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Schumer to FERC: Deny NYRI's Billion-Dollar Bid to Stick Local Ratepayers With Bill for Controversial Power Line Route

After NYRI Pledged to Privately Bankroll Entire Project, Company Now Seeks Massive Federal Incentives under EPAct, which Gives Companies Incentive Rates to Construct Lines and Guarantees Astronomical Returns Rates for Stockholders

NYRI's Application Fails to Meet EPAct Requirements which Stipulate that an Economically Efficient Transmission System be Built - Application Ignores Co


Today U.S. Senator Charles E. Schumer called on the Federal Energy Regulatory Commission (FERC) to deny New York Region Interconnect’s (NYRI) application to receive incentive rates for constructing a power line route that would cut through vibrant communities and scenic areas from Oneida County to Orange County. Despite pledging to privately bankroll its highly controversial power line route, the company recently applied to FERC under the Energy Policy Act of 2005 (EPAct) to receive incentive-based rate treatment at a rate of return of 13.5 percent to offset the price of constructing the power line. Under the policy, local ratepayers would end up footing the bill for a significant portion of the costs to construct the power line.


Schumer today called on FERC to deny NYRI’s application, which could cost ratepayers billions, on the grounds that it’s premature and fails to adequately offer a selection of cheaper, alternative routes.


“It’s beyond pale that NYRI thinks it can force local ratepayers to bankroll a proposed power line that slices through vibrant communities and scenic parks stretching from Oneida County down to Orange County,” said Senator Schumer. “NYRI has been disingenuous, first pledging to foot the entire bill for this project, but now making a greedy money grab claiming it needs federal incentives to pay for a project, while it has turned a blind eye to community feedback. Today I’m calling on FERC to deny NYRI’s fatally flawed and premature application because the company has failed to pursue cheaper alternatives for the power line and rejected viable suggestions by the very communities that will be affected by it. It was not the intent of EPAct to give FERC a blank check to hand out to new transmission builders.”


Schumer today argued that the EPAct policy was designed to give incentives to power companies that demonstrate an effort to construct lines that are "reliable and economically efficient transmission and generation of electricity by promoting capital investment.” The Senator stressed that NYRI’s application fails to do this by failing to seriously  pursue cheaper, alternative routes that have been either suggested by local communities or during the public comment period. For example, one of those alternative routes uses existing rights-of-way owned by the New York Power Authority and would greatly reduce the purchase of private land.  Commenters have suggested alternative routes would potentially have lower construction costs.


A recent report by the New York Independent System Operator (NYISO) did not find the need for new transmission capacity along NYRI's proposed transmission route as either critical or advisable to ensure electricity reliability for New York in the coming decade.  


Schumer is the architect of legislation to rein in the ability of NYRI to opt out of the more thorough and appropriate New York State Public Service (PSC) approval process in an attempt to gain approval at the federal level for its highly controversial proposed power line route.


Schumer’s legislation, which was introduced last summer, is designed to accomplish the following:


·         Reverse FERC rulemaking and clarify that a state denial of a permit is not equivalent to state inaction.

·         Eliminate FERC’s authority to grant eminent domain, as created under the Energy Policy Act of 2005.

·         Insure that if the proper state entity denies an application for an interstate transmission line, that decision may be appealed only if the applicant can prove to FERC that the decision lacked merit. If the state regulatory authority does not make a final decision within a year of a request being filed for permits to build a new transmission line, FERC may obtain jurisdiction only if it is determined that there is no rational basis for the delay.


Schumer today sent the below letter to FERC calling on the federal agency to deny NYRI’s request for financial incentives in building its proposed line.


Dear Chairman Kelliher,


I am writing to urge you to reject the request of New York Regional Interconnect, Inc. (NYRI), Docket No. EL08-39-000, to receive incentive rate treatment for the its proposed electric transmission line from Oneida County to Orange County in New York, filed on February 12, 2008.


In that filing, NYRI requests that the Commission approves rates for its transmission project, including a 13.5% return on equity (ROE) for the life of the project and use of 13.5% ROE for the purposes of calculating the equity component of Allowance for Funds Used During Construction (AFUDC).  In the alternative, NYRI requests a 13.5% ROE for the first three years of the project along with ROE basis point incentives after that time.


The Energy Policy Act of 2005 (EPAct) directed the Commission to establish incentive-based rate treatments for the promotion of "reliable and economically efficient transmission and generation of electricity by promoting capital investment in the enlargement, improvement, maintenance, and operation of all [transmission] facilities." To carry out this mandate, the Commission issued Order 679, which established a process whereby applicants may receive incentives for transmission infrastructure investments that help ensure the reliability of the bulk power transmission system or reduce the cost of delivered power to customers through reducing transmission congestion.


While the intent of EPAct is to encourage investment in transmission, this investment must be done in a manner in order to ensure an economically efficient transmission system.  NYRI has not shown that the route suggested is the most economic route to add transmission.  For example, as discussed in the objections filed by the City of Utica, other routes such as the New York Thruway or the existing Marcy South transmission system must be considered before granting this request.  At a minimum, we agree with the New York Public Service Commission (NY PSC) that this application is premature – NYRI has not arranged for any customers for this proposed line nor has NYRI submitted all of the requested information to the NY PSC.


It was not the intent of EPAct to give FERC a blank check to hand out to new transmission builders.  The cost of this new transmission is estimated to be $2 billion dollars, plus the 13.5% ROE that NYRI will earn over the lifetime of this project.  If there are substantially cheaper alternatives, including existing routes controlled by other entities, FERC must consider those alternatives before burdening New York ratepayers with these high construction and ROE costs.




U.S. Senator Charles E. Schumer


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