Blair Horner: Nuke Bailout Will Cost New Yorkers Billions

Oct 24, 2016

During the lazy, hazy days of last summer, the Cuomo Administration approved a plan to hike New Yorkers’ electric utility bills by billions of dollars. The hike is to bail out three upstate nuclear power plants in central and western New York. Some of these plants, built during the Vietnam War era, were slated to be shut down because they were no longer efficient or profitable, having run well past their projected lifespan of 40 years.

Instead, New York ratepayers – be they commercial, industrial, municipal governments, schools, nonprofit groups or residents – will have to pay an estimated $7.6 billion more on their electric bills to bail out three nuclear power plants operating near Oswego and Rochester.

The $7.6 billion estimate was calculated by the Public Utility Law Project, an independent think tank. Of that amount, an estimated $2.3 billion will be paid over the next 12 years by residential consumers—homeowners and renters.  Niagara Mohawk residential customers, for example, will pay nearly a half of a billion dollars more; Con Edison consumers in downstate New York, will pay over $700 million more.

New Yorkers will be paying more for electricity so that the Illinois-based company Exelon, the owner of two of these plants and prospective buyer of the third, can turn a profit.  Exelon is already a hugely profitable energy company that makes billions every year; the plan to transfer billions of New York ratepayer dollars to Exelon has been described as one of the biggest transfers of wealth in state history.

Despite the magnitude of the subsidy, there was little public debate or transparency about the process. The Cuomo Administration downplayed the possible impact. In its initial reports last spring, the Cuomo Administration estimated that the cost of the bailout could range from as little as $59 million or as much as $658 million. It wasn’t until July that the true cost of the bailout began to emerge.

In mid-July, the Cuomo Administration unveiled the biggest—and most accurate—cost estimate right before the August 1st vote to approve the deal; the time when many New Yorkers were barbecuing and enjoying vacations. 

The new estimate was a ten-fold increase over the highest that had been projected in the spring.  And then New Yorkers were given less than two weeks to comment.  Certainly not enough time during any part of the year, but particularly difficult to engage the public during the middle of the summer.

There can be no doubt that New Yorkers would agree that investments in the state’s renewable energy future are worth it, but spending billions of dollars to bail out old, dirty, unprofitable 20th century energy sources makes no sense at all. It’s the equivalent of spending big bucks to keep the horse-and-buggy industry alive while Henry Ford is moving cars off the assembly lines.

It is crystal clear that instead, New Yorkers should invest in clean, renewable, 21st century energy technology and reap the economic, health and environmental benefits that brings, while at the same time keeping the cost as low as possible for ratepayers. Renewable technologies and energy efficiency programs are already cheaper than nuclear power, so these investments would save money while greening the state’s energy system.

This November, the Cuomo Administration will decide whether to go through with the bailout by approving the sale of one upstate nuclear plant and drafting a contract to subsidize all the upstate plants.  If the governor chooses to pull the plug on the deal, then the state entities involved will have to come up with a new plan for better, cleaner, cheaper energy.  If that happens, there is a good chance New Yorkers will be part of that process, not out of the loop and then stuck with the bill.

Blair Horner is the Legislative Director of the New York Public Interest Research Group.

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