Skip to main content

Fossil Fuel vs. Renewables: Pressure Is on LIPA

Wed, 11/04/2020 - 19:03

The East Hampton Town Board is expected to vote today to begin the process of adopting a community choice aggregation program.

Community choice aggregation, or C.C.A., allows a local government to procure electricity and/or natural gas on behalf of its residents, businesses, and municipal accounts from a provider other than the incumbent utility. In a C.C.A. program, a municipality enters into contracts with energy service companies, or ESCOs, for power supply purchase options within its jurisdiction. Options include power produced through 100 percent renewable sources, power produced through nonrenewable sources, or a blend.

The board has held public hearings and hosted a webinar on C.C.A. Should it vote to adopt enabling legislation, the first step in the process, the town would choose an administrator to issue a request for bids and choose a supplier for electricity, natural gas, or both. Southampton Town has already selected an administrator, Joule Assets. Brookhaven Town has also adopted enabling legislation, and other municipalities on Long Island are considering the same.

But alongside this push, C.C.A. proponents are pointing to terms and conditions approved by the Long Island Power Authority for C.C.A. in May, a tariff they say renders such a program unworkable on Long Island. (C.C.A. has been permitted in most of New York State since 2016 through an order issued by the Public Service Commission, but that order applied to investor-owned utility service territories only. It did not apply to LIPA, which is a public utility.)

In a September webinar, a LIPA official said that under the utility's LI Choice program, which allows customers to buy electricity from an ESCO and through which a C.C.A. would engage with the utility, "ESCOs pay LIPA the monthly cost of power supply minus the market price of the services that are provided by the ESCO instead of by LIPA. In other words, LIPA forgives the cost of the services that are not provided by LIPA," which, he said, include the energy itself, ancillary services, and off-Island capacity. LIPA, he said, estimates those avoidable costs up front and adjusts them upward to the actual market cost, which is known as a bill credit adjustment.

But the portion of those costs that are avoidable and therefore forgiven is much smaller on Long Island than upstate and in western New York, he said, because those regions have no requirement that they purchase local capacity, whereas the New York Independent System Operator requires load-serving entities on Long Island to purchase most capacity locally. Consequently, much of the existing capacity is under contract to LIPA.

Jessica Stromback, managing director of Joule Assets, Southampton's C.C.A. administrator, said in September that╩the requirement "is in fact a chosen market structure" unrelated to necessity. She said that it "guarantees the utility payment no matter how╩they behave or perform." And Lynn Arthur, energy chair of Southampton Town's sustainability advisory committee, likened the power authority's answer to a "LIPA surcharge."

Ms. Stromback wrote to Tom Falcone, LIPA's chief executive officer, and the LIPA board of trustees in September to complain that its terms and conditions "will not allow for a competitive C.C.A. electricity supply process." LIPA's preconditions, combined with its billing limitations, "blocks C.C.A. in its entirety," she wrote, as it requires ESCOs to pay a charge for energy and another for capacity.

LIPA asserts that the energy charge is simply a pass-through, she noted, but "trading market realities dictate that the energy market pass-through has ensured that no competitive suppliers will participate in an energy offering," because suppliers lose money if market prices are high and earn money only when market prices are low, "and they are therefore offering consumers a bad deal."

Mr. Falcone countered that "ESCOs that can provide service less expensively than LIPA will earn a profit. Those that can't, won't. In either case, LIPA's role is not to guarantee that ESCOs are profitable or to provide ESCOs with subsidies paid for by other customers."

Earlier this year, Assemblyman Fred W. Thiele Jr. sponsored a bill that would give the Public Service Commission oversight authority over LIPA. Under the bill, the commission would require LIPA and its service providers to implement P.S.C. recommendations "made in any comprehensive and regular management and operations audit where fraud, abuse, or mismanagement is found." The bill passed in the Assembly and Senate and requires Gov. Andrew M. Cuomo's signature by year's end to become law. "One of my chronic complaints about LIPA and PSEG is lack of transparency and accountability," Mr. Thiele said on Tuesday (PSEG Long Island manages the electricity grid on LIPA's behalf).

Mr. Thiele said that a second bill, now in draft form for introduction early next year, would make LIPA play by the same rules that the Public Service Commission has set for the rest of the state. "First and foremost is the way the tariff is structured, a way that takes away a lot of incentives," he said. "It boils down to, the rules are different on Long Island than the rest of the state, and it's harder to do C.C.A. on Long Island" because "LIPA tries to take out any economic incentive for towns to do C.C.A. Unlike other utilities in the state -- with the P.S.C. looking over their shoulder -- that's not the case on Long Island."

Such a law would be constructive, Ms. Stromback said. "LIPA's been pushed, to a degree, by the regulator to review the tariff," she said, "but without legislative backing and that kind of quorum of everyone deciding this type of arrangement is unacceptable and they have to adjust to create better outcomes for the community, you're not going to have the pressure required to make it happen."

Councilwoman Sylvia Overby said on Monday that the town board may also vote on a memorializing resolution supporting Mr. Thiele's draft legislation. "For me, the bottom line is fossil fuel use versus renewables," she said.╩"I am prepared to pay more for renewable energy to protect our planet and combat climate change.╩It is my hope, therefore, that in our capitalistic economy, businesses will ramp up to meet the demand for more renewables, driving the price for electricity down through competition."

Thank you for reading . . . 
...Your support for The East Hampton Star helps us deliver the news, arts, and community information you need. Whether you are an online subscriber, get the paper in the mail, delivered to your door in Manhattan, or are just passing through, every reader counts. We value you for being part of The Star family.

Your subscription to The Star does more than get you great arts, news, sports, and outdoors stories. It makes everything we do possible.