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LIPA narrowing list of proposals for small peak-power generators

The National Grid power plant on Shore Road

The National Grid power plant on Shore Road in Glenwood Landing, Friday, Nov. 7, 2014. Credit: Steve Pfost

LIPA is narrowing a list of dozens of proposals for small peak-power generators to replace an existing, aging fleet, but the costly plan is facing unprecedented scrutiny.

People familiar with the recommendations say authority staff have narrowed a list of some 38 proposals down to five and that the new "peaker" plants, as they are called, would be capable of producing a combined 1,100 megawatts of power. A megawatt powers about 800 homes. The total cost wasn't available, but one expert said if LIPA moves ahead with all the proposals, the costs would be in the billions of dollars.

In October 2013, the Long Island Power Authority put out a request for bids for the new plants, which would replace about 1,000 megawatts of existing National Grid-owned peakers. LIPA's bid also asked for location-specific proposals for large battery-storage units, and other proposals.

The original peaker plants were built in the '60s and '70s, when the Long Island Lighting Co. owned the electric grid, and were used to bolster the system as demand was increasing.

But several factors could stand in the way of LIPA moving ahead with the proposals, particularly at a time when Long Islanders are generally using less power and are probably facing three years of rate increases starting in 2016.

For one, PSEG Long Island, which manages the electric grid under contract to LIPA, is scheduled to take over responsibility for power planning beginning in January. In addition, PSEG is in the midst of reviewing all LIPA power resources as it devises a plan to meet future power needs. An interim review found LIPA had ample power to meet demand through at least 2020, Newsday has reported.

A PSEG source said the company has recommended that LIPA not make any financial commitments on the new peaker plants before PSEG finishes its review by the end of next year. "Until we have the integrated resource plan finished, it's still unclear what is needed and when," said the source, adding that PSEG has been briefed on LIPA's short list of finalists.

"We recommended they continue with the request for proposals and their review, but that they make no financial commitments," the source said. "My understanding is they [LIPA staff] are complying."

If the awarding of the contracts is delayed or ultimately killed, it won't be the first time since PSEG took over the grid. This summer, it recommended that LIPA forestall commitments to the 750-megawatt Caithness II plant in Yaphank because of the existing power excess. LIPA had selected Caithness from a list of proposals in July 2013, but has suspended final contract approvals pending the PSEG review.

 

Against state vision

The new plan for up to five new peaker plants, including one that would produce about 460 megawatts of power in Holtsville, also appears to run counter to a new state energy vision that stresses green-energy alternatives and market-driven sources to avoid construction of traditional plants.

"The days of utilities being able to dictate what happens are over," said Julia Bovey, director of the Long Island office of the Department of Public Service.

Instead, she said, pointing to recent Utility 2.0 green-energy meetings with PSEG, utility challenges will be solved by open, competitive markets to reduce costs and usher in alternative energy sources. "It's a new world and the way we think about creating and distributing electricity has evolved," Bovey said.

In a statement, Jim Parmelee, managing director of Power Supply Long Island, LIPA's power markets arm, said the authority has been working with PSEG to "determine the resources needed to address peak-energy demand to ensure reliability of electric service for our customers and to evaluate the proposals that have been submitted. "

He declined to confirm specifics of the review, but noted PSEG's ongoing study of LIPA's power sources and the state's energy vision as considerations in the peaker selection process.

In addition, Parmelee said the authority staff has been providing "regular briefings to the [LIPA] trustees as staff proceeds with its review and analysis."

But one trustee, who was an executive at the Long Island Lighting Co. and played a role when the original peakers were built, said a reporter's call was the first he'd heard that a list of 38 proposals had been narrowed. LIPA says in bid documents that eventually all the units from the 1960s and '70s will be retired or replaced.

"I don't think it's really rational or feasible to go ahead and replace all the old peakers," said trustee Matthew Cordaro, speaking on his own behalf. "I'd be hesitant to endorse a plan that called for a wholesale replacement of all the old peakers. It's something we may not be able to afford."

Cordaro estimated that a plan for 1,100 megawatts of new capacity in peakers would cost a minimum of $1.1 billion just to build. But the long-term contracts for such plants, including financing costs, profit and taxes, would probably double that.

State records show LIPA pays hundreds of millions each for contracts with several of its existing peaker plants.

For instance, LIPA has two separate contracts for generators with Juno, Florida-based NextEra Energy Resources, a company formerly known as FPL Energy. The Bayswater Peaking facility and the Jamaica Bay Peaking plant have long-term contracts with LIPA valued at $182 million and $190.1 million, respectively, over 15 to 18 years. The sites provide LIPA with 56 megawatts and 54 megawatts, respectively.

Because they are designed to handle peak-power loads in summer, plants such as the Far Rockaway units sit idle most of the year.

The former FPL was among more than a dozen developers awarded expedited contracts in the early 2000s after former Gov. George Pataki determined Long Island was susceptible to blackouts because of power shortages. Critics at the time criticized the move as expensive and the plants inefficient.

 

Series of proposals

Former Sen. Alfonse D'Amato's Park Strategies has been a consultant to NextEra. A NextEra spokesperson didn't return a call seeking comment.

Sources familiar with the LIPA proposals said NextEra partnered with National Grid to propose a series of peaking proposals, and that at least two are considered finalists: a 190-megawatt proposal to upgrade existing peaker units at Glenwood Landing, and another to install about 100 megawatts near the old Far Rockaway site. The Far Rockaway site may be one of the few that also includes a battery storage proposal, which green-energy advocates prefer as a noncombustion alternative, according to sources.

National Grid and NextEra are 50-50 partners on another venture at the E.F. Barrett power station in Island Park that seeks to overhaul an existing larger power plant and upgrade peaking facilities at the station. The proposal, originally scheduled to be voted on by LIPA's board in the spring, has been on hold until PSEG finishes its review.

National Grid spokeswoman Wendy Ladd said, "We are joint venture partners with NextEra on the repowering of E.F. Barrett and we are looking into other opportunities on Long Island." She declined to be more specific.

LIPA bidding papers say up to 279 megawatts of existing peaking generation at the Barrett plant is up for replacement because of the age of the peakers. Transmission lines there can handle up to 380 megawatts, the papers say.

 

Oceanside eyed

That could explain why LIPA appears to be favoring a proposal by Caithness Long Island Energy to site an approximately 100-megawatt peaking plant in nearby Oceanside, according to sources.

Caithness spokesman Don Miller confirmed the company "did respond" to LIPA's bid request, but said the specifics were confidential. "At this point we have not gotten any information back from LIPA," Miller said.

Other proposals that LIPA staff are said by sources to recommend include a nearly 460-megawatt proposal in Holtsville to replace 500 megawatts operated by National Grid, and an approximately 250-megawatt proposal near a landfill in West Babylon, to replace a 49-megawatt plant.

Gordian Raacke, executive director of Renewable Energy Long Island, a green-energy advocate, said LIPA's plan runs counter to the state's "reforming the energy vision" initiative, which emphasizes efficiency, renewables, better grid management and dispersed energy sources to reduce the need for new plants.

"It just shows that LIPA staff, at least apparently, is still stuck in the 20th century," he said.

Worse, Raacke said, the fossil fuel-centric peaker plan exposes ratepayers to considerably higher future costs.

"To me the biggest issue is that it comes with an enormous risk of the unknown fuel cost," he said, noting recent volatility in natural gas prices. "And it locks us in for 20 years. I think that's the wrong thing to do at this point."

 

UP FOR REPLACEMENT

 

Peak generators set for retirement (in megawatts):

East Hampton (Montauk) 6 mw*

East Hampton 18 mw

Glenwood Landing 63 mw

Holtsville 500 mw

Island Park (E.F. Barrett) 279 mw

Shoreham 63 mw

Southold 7 mw

Southampton 9 mw

West Babylon 49 mw

Source: LIPA request for proposals

*Diesel generators

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