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NRG to close 380-MW Huntley coal-fired plant, puts Dunkirk conversions on hold

Birmingham, Alabama (Platts)--25 Aug 2015 559 pm EDT/2159 GMT


NRG Energy said Tuesday it plans to close the 380-MW Huntley coal-fired north of Buffalo, New York, and has put on hold the conversion of four units at the Dunkirk coal-fired plant south of the city to burn natural gas.

The company notified the New York Public Service Commission that Huntley faces difficult challenges. "This decision demonstrates that the energy and capacity markets in New York don't meet the needs of the electric system," NRG spokesman David Gaier said Tuesday in an interview.

The PSC has 180 days to determine if the plant can be retired without creating a reliability problem, Gaier said. If it is needed for reliability, the company would work with the New York Independent System Operator or National Grid to negotiate a reliability contract. If the plant is not needed, it would be retired March 1, Gaier said.

"Market conditions just don't allow keeping the plant open. There is no reasonable situation that would allow it to stay open," Gaier said, noting that low natural gas prices, coupled with capacity and other energy prices, have made the plant uneconomic to run.

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NRG also said Tuesday that Entergy Nuclear's challenge to the legality of the contract supporting the conversion of the Dunkirk coal-fired plant to burn gas has forced the company to put the conversion on hold. "We can't continue to invest in the plant under such massive uncertainty," Gaier said.

Entergy Nuclear, which owns the 838-MW FitzPatrick nuclear plant that is located in the same NYISO zone as Dunkirk, challenged in February a PSC order that authorized Dunkirk to receive a payment of $20.4 million a year from National Grid and a $15 million one-time subsidy from an unnamed New York agency to keep the 435-MW plant online through 2025.

NRG previously said Dunkirk would be mothballed, because economic conditions were causing it to operate at a net loss. Currently, three units at the plant are mothballed, with the fourth currently operating under a reliability support services agreement with National Grid that ends December 31. At that point, that unit would be mothballed as well, Gaier said.

Entergy Nuclear argued in the lawsuit, which was filed in the US District Court for the Northern District of New York, that the PSC's action falls within the Federal Energy Regulatory Commission's exclusive jurisdiction over wholesale rates and violates the Federal Power Act.

National Grid said the company needs the plant for voltage support for its transmission system.

"Even if the lawsuit settles, we will have to look at the new market rules established by the NYISO," Gaier said. The ISO must establish new rules for reliability must-run contracts that FERC would authorize. FERC, for instance, does not approve the state's RSSA contracts.

A state's authority to ensure reliability does not give it license to regulate areas exclusively reserved to FERC, Entergy said in its complaint. FERC reaffirmed that it has jurisdiction to address the rates, terms, conditions and market impact of reliability must run services, Entergy said.

FERC said in a February 19 order that its policy regarding reliability service agreements is intended to ensure measures are of limited duration and do not perpetuate out-of-market solutions that have the potential to undermine price formation.

Because the National Grid contract requires Dunkirk to bid into the NYISO capacity auction, the payments constitute extra compensation to Dunkirk above and beyond revenue from the auction and, in effect, is a floor below where Dunkirk's revenue will never fall, Entergy said in its suit.

--Mary Powers, newsdesk@platts.com
--Edited by Valarie Jackson, valarie.jackson@platts.com

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