility in Oswego County. Exelon is also in talks to purchase the James A. FitzPatrick power plant from Entergy Corp, which had planned on shutting the plant down. The Fitzpatrick plant is located in the town of Scriba near Oswego. Exelon is the nation’s largest utility company.

While the nuclear bailout has attracted most of the media attention, it’s really just a small part of Cuomo’s larger renewable agenda. The governor claims the energy mandate is needed to avert catastrophic climate change. His plan establishes renewable energy credits, not just for nuclear power, but for solar, wind, hydro, biomass and tidal power and fuel cells.

“New York has taken bold action to become a national leader in the clean energy economy and is taking concrete, cost-effective steps today to safeguard this state’s environment for decades to come,” Cuomo said in a press statement. “This Clean Energy Standard shows you can generate the power necessary for supporting the modern economy while combatting climate change. Make no mistake, this is a very real threat that continues to grow by the day and I urge all other states to join us in this fight for our very future.”

For Cuomo to achieve his stated goal of having renewables provide 50 percent of his state’s electricity needs come 2030, wind and solar would have to assume a prominent position in the implementation process and in the final portfolio. To achieve these goals, Cuomo has set a rigorous schedule in motion. For the initial phase, “utilities and other energy suppliers will be required to procure and phase in new renewable power resources starting with 26.31 percent of the state’s total electricity load in 2017 and grow to 30.54 percent of the statewide total in 2021,” according to a press release.

Since the energy mandate was approved, Cuomo’s energy regulators have been dismissive of any cost concerns. PSC chair Audrey Zibelman has told members of the press that the energy mandate will actually benefit consumers. But how so, if no one denies that consumer prices will rise? On the sly, PSC officials claim consumer prices would rise even higher if the nuclear plants were to close. They point to an Exelon-funded study that concludes consumer would pay $15 billion more over the next decade for electricity if the nuclear plants were to close. But this assumes the PSC is not underestimating the cost of the subsidies.

Cuomo certainly has a vested interest in keeping the nuclear plants up and running since they could be replaced by carbon-emitting power plants that would discombobulate his 2030 deadline. It would seem the strategy is to prop up nuclear plants as part of a transitional process while wind and solar energy power sources are developed.

New York taxpayers and ratepayers should not be forced to subsidize any form of power, especially those that come with unrealistic mandates.  If nuclear power, or any other form of power, is to survive, they should do so on their own.  This bailout should be a warning to other states.

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