Via Email to: firstname.lastname@example.org
June 9, 2014
To: Honorable Kathleen H. Burgess, Secretary and
Honorable Paul Agresta, Administrative Law Judge
New York State Public Service Commission
Three Empire State Plaza
Albany, NY 12223-1350
Subject: CASE 10-E-0501 Petition of CPV Valley, LLC (CPV) for a Certificate of Public Convenience
Dear Secretary Burgess and Judge Agresta:
We request that the PSC revoke the May 9, 2014 ORDER GRANTING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY, AUTHORIZING LIGHTENED RATEMAKING REGULATION, AND APPROVING FINANCING to the CPV Valley LLC proposed power plant due to the flagrant misrepresentations that CPV officials made in their October 12, 2010 petition to the PSC.
Among other requirements, CPV, the Petitioner, must provide the Commission with “ . . . a description of the manner in which the cost of such plant is to be financed; evidence that the proposed plant is in the public interest and economically feasible; and proof that the applicant is able to finance the project and render adequate service.” (See CPV Petition, page 4.)
CPV states that, “The project will sell its electrical output exclusively at the wholesale level and will not be a retail provider. The project anticipates selling its electrical output into one or a combination of: the spot markets administered by the New York Independent System Operator (“NYISO”), neighboring control areas, pursuant to power purchase agreements, or financial hedge contracts.” (See CPV Petition, page 3.)
The Petitioner repeatedly asserts that its production “ . . . will be one of the most efficient methods of generating dispatchable electricity. The high efficiency of combined-cycle technology equates to less fuel consumed to produce electricity . . ..” (See CPV Petition, page 7.) That efficiency would also lead to lower production costs and a price advantage for CPV over other generators and also enhance competition in an open market. (See footnote 11, CPV Petition page 9.)
The Petitioner describes its financial resources as follows: “CPV, the parent of Petitioner, as previously noted, is a leading North American electric power generation development and asset management company that has the financial capability to arrange for the proposed financing described in the ensuing section of this Petition.” (See CPV Petition, page 9.)
“Financing – Section 69”
“Pursuant to Section 69 of the Public Service Law, Commission authorization is necessary for an “electric corporation” to enter into indebtedness payable at periods of more than 12 months. Since the Project will be a competitive wholesale provider of electricity and will not serve retail customers, the scrutiny applicable to monopoly utilities under PSL Section 69 may be reduced. See Case 06-E-0843 – Noble Clinton Wind Park I, LLC, et al., Order Approving Financing Subject to a Condition (issued September 25, 2006). The Project’s construction and operation will be funded by a combination of debt and equity, with CPV retaining an ownership position and management responsibility. CPV is backed by significant equity investment from a leading private equity investor, Warburg Pincus. CPV has lead the refinancing of existing generating assets with total loans in excess of $2 billion, representing roughly 4,200 MW. Additionally, as recent as February 2010, CPV raised approximately $320 million of long-term debt financing and equity capital for 152 MW of power projects in the United States. In the upcoming month, CPV will be financing an approximate $1 billion peaking facility located in southern California.
“The financing for the Valley Energy Center will be done through the limited liability company, CPV Valley LLC. Total financing will be approximately $680 million. The proceeds will be issued exclusively for the construction and operation of the generation project authorized by the Commission in the Certificate of Public Convenience and Necessity. As part of the financing for the Valley Energy Center, CPV Valley proposes to enter into a sale/leaseback (or lease/leaseback) arrangement with the Orange County Industrial Development Agency.
“As with other financing approved for such facilities, captive New York ratepayers cannot be harmed by the terms of the contemplated financing because the Petitioner and it affiliates bear all the financial risk associated with the financing arrangements. Case 03-E-1179 – Equus Power I, P., Order Providing for Lightened Regulation and Approving Financing (issued October 30, 2003).” (See CPV Petition page 10.)
Subsequently, the PSC held a Public Statement Hearing on February 25, 2014, at SUNY Orange, Middletown, NY at which time the economic feasibility of the proposed power plant was challenged (see February 26, 2014, Sierra Club Comments).
In its May 9, 2014 Order Approving the Certificates, the Commission relied upon the validity of the assertions made in the CPV Petition. Those assertions included that CPV and its affiliates, such as Warburg Pincus, in fact, have private equity funding and the financial ability to construct and operate the proposed power plant, that financial risk would be shouldered by private investors – not by ratepayers or by the public, that CPV would produce electricity to be sold on a competitive basis into the open power supply market such as the NYISO bid-auction system in competition with other private generators, and, as a consequence, CPV would bear any market risk while the public would be protected from any financial harm.
We submit that the Commission was deceived and that CPV has no capabilities to implement the financial promises made in their petition.
CPV Vice President Steve Remillard has confessed that CPV cannot obtain financing on the merits of the proposal and must, instead, rely on a take-or-pay contract with New York Power Authority (NYPA). Such a government agency contract, which has not been offered by NYPA to CPV, would guarantee the bonding required to finance the project. As reported in the May 9, 2014 Times Herald-Record: “. . . Competitive Power Ventures, the Massachusetts company that proposed the plant, cannot move forward, even with the final permit, called the certificate of public convenience and necessity.
“CPV still needs the state to decide if it will award the company a long-term power contract through the Energy Highway, an initiative to modernize the energy system. The contract would have a state organization buy energy from CPV over a number of years, and is essential for the company to secure financing for the plant, said Vice President Steve Remillard.”
Such a contract as stipulated by Remillard would transfer all financial risk from CPV to ratepayers and to the public at large in a market that has no customers for electricity. Under that scenario, NYPA would be required to purchase all electricity produced by CPV for resale or to pay for all CPV costs even if NYPA does not “take” and resell any of that electricity. And, the probability of NYPA’s obligation to buy power with no customers is very real as exemplified by NYPA’s current $64 million annual take-or-pay contract loss for the Hudson Transmission Project designed to sell unneeded electricity to New York City (see: Albany Times Union, April 5, 2014, article entitled: “No customers for Authority’s Power”).
At this time, CPV has not obtained private equity to finance construction, does not intend to sell electricity competitively in the open market, does not assume any financial responsibility or market risk, and shifts all financial risk to ratepayers and to the public, contrary to the assertions contained in its Petition. In view of the above, it is clearly evident that CPV has not satisfied the requirements of PSC Law Sections 68 and 69. Therefore, we request that the Commission reopen this Case and revoke the Order approved on May 9, 2014.
Jurgen Wekerle, Co-chairman Sterling Forest/Highlands Committee
PO Box 287, Walden, NY 12586, Tel: 845-744-5116, email: email@example.com
Randolph Hurst, Ramapo/Catskill Group Conservation Committee
83 Post Road, Slate Hill, NY 10973, Tel: 845-374-6006, email: firstname.lastname@example.org