LIPA power bidding raises cost concerns

As the Long Island Power Authority explores new projects to augment or replace antiquated plants, local experts are raising questions about the costs, types and ultimately the amount of power planned in LIPA's next generation.

Next month, LIPA will begin taking bids from companies seeking to supply up to 2,500 megawatts of electricity - the most sweeping bid in its 13-year history.

LIPA says its aim in seeking the bids is flexibility - if newcomers can offer cleaner, more efficient ways to supply energy, it might be worth switching from the 17 existing National Grid plants.

LIPA is also open to overhauling the old plants, a cost the authority has estimated at $3.5 billion for the three largest.

Ratepayers on the hook

But more efficient plants don't necessary mean lower rates. The power contracts will leave ratepayers on the hook for $4 billion to $12 billion in construction costs over 20 years or more, depending on the choices made. The figure is based on LIPA projections for upgrading existing plants, current plant costs and industry estimates.

Experts generally applaud LIPA's efforts in exploring a range of options. But some critics say it should focus more on renewable energy specifically. Others worry that LIPA may end up sticking its ratepayers with the cost of more long-term capacity than it needs.

"I think it's good for LIPA to be looking for other sources of energy to be bringing onto Long Island," said Robert Catell, former KeySpan chief executive and now chairman of the Advanced Energy Research and Technology Center at Stony Brook University. He said LIPA could benefit by exploring "lower cost, perhaps more renewable-based energy."

Gordian Raacke, executive director of Renewable Energy Long Island, said leaving green power off the bids was a "big risk" given climate concerns and the volatility of fossil-fuel prices.

LIPA power markets vice president Paul DeCotis said wind and solar projects generally aren't large enough to meet the bid's 100-megawatt minimum, and their power generation is intermittent. LIPA still hopes to add more renewables with other projects, he said.

Neal Lewis, a LIPA trustee who heads the Sustainability Institute at Molloy College, wants LIPA to go greener now. "We need right now to be engaged in a serious discussion about renewables and it's just not happening."

But some see promise in LIPA's plan. Matthew Cordaro, a former Long Island Lighting Co. executive, applauded the decision to make overhauling old plants part of the answer.

"I think they've come to realize they have to deal with the backbone of the existing steam-generating fleet," said Cordaro. "They're starting to realistically look at repowering."

Most of LIPA's power today comes from 1950s-era steam-based plants, which operate on natural gas or fuel oil.

LIPA officials declined to put a price tag on the costs for all-new facilities, but its contract for the new Caithness plant in Yaphank, which burns primarily natural gas more efficiently than old plants, may be an indicator. Its 350 megawatts of power will cost ratepayers $1.59 billion over 20 years, or $4.4 million a megawatt.

Catell noted that a former KeySpan plant in Queens added 250 megawatts of power to an existing site and cost just $300 million. "Each site really has to be looked at individually," he said.

Does it need the power?

Not everyone is convinced LIPA will need all the power it is bidding for, particularly if energy efficiency measures on the consumer end improve.

On one hot day last summer, LIPA demand hit a new record: 5,825 megawatts. Right now, LIPA has contracts for more than 6,500 megawatts. Though typical daily usage is around 3,000 megawatts, regulators require that LIPA build enough power for the peaks.

One former LIPA trustee worries the authority may be overdoing it.

"In our view, the trends do not point to higher load demand," said Shelly Sackstein, chairman of Action Long Island, a business group. He's concerned LIPA may be locking ratepayers into expensive long-term contracts for power they may not need as more residents and businesses seek to conserve energy.

LIPA expects to make a decision on the proposals by next winter and phase in new power sources through 2017.