Sept 26 (Reuters) - New York utility regulators and some of the state's power companies asked federal energy regulators to reverse a recent decision that the New York parties say could increase electric bills in the Lower Hudson Valley by $350 million a year.
The New York State Public Service Commission (PSC) and the state-owned New York Power Authority (NYPA) said in a press release on Wednesday that the proposed new capacity zone in the Lower Hudson Valley could result in the construction of unnecessary new power projects.
The PSC, NYPA and other New York utilities asked the U.S. Federal Energy Regulatory Commission (FERC) to reconsider its August decision allowing the state's power grid operator, the New York Independent System Operator (NYISO), to create a new capacity zone in the Lower Hudson Valley that includes New York City.
The NYISO has said it designed the new capacity zone to maintain system reliability and attract investments in new and existing generation and demand response resources.
In basic terms, capacity markets pay generators to help keep existing power plants in service and build new units in order to maintain system reliability. Demand response providers who agree to reduce power usage when needed can also participate in capacity markets.
The new zone will include the current NYISO zones G, H and I in the Lower Hudson Valley and zone J in New York City.
The PSC and NYPA said the state is already working on New York Governor Andrew Cuomo's so-called Energy Highway initiative to expand the state's transmission resources to bring more power from upstate New York to the Lower Hudson Valley and New York City area.
The PSC and NYPA said the Energy Highway could negate the need for FERC to offer financial incentives to build more power plants downstate.
"We strongly urged FERC to reconsider its decision to create a new capacity zone in New York, which it says is needed to build more power plants downstate to alleviate demand for electricity," PSC Chairwoman Audrey Zibelman said in the release.
"We are well aware of the downstate demand for electricity...However, in its decision, FERC did not take into consideration the ongoing initiatives included in the Governor's Energy Highway," Zibelman said.
The biggest power companies in New York include units of Consolidated Edison Inc, National Grid Plc, Iberdrola SA, Entergy Corp, TransCanada Corp and NRG Energy Inc.
The PSC said if FERC's plan goes into effect, typical residential customers in the Lower Hudson Valley could see monthly bill increases ranging from 5 percent to almost 10 percent, depending on the utility. The increases for industrial and commercial customers could be even higher, the PSC said.
"Creation of a permanent new capacity zone undermines the Governor's Energy Highway initiatives," Gil Quiniones, NYPA president and chief executive, said in the release.
"The Energy Highway pursues a long-term solution to deliver lower-cost, upstate power to the downstate area by reinforcing the transmission system, Quiniones said, noting the new capacity zone will "take money out of the pockets of ratepayers and result in a windfall of profits for existing power plant owners in the region."
The NYISO plans to implement the new zone by May 1, 2014. The PSC is asking FERC to delay implementing its decision until 2017 and consider how the Energy Highway proposals will affect long-term power prices.
"Without such analysis, FERC cannot properly assess whether it is causing more harm than good, and whether consumers might end up paying hundreds of millions of dollars for unneeded power plants," the PSC and NYPA said.
Governor Cuomo proposed the Energy Highway initiative in January 2012 to rebuild the state's power system by adding up to 3,200 megawatts (MW) of generation and transmission capacity and clean power.
One megawatt can power about 1,000 New York homes.