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Caithness files suit against PSEG, alleging conspiracy to nix new plant

PSEG had advised LIPA to reject the plant, which it said would cost ratepayers $2.9 billion, because it was not needed.

Caithness Long Island Energy and its parent have filed an antitrust suit against PSEG, charging that the New Jersey company and its Long Island subsidiary conspired to “exclude competition” from the Long Island energy market by rejecting Caithness’ plans for a new on-Island power plant.

In a 36-page filing in federal court in Brooklyn, Caithness said it has suffered “hundreds of millions of dollars of harm” as a result of PSEG’s alleged actions, and is seeking several times that amount in relief. It has hired noted litigator David Boies  to argue the case.

In a statement, Boies said, "We believe PSEG has acted improperly in preventing Caithness from building a new, clean, efficient, power plant on Long Island which would reduce Long Island's dependence on less efficient and more costly power produced off Island, including by PSEG's plants.”

A senior PSEG official countered, "Building Caithness would have been viewed as a big mistake and a move in the wrong direction," given the state's focus on renewables.

"The economics aren’t there," the official said. "We’re very confident we made the right decision. We plan to defend it." 

Caithness, which already operates a 350-megawatt plant contracted to LIPA in Yaphank, said PSEG’s efforts over the past four years “derailed” its LIPA-approved plan to open the second plant, which was to be more than twice as large as the first. Last year, PSEG advised LIPA to reject the plant, which it said would cost ratepayers $2.9 billion, because it was unneeded, given PSEG’s projection that no new plants would be required until 2038. LIPA expects an influx of renewable energy, including offshore wind turbines off the South Shore, to displace power from conventional plants over time.

PSEG, in a statement, said the Caithness antitrust suit is "without merit" and that the companies will "vigorously defend against it." 

"PSEG Long Island’s focus is — and always has been — on doing what’s right for the customer and saving them money," the statement said. "Our analysis of Long Island’s power needs, which was reviewed by the State Department of Public Service, showed that no new generation is needed. As a result, LIPA rightly decided that Caithness II, which would have increased Long Island customers’ bills, was unnecessary." 

Caithness, in its suit, says the new plant would have allowed LIPA to retire “old and inefficient plants” while saving upward of $1 billion in costs. At the time the 750-megawatt Caithness II was proposed, officials argued it was necessary to help LIPA rebuild the old National Grid plants. LIPA recently rejected plans even to rebuild the old plants, saying the work was too costly and unnecessary.

The suit charges PSEG and its parent engaged in a “multi-year scheme” to “derail” the Caithness II plan, drafting an energy blueprint for LIPA power resources that first delayed the new Caithness plant, then nixed it altogether.

Caithness charges that by derailing the Caithness II plan, PSEG forced LIPA to rely more heavily on off-Island energy to operate the grid, “including PSEG’s own plants, with PSEG reaping the profits.”

It said PSEG has “misrepresented and hidden key facts” in its dealings with LIPA, including its “clear conflict of interest” relating to its alleged profit motive. PSEG in the past has denied the charge, noting that its plants represent only a small portion of the energy available from the regional energy market from which LIPA imports energy. 

Caithness alleged that had PSEG not interfered with its plans for the big new plants, LIPA’s energy imports from off Long Island would have declined, “resulting in tens of millions of dollars in lost revenue to PSEG.”

In the year since LIPA formally rejected Caithness II, Caithness has offered a plan for a 600-megawatt plant that it is attempting to move through approval with Brookhaven Town, which voted last month to lift a restriction on it. The company plans to operate the plant on a “merchant” basis, meaning it won’t rely on a long-term contract with LIPA, but instead sell its energy on the open market.

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