ALBANY, N.Y. (CN) - Local electric rates will jump by $155 million in the next three years unless New York reconsiders a plan to keep a 1950s-era coal-fired power plant operating in the Finger Lakes, ratepayers and their advocates claim in court.
The complaint in Albany County Supreme Court contends that only by re-evaluating the plan will state utility regulators "ensure that New York ratepayers are not being asked to pay for significant long-term upgrades" to a plant regarded by its owner as "uneconomic to operate."
The plaintiffs are the Sierra Club and Ratepayers and Community Intervenors, a group of local officials, activists and utility customers formed specifically to have a say in the state's deliberations.
Named as defendants are the state Public Service Commission, which regulates utilities in New York, and its administrative arm, the Department of Public Service.
In mid-2012, Cayuga Operating Co., an electricity producer in Lansing, N.Y., near Ithaca, gave the state six months notice that it planned to mothball its plant on the eastern shore of Cayuga Lake.
The facility's two coal-fired generating units were commissioned in 1955 and 1958.
The company blamed the decision on "inadequate" wholesale electric prices in New York, which prevented the plant from being operated cost-effectively.
But taking the plant offline worried the local utility, New York State Electric & Gas Corp. (NYSEG), which expressed concern about the reliability of its electric grid without the plant's power.
According to the complaint, the two companies got together to propose a so-called reliability support services agreement to state regulators, to temporarily set aside the plant's mothballing.
Under the agreement, NYSEG planned to pay Cayuga Operating some $2.4 million a month through mid-January 2014 to subsidize operation of the plant, or about $30 million in all. NYSEG also planned to underwrite $4.3 million in capital investments at the plant.
In November 2012, the Sierra Club questioned the cost of the agreement, telling regulators they had "no clear plan to permanently address underlying reliability needs" and no idea whether the terms were "just and reasonable or that they were vigorously negotiated to protect ratepayer interests."
A month later, the Public Service Commission approved the agreement, but asked NYSEG to solicit competitive bids from other energy suppliers, with an eye to maintaining reliability without the Cayuga Operating plant and to keeping rates affordable.
When New York deregulated the energy industry in the 1990s, it required that legacy utilities sell off their generating plants. They now transmit power supplied by other companies.
But the report NYSEG later returned to regulators "rejected all alternative proposals" in favor of one that would extend the agreement with Cayuga Operating through mid-2017, according to the lawsuit.
The new agreement "would subsidize continued operation of the Cayuga coal plant through at least June 2017, raise annual fixed payments by more than $4.2 million to keep the uneconomic Cayuga plant on life support, and require ratepayers to fund approximately $42 million in capital investments in the Cayuga plant," the complaint states.
A long list of maintenance costs for 2016 was included, which the complaint says "appear designed to subsidize the continued operation of the Cayuga plant well past June 2017."
Through 2017, the cost to ratepayers would be about $155 million, the complaint states.
The new agreement was approved by regulators in January this year.
In February, the plaintiffs filed a joint motion for rehearing on the approval, claiming the agreement needed more thorough vetting.
The state has yet to act on the motion - though state public service law requires approval or denial within 30 days, according to the complaint.
The plaintiffs ask the court to vacate the agreement because it was arbitrary, capricious and affected by error of law. In the alternative, they want the commission ordered to issue a ruling on their motion for rehearing, temporarily staying their complaint until that occurs.
The plaintiffs, who also seek costs and fees, are represented by Christopher Amato of Earthjustice in Manhattan.
The Public Service Commission declined to comment.
The agency told the Ithaca Journal that the Cayuga Operating plant needed to stay open to fill a 300-megawatt shortfall during peak demand periods in the region.