New drilling technologies and cheap capital have revolutionized the natural gas industry in the United States. There is no better example of this than the prolific Marcellus and Utica basins in the Northeast, where natural gas prices are at historic lows. Inexpensive natural gas in the Northeast has, in turn, resulted in lower power prices as natural gas has become the marginal fuel for power generation. According to NYISO’s Power Trends 2016 Report, approximately 2,000 MW of coal-fired power generation have retired or suspended operation since 2000[i].
Nuclear-fueled power is also under competitive pressure due to low gas and power prices. In 2015, Entergy announced that it would shut down its 800MW Fitzpatrick nuclear plant given its inability to operate profitably. Since that time, Exelon Corporation, a $32 Billion Company with headquarters in Illinois, has proposed to buy Fitzpatrick from Entergy and continue operating the plant, provided that it receive a subsidy from New York State. In August 2016, Governor Cuomo announced an agreement with Exelon under which New York would make subsidy payments, over and above the price of power, to Fitzpatrick and Exelon’s 3 other nuclear plants (576MW Ginna, 610MW 9 Mile One and 1080MW 9 Mile Two). This agreement is estimated to cost New York more than $7.8 – $10 Billion over its 12 year term.
In order to implement New York’s agreement with Exelon, the New York State Public Service Commission (“NYPSC”) issued an Order Adopting a Clean Energy Standard in August 2016. Among other things, this Order requires all utilities and energy service companies (ESCOs) supplying electricity in New York State to purchase Zero Emission Credits (“ZECs”) from New York State beginning April 1, 2017. New York State will buy these ZECs from Exelon’s nuclear plants, payment for which comprises the subsidy payments identified above. As a result, the Utilities and ESCOs will begin collecting the charges for ZECs from their electric supply customers on behalf of NYS Clean Energy Standard beginning April 1. Customers receiving delivery of power through their utility are unable to opt out or avoid this ZEC charge regardless if they are with an ESCO or under supply service directly from the utility.
The ZEC charges for the first year beginning April 1 will result in a roughly a 5-8% increase in the cost of supplying a New York customer in Upstate New York. Therefore, when shopping for electricity, New York customers should determine how the cost of ZECs is included in proposed prices (i.e., included or passed through later) in order to ensure proper comparison of supply offerings. For more information visit: http://www.energychoicematters.com/stories/20160802b.html.
BlueRock will be happy to discuss your account with you and work collaboratively with you to structure a supply arrangement tailored to your specific needs. Please call your Energy Advisor for further information or additional questions.