FERC "Capacity Zone" Plan

The Federal Energy Regulatory Commission (FERC) is telling state officials that expected annual growth in electricity demand and the loss of power sources are driving the need to establish a new “capacity zone” between New York City and Albany.

Capacity is the amount of electricity a utility is required to have available under peak conditions — the maximum amount expected — plus an additional 18 percent. A capacity zone quite simply reflects where you have more need than where transmission can give you generation.

Under rules for a new capacity zone, utilities like Central Hudson will be required to purchase at least 88 percent of its “capacity,” or amount above actual demand, from electricity producers within the zone. Officials said that is required as a way to provide incentives for new producers to build plants that meet the growing demand for electricity.

Central Hudson has opposed the capacity zone, which is scheduled to begin in March, arguing that it will increase the costs charged to customers by 8 to 15 percent.
While demand for electricity in the region is increasing at a rate of 200 megawatts per year, the amount of electricity generated has declined by 1,700 megawatts.  It is because the 1,700 megawatts was retired in part because generators weren’t making enough new capacity the month before to justify the upgrades to their systems.

There is a growing requirement in this area that the current system can’t fix and if an answer is not found, there will be blackouts.  The reduction in electricity generated is a result of regulators rejecting requests for upgrades based on profit margins that have been reduced due to environmental regulations. If you’re a plant owner, you have to make money enough to run that plant ... and (coal-based plants) have not been able to survive because of the environmental requirements on (them). Because of the cost of natural gas as compared to the cost of coal they just simply can’t compete, so coal has been retired across the state and you’ve had some of that in this area retire.

The New York Independent System Operator is a nonprofit organization that reports to the state Public Service Commission on the demand for electricity and forecasts where shortages can be expected. Limits on electricity are also based on how much power can be carried through existing transmission lines from other parts of the state, which is why additional lines are being considered for the region.

The majority of the congestion is from Leeds (in Greene County) to Pleasant Valley (in Dutchess County. On peak days, you just simply can’t move any more power through those lines.

There are currently capacity zones for New York City and Long Island, where additional electricity comes from outdated generators that are brought online when demand is high. There has been an impact from people trying to cut back on electric use, but the use of air conditioners and increased heating needs have offset those savings.  Energy efficiency has made us efficient in our daily lives, but the state has also set peak demand records in summer and winter in the last seven months.  (Daily Freeman News, 1/30/2014)