By Tyson Slocum
On October 14, the owners of two natural gas power plants located in NYISO filed a complaint under Section 206 of the Federal Power Act. The complaint claims that state policies promoting a proliferation of zero emission power resources—including retention of existing nuclear and the addition of as much as 9,000 MW of new offshore wind generation—will unfairly suppress capacity prices. The power plant owners assert that they will experience financial hardship from these lower capacity prices, but provide no detailed balance sheet data to verify the contention. The two owners ask FERC to declare these low prices to be unjust and unreasonable, and have the Commission initiate market rule changes that would increase capacity prices in ways that would conveniently result in larger financial payments for their natural gas power plants.
The Commission should dismiss the complaint. First, both complainants’ facilities have received roughly $200 million in direct cash subsidies from state and local governments to construct and operate their facilities—negating whatever (dubious) claim they have that certain zero emission generation resources receive unfair subsidies. Second, the alleged financial difficulties described by the complainants are a feature facing natural gas power plants across all markets in the U.S. and are not unique to NYISO.
While it’s clear that these owners of the two natural gas power plants do not have a strong appetite for risk, it is not a responsibility of ratepayers to cough up higher capacity payments as proposed by the complainants. The NYISO risk-based power market began in response to a petition by Enron Corp. that New York regulators unanimously approved in 1996, thereby subjecting merchant power plant owners to significant risk in exchange for opportunities to earn far higher profits than had been allowed under cost of service regulation. It is not just and reasonable to guarantee cost recovery for the owners of power plants only when they claim financial hardship, while allowing them unregulated and unlimited profits when times are good.
Neither owner has supplied the detailed balance sheet data required to certify their supposed uneconomic performance. The complaint is meritless and should be dismissed.
Empire Generating is a 653 MW natural gas power plant in Rensselear, NY. The private equity firm Energy Capital Partners bought Empire Generating in July 2007 during the late stages of the project’s development and construction, and it began commercial operation in September 2010. Energy Capital Partners closed the sale of Empire Generating to a consortium in March 2017—most likely because Energy Capital Partners recognized that the facility’s value had significantly changed in the face of low-cost renewables. Indeed, the new owners were forced to declare bankruptcy just two years later on May 19, 2019, with a collection of creditors applying for permission under Section 203 of the Federal Power Act to emerge with equity control.
Empire Generating has five owners: Greenwich, CT-based Black Diamond Capital Management (51.5%), Los Angeles-based Ares Management Corp. (34.4%), Greenwich, CT-based Starwood Property Trust, Inc. (10.3%), New York-based MJX Asset Management LLC (3.5%), and an entity only identified as “Goldman”, which may be The Goldman Sachs Group (0.3%).
Cricket Valley Energy Center LLC operates a more than 1,000 MW natural gas power plant in Dover, NY, which began construction in 2017 and just became operational this year. It is owned by a group of foreign entities, including the national government of Japan, which controls nearly 11% of the power plant—which means a foreign government has paid for a share of the complaint.
A 50/50 venture between Tokyo Electric Power Company (the Japanese national government controls 25% of Tokyo Electric Power Company) and Chubu Electric Power Co., Inc. controls 86.57% of Cricket Valley, with Switzerland-based Advanced Power AG owning 13.4%.
Read the entire 6 page filing here: CricketMBR