Blair Horner: The Assembly Pushes Back Against The Governor's Nuke Bailout

Jun 12, 2017

While the nation was transfixed by former FBI Director James Comey’s testimony on the Russian efforts to influence the 2016 Presidential election and the possible involvement of the Trump campaign, Albany was moving legislation which could dramatically lower electric utility rates across the state. 

Last year, the Cuomo Administration pushed through an agreement to raise electric utility rates in order to bail out aging nuclear power plants located on Lake Ontario.  The Administration’s final deal was pushed through with virtually no public participation and done so in the middle of the summer.  At that time, the Administration offered no cost estimates for the impact of the 12-year deal, other than to admit that the first two years would hike rates around a billion dollars.

The total cost of the 12-year deal could be as much as $7.6 billion according to an independent analysis.  Those costs would be passed on to all the state’s ratepayers – industrial, commercial and residential.  Thus, local governments and school districts would have to pay more, not-for-profits like hospitals would have to pay more, businesses would have to pay more and they would likely raise prices to pass those costs onto their customers.  As a result, the public – which would have its own residential rates hiked as well – would bear the entire multi-billion-dollar price tag.

The bailout plan covers four upstate nuclear power plants, all located on Lake Ontario.  Three of them are among the oldest on the planet and two were scheduled to be shut down since they were increasingly unprofitable.

Then the Cuomo Administration stepped in and cut its bailout deal largely outside of public view.

The deal has stunned some of the leading members of the Assembly and hearings were held to examine the process and the impact of the agreement.

As a result of that process, the Assembly last week moved legislation that would cap the monthly charge imposed on residential utility consumers by the governor’s deal to bailout the nuclear power plants.  The bill prohibited any utility from charging a residential consumer more than 25 cents per month for costs related to the continued operation of the bailed out nuclear-powered facilities.

The 25 cents per month cap is not a number that comes out of thin air – it is the exact fee charged for costs contained in a similar deal in the state of Illinois.  Illinois’s program was the product of a deliberative legislative process, unlike New York’s process which relied on secret negotiations between the Cuomo Administration and the Chicago-based company Exelon.

Exelon is a Fortune 500 company that owns nuclear power plants in both Illinois and New York and is the sole beneficiary of New York’s decision to bail-out the nuclear power plants. 

And while New York’s $2 per month surcharge may not sound like a lot, right now many state residents are having a hard time paying their electric bills.  According to the state, roughly one-in-eight New York residential ratepayers are 60 days or more late in paying their bills.  For them, this deal will make it even harder to catch up.

In order to protect all ratepayers, but certainly those most in need, New York’s legislature needs to drive that same bargain as Illinois and save ratepayers money.

Other than the price, the deal is similar in both states.  New York’s deal covers four reactors for 12 years (those facilities generate 3,351 MW); in Illinois, the deal covers three reactors over 10 years (2,889 MW).  The financial bailout, however, is markedly less expensive in Illinois.  Why should New York cut a worse deal?

Ironically, Exelon crows about the consumer savings for Illinois consumers on its website.  Clearly, the company is satisfied with its deal – even at one-eighth the cost of New York’s.

New York ratepayers need protection.  There is a good case to be made for not bailing out power plants that were built in the 1960s and have far outlived their usefulness.  Instead, the state should be investing that money in clean, renewable, 21st Century technologies.

However, if such a subsidy is to be imposed, it should cover the costs of operating those plants, not gouge New Yorkers to fatten the profits of an out-of-state company. 

Whether, and how, the state legislature chooses to react the Administration’s bail out plan is likely to be one of the key issues as lawmakers move into the last two weeks of their session.  What they choose to do could have a real impact on the costs of the electricity in New York.

Blair Horner is executive director of the New York Public Interest Research Group.

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