N.Y. PSC Denies NiGen Request to Change RPS Contract Price Email This Story November
The New York PSC denied the request of Niagara Generation, LLC for a pricing adjustment
in a Main Tier incentive contract entered into between NiGen and the New York State
Energy Research and Development Authority (NYSERDA) under the Renewable Portfolio
Standard (RPS) program, as the PSC found that, "the contract is a binding agreement
that was awarded in a competitive solicitation at the price bid by NiGen and allowing
a price adjustment in such a circumstance would undermine the competitive process
established for the Renewable Portfolio Standard (RPS) program."
NiGen, which owns a 54-MW coal plant which it co-fires with wood as biomass power
under the RPS contract, was seeking a pricing adjustment to allow for the introduction
of a cost-based rate established by negotiation with the Staff of the Department
of Public Service, with future price adjustments every two and one half years during
the term of its RPS contract. NiGen said that it currently finds itself in a position
where the cost of biomass and other fuels, combined with other operating costs, have
made continued operation of the NiGen facility on biomass fuel uneconomic.
"The incentive level in the NiGen RPS contract is set at the price NiGen itself bid
before it was awarded the contract," the PSC said in denying the requested pricing
adjustment. "The changes in the market NiGen describes are all risks that a developer
in a competitive market accepts when it enters into a long term contract, and must
responsibly be factored by the developer into any bid price that the developer offers.
The premise of our move to wholesale competition was that wholesale generators would
bear these risks rather than ratepayers. Allowing the requested mid-stream price
adjustment in a contract that does not provide for such adjustments would undermine
the competitive process established for the RPS program," the Commission concluded.
"Other bidders in the solicitation that NiGen participated in were subject to the
same rules and it would be unfair to the other bidders that were underbid by NiGen
and were not awarded contracts to now allow an upward price adjustment for NiGen
that the others might have beat. In addition, our stepping in and breaking the price
terms of an executed contract would invite all other RPS contract holders to petition
us to adjust their prices upwards whenever market changes do not go their way. Contracting
under such circumstances would be a mockery and there would be little protection
for ratepayers as to the cost certainty of the RPS program that the current contract
prices provide," the PSC added.
While NiGen had noted that the PSC will allow future biomass contracts to include an "escape
clause" and potential price adjustment to address rising costs, the PSC stressed
that such action was purposefully limited to a going-forward basis and does not abrogate