Niagara
Power Project FERC No. 2216
Niagara
Power Project Power Allocations, Rates, and Opportunities
HTML Format. Text only.
Prepared
for: New York Power Authority
Prepared
by: The Brattle Group
August
2005
Copyright
© 2005 New York Power Authority
_________________________________________
Agencies
ENCRPB Erie and Niagara Counties Regional Planning Board
FERC Federal Energy Regulatory Commission
FPC Federal Power Commission
NYISO New York Independent System Operator
NYPA New York Power Authority
PASNY Power Authority of the State of New York
Units of Measure
cfs cubic feet per second
fps feet per second
G giga (prefix for one billion)
GW gigawatt
GWh gigawatt-hour
k kilo (prefix for one thousand)
kV kilovolt
kVA kilovolt-ampere
kW kilowatt
kWh kilowatt-hour
M mega (prefix for one million)
mgd million gallons per day
MV megavolt
MVA megavolt-ampere
MW megawatt
V volt
W watt
Wh watt-hour
Regulatory and
Legal
CFR Code of Federal Regulations
FPA Federal Power Act
PAA Power Authority Act
PAL Power Authority Law
Miscellaneous
DEIS Draft Environmental Impact Statement
EA Environmental Assessment
EIS Environmental Impact Statement
FSCR First Stage Consultation Report
IOU Investor-Owned Utility
MEUA Municipal Electric Utilities Association of New York
NMPC Niagara Mohawk Power Corporation
NYSEG New York State Electric & Gas
RG&E Rochester Gas and Electric
This report describes the legal and institutional framework that governs allocations of Niagara Project power, explains ratemaking methodologies and outcomes, and discusses current and future opportunities for utilizing project power. The Niagara Redevelopment Act authorized the New York Power Authority (NYPA) to build a hydroelectric project that would use the United States share of water made available for power generation under the 1950 Niagara River Water Diversion Treaty. The allocation of this power is governed primarily by Federal and State law, as administratively and judicially interpreted, with discretion given to NYPA regarding allocation and contracts once legal requirements are met.
Niagara Project power is divided among four basic types of allocations – Preference Power, Replacement Power, Expansion Power and contract sales to three upstate investor-owned utilities for resale to residential customers. As currently allocated, 50% of Firm Power (940 MW) is allocated to Preference customers, which are municipal electric and rural cooperative utilities (40% in New York and 10% out-of state), 445 MW to Replacement Power, 250 MW to Expansion Power, and the remaining power to investor-owned utilities. The allocation has remained fairly constant throughout the term of the project, with the primary exception being the Preference Power allocation rising to serve the growing needs of eligible municipal and rural cooperative systems, while the allocation to investor-owned utilities fell.
The customer base that ultimately uses the power provided by the Niagara Project varies considerably – both geographically and in uses of the power – depending upon the class of power and the entity purchasing the power from NYPA. Preference Power provides the most geographically distributed benefit of Niagara Project power, but also is quite concentrated in terms of the relatively small proportion of customers and loads that it serves within those broad geographic regions. The share of residential retail sales to total retail sales for the New York Preference customers averages 40%, and Preference Power serves about 2% of New York State residential customers. Replacement Power and Expansion Power serves only industrial customers that are heavily concentrated in Niagara County (Replacement Power) or in Niagara, Erie, and Chautauqua counties (Expansion Power). Power deliveries to three upstate investor-owned utilities are dedicated to residential customers, which together serve 2.4 million customers in 54 of New York’s 62 counties.
The rates on Niagara power remained constant from 1961 to 1981, when court decisions mandated a change to cost based rate making. Preference Power and energy sold to upstate investor owned utilities for residential customers are sold at cost, while Replacement and Expansion Power are sold at below market rates. The cost-based rates are determined using a unique version of the “Trended Original Cost” method of rate regulation in which the rate of return on capital is not included.
Due to statutory, judicial and contractual restraints, opportunities for new utilizations of project power are limited. The Niagara project is fully allocated, except for quantities of Replacement and Expansion Power that are underutilized, voluntarily relinquished by or withdrawn from recipients. There are established procedures for eligible business applicants to apply for and receive an allocation from the blocks of unallocated Replacement and Expansion Power. The New York State Legislature on June 23, 2005 passed legislation that provides a state statutory basis for the continued sale of 445MW of Replacement Power to businesses within 30 miles of the Project. (S5866/A8960). The legislation, which will be sent to the Governor for his approval, also provides for the use of a portion of unallocated Replacement Power for the purpose of Energy Cost Savings Benefits to be granted by the New York State Economic Development Allocation Board, consistent with current contractual obligations.
The contracts with the upstate investor-owned utilities for resale to residential customers expire at the end of the current license (August 31, 2007). Except for the general priority for resident