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LIPA drops plan for new peak power plants

PSEG and LIPA towers along a power line

PSEG and LIPA towers along a power line in Commack on Dec. 2, 2014. Photo Credit: Newsday / J. Conrad Williams Jr.

LIPA officially pulled the plug Tuesday on a potentially costly plan to build several small, gas-fueled power plants for use in the peak summer period.

In a statement, the Long Island Power Authority said it would "no longer move forward" with any proposals received in response to a bid request for peak power in October 2013. It did not cite specific reasons, but it left open the prospect that PSEG Long Island, which will take over power-planning functions from LIPA in 2015, could issue new proposal requests, most likely after PSEG completes a review of system resources and power needs by next year's end.

The move marks the second time in less than six months that LIPA has pulled back on a major energy project. This summer, LIPA withdrew plans for Caithness II -- a 750-megawatt power plant in Yaphank -- after a preliminary review found the capacity wasn't needed.

In both cases, stalling or canceling new power contracts would obviate the need for billions of dollars of new long-term power contracts. PSEG previously has said LIPA, with some 6,000 megawatts of total electric capacity through power plants, undersea cables and other sources, has adequate power to last until at least 2020.

Tuesday afternoon, companies that responded to the bid requests received letters telling them the project had been canceled. PSEG also posted a notice on its website.

"It was the right decision not to pursue the proposals," said Julia Bovey, Long Island director of the Department of Public Service. "There's a need for resources on the Island in specific places, but that can be best met through new solicitations open to all types of technology."

Withdrawing the plan "is in the interest of ratepayers," said Irving Like, a member of the newly revived LIPA Oversight Committee of the Suffolk Legislature. Like, who in the 1980s was instrumental in undoing the former Long Island Lighting Co.'s Shoreham nuclear plant, said ratepayers would benefit because "we won't have to pay for these plants."

LIPA's statement said it "still anticipated that there is a need for resources in specific locations on the electric system" that PSEG will address with new projects and bid requests. Any power shortages, LIPA said, would be met with "market-based" solutions in line with the state's new Reforming the Energy Vision approach, which stresses demand reduction, green energy and efficiency measures to avoid building expensive new plants.

PSEG's Utility 2.0 initiative to reduce demand by some 250 megawatts through $345 million in efficiency and renewable measures also will be used, LIPA said.

LIPA originally issued the bid request to replace National Grid-owned "peaker" plants built in the 1960s and 1970s.

Newsday last month reported that LIPA had narrowed some 38 proposals to five natural-gas-powered peaker plants and a battery storage unit. The plants would have been located in Holtsville, West Babylon, Oceanside, Glenwood Landing and Far Rockaway, sources said.

The new plants would have been capable of producing around 1,100 megawatts of power, though most peak units are designed to be used only during summer days with the highest electric use. LIPA currently pays hundreds of millions of dollars for long-term contracts for peak-power plants, and the new plants were estimated to cost in the billions of dollars. Around 1,000 megawatts from old peak-power plants would have been retired.

LIPA's statement said that while the peak-power proposals had been canceled, LIPA and PSEG continued to evaluate renewable energy projects under a separate 280-megawatt request for proposals. LIPA said a renewables recommendation is expected to be presented at its next board of trustees meeting on Dec. 17. A wind farm 30 miles from Montauk proposed by Deepwater Wind is a finalist, Newsday has reported, as are solar projects.

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