Dive Brief:
- New York state regulators and utilities are seeking to overturn the imposition of a new "capacity zone" on the Lower Hudson Valley by the Federal Energy Regulatory Commission (FERC), citing errors in due process in a filing with the U.S. Court of Appeals.
- The capacity zone was set up on May 1 of this year to encourage new generation investments to address capacity shortfalls in the area.
- Since it was set up, electricity prices have risen 6% for residential customers and 10% for business customers, with a total $20 million monthly rise.
Dive Insight:
If new capacity is added to the zone, prices will come down. For example, a new plant scheduled to come online in the near future in Newburgh will cut the controversial price increase in half.
The plaintiffs argue that FERC should not have initiated a capacity zone without first properly assessing the need for new capacity in the zone. If FERC did not follow procedure or contradicted itself in the order, it is within the judge's purview to alter the capacity zone -- or get rid of it entirely.
The New York parties believe that the capacity zone, designed to address a very real need for new generation, does not achieve that goal. The utilities and the PSC favor adding new and improving existing transmission lines and the distribution system as a means to solving the problem.
"The new capacity zone was formed to address potential energy shortfalls in lower New York by sending a price signal to developers to encourage construction of new generators in the region," said Central Hudson Gas & Electric Corp president James Laurito. "However, these higher prices benefit existing generators at the expense of our customers, and development of new generation will likely lag considerably, if at all."