SIERRA STERLING FOREST/HIGHLANDS COMMITTEE
CLUB RAMAPO/CATSKILL GROUP CONSERVATION COMMITTEE
August 27, 2014
Via Email to: email@example.com and firstname.lastname@example.org
To: Honorable Paul Agresta, Administrative Law Judge
And Honorable Kathleen H. Burgess, Secretary
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 and Necessity, Approval of Financing and for Approval of a Lightened Regulatory Regime. Sierra Club Request for Rehearing/Reconsideration of Commission Order issued on July 28, 2014 denying the Request to Revoke.
Dear Judge Agresta and Secretary Burgess:
Sierra Club predicates this request on the fact that the Commission failed to respond to or misstated the contentions in our filings of June 10 and July 10, 2014.
In the interests of brevity, please refer to the Sierra Club Motion to Revoke filed on June 10, 2014, and Correspondence with Attachments dated July 10, 2014, for background information.
On May 9, 2014, as the Commission was issuing the Order Granting the Certificate to CPV, the Middletown Times Herald-RECORD published an interview with CPV Vice President Steve Remillard, who contradicted the financing representation that CPV had previously made to, and accepted on face value by, the Public Service Commission. Mr. Remillard acknowledged that CPV could not obtain outright private financing in the current competitive power market. CPV would now need a long-term contract with a state organization. That state contract secured by the taxing authority of New York State is necessary to guarantee the private revenue bonds needed to finance the power plant construction and operation. Such a state contract would not only nullify the requisite competition necessary for Lightened Regulation, but also would shift financial risk from the private CPV investor to the captive ratepayer and taxpayer, a new circumstance, which is in total opposition to the justification the Commission gave for granting the certificate in the first place.
The Commission’s May 9, 2014 Order noted that: “. . . we need not make an in-depth analysis of the proposed financial transaction . . . Additional scrutiny is not required to protect New York ratepayers who cannot be harmed by the terms arrived for this financing because CPV Valley will bear the financial risk associated with its financial arrangements.” (See pages 22-23).
CPV’s most recent comment reversed the above noted rationale to grant the Certificate. The Request to Revoke was made based upon the significant power market and financial market changes that had evolved since the October 2010 CPV Petition. The new circumstances would reverse the CPV business plan, would negate the role of market competition, and would now burden the public with financial risk. The hope of the Sierra Club Motion was that the financing requirements for the Certificate would be updated, would be given professional evaluation and would provide guarantees to protect both the ratepayers and the taxpayers from financial risk.
On July 28, 2014, the Commission issued an Order Denying the Sierra Club Motion for Certificate Revocation.
CIRCUMSTANCES REQUIRING REHEARING/RECONSIDERATION
We agree with CPV’s desire to obtain long-term power purchase agreements (PPA’s) to provide financial stability in a rapidly changing power supply market and we have shared those considerations with CPV. However, the only long-term PPA’s that we would support are competitive bilateral contracts between private CPV investors and private investor-owned utilities where all financial risk remains in the private sector. We strongly oppose the current bait-and-switch tactic by CPV to promise competition and to assume financial risk but then attempt to secure state guaranteed contracts, which transfer financial risk from private investors to the public.
The Commission discussion on page 17 of the July 28, 2014, Order thoroughly misstates the Sierra Club position: “Despite Sierra claims, a PPA would not transfer all financial risk from CPV Valley to ratepayers, but would simply allow CPV Valley to provide greater certainty to lenders, thereby facilitating financing agreements.” Contrary to the Commissions assertions, the Sierra Club never made such a claim regarding private competitive PPA’s. All PPA’s are not the same. We support competitive bilateral PPA’s between CPV investors and utilities, which do not transfer risk to ratepayers and taxpayers. PPA’s by themselves do not assign risk. A vastly different impact is determined by whether or not the counter-parties to the contract are public or private. We oppose the suggested PPA with a state agency, which does transfer financial risk to the public and would be an unjustified gift to CPV.
The notation by the Commission of a PPA obtained by CPV through the Energy Highway Initiative is a vacuous distraction from this discussion. No such contract exists and no offer for such a contract with CPV has been proposed. The only active efforts to modernize New York’s electric power system is the Reform the Energy Vision (REV) Proceeding currently in progress. And, last weeks PSC staff report on REV favors decentralized power supply networks and reauthorizing utilities to reenter power generation activities, either of which would create immense market obstacles for large central power plant projects such as CPV.
Also on page 17, the Commission discussion discounts the veracity of the newspaper reporter’s interview story without any justification for doing so. To quibble over the use of quotation marks is another distraction. Whether or not Mr. Remillard’s comments were expressed as a direct quote or were paraphrased neither ensures nor diminishes the accuracy of the message. Please note that Mr. Remillard reaffirmed the May 9, 2014 news story regarding the necessity of a state agency contract to obtain financing during a conversation on June 12, 2014, with the undersigned.
Also note that the genesis of that news article was through efforts involving CPV and its local business partners and beneficiaries to publicize the Orange County Partnership’s May 5, 2014 letter to Governor Cuomo. (See Sierra Club July 10, 2014 attachments.) That letter was a coordinated lobbying effort to put pressure on the Governor to sign a state PPA contract with CPV. That letter and news article were to coincide with the PSC Certificate decision directly related to Case 10-E-0501.
The Certificate of Public Convenience and Necessity, Approval of Financing, and Approval of a Lightened Regulatory Regime all require PSC decisions to be made in the “PUBLIC INTEREST,” not just in the interest of ratepayers. The Commission narrowly focuses on captive ratepayer risk and ignores the Sierra contention regarding financial risk to all taxpayers who are just as captive.
The Commission discussion on page 13 justifies its limited position with a series of false economic theories and misplaced examples resulting in erroneous conclusions. For instance, the Commission states: “Although Petitioner believes that there is too much generation supply and too little demand, as a general rule, additional supply benefits ratepayers by decreasing prices through competition.” That promised price reduction somehow has not been the experience of consumers. That theory may apply to an oversupply of unsold autos piling up on a car dealers lot, but it does not apply to power markets where electricity cannot be stored. Our real life experience has been that too much generation supply and too little demand results in power plants becoming unprofitable and closing down, which is the major reason for the creation of the FERC/NYISO New Capacity Zone that has artificially raised electricity prices to the detriment of all ratepayers and taxpayers.
Further, “If there is indeed oversupply, then either CPV Valley will be dissuaded from building, or run the risk that such oversupply will prevent it from achieving the revenue desired.” Both CPV and the financial market would agree to that Commission scenario but CPV’s response is a third alternative to obtain state guaranteed contracts, which shifts financial risks to taxpayers instead of CPV investors, which is not in the public interest.
And, the Commission discussion on bankruptcy is incredibly simplistic and deceiving: “Entrance into, and exit from bankruptcy is a normal incident in competitive markets, but as CPV Valley observes, four New York generators have emerged from bankruptcy while another is being restructured. Consequently, power plants can survive bankruptcy and continue to operate.” Bankruptcy, however, is a business failure that is not in the public interest and should not be the goal of a business plan. Power plants can survive bankruptcy, but can the public and our economy survive a procession of power plant bankruptcies? The examples of Mirant and Dynegy show how those bankruptcies devastated the finances of the taxpayers and the municipalities in which they were situated, especially the school districts. The North Rockland School District is obligated to refund Mirant over $220 Million, and the Marlboro School District is obligated to refund Dynegy over $10 Million, plus bond interest, as a claw-back for retroactive bankruptcy court-ordered reassessments to benefit investors. None of those designer bankruptcies are in the public interest.
Collectively, market forces beyond the control of CPV have presented new circumstances that require a current evaluation of the financial capabilities and resources needed to move the CPV project forward in a manner that avoids any financial risk to the public. We maintain that this request represents sufficient “NEW CIRCUMSTANCES” to warrant such reconsideration to protect the public interest.
At a minimum, we request a financial condition be added to the Certificate/Approvals analogous to Condition 15(b) of the Article VII Certificate of Environmental Compatibility and Public Need issued to Champlain Hudson Power Express (Case 10-T-0139). The condition 15(b) would require that the CPV project would be developed, financed, constructed, and operated on a competitive merchant basis with no reliance on a contract with any municipal subdivision, agency, authority, or any other entity of the State of New York, which would obligate same to pay for any construction, operational cost, or indebtedness related to the CPV project.
Jürgen 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,
cc: David Drexler, Esq., Pramilla Srivastava, Steve Remillard, and Ruth Leistensnider, Esq.