Long Island, downstate must pay for bulk of $1.5B wind-farm upgrades, state says

By Mark Harringtonmark.harrington@newsday.com MHarringtonNewsMay 2, 2021

LIPA and the state are at odds over who will pay for billions of dollars in upgrades needed to distribute the massive amounts of green energy that will come from offshore wind farms, according to public documents examined by Newsday.

LIPA argues that ratepayers statewide will benefit from the grid upgrades on Long Island and in New York City, so the costs should be shared equally across the state. But the state Public Service Commission says the lion's share of the cost should be borne by ratepayers in the "energy-congested" regions such as Long Island and New York City that are receiving the upgrade and who it says will benefit more from higher-capacity power lines and other enhancements.

What to Know

LIPA is proposing nearly $1.5 billion in grid upgrades for coming influx of offshore wind.
LIPA says those costs should be shared statewide.
But a PSC order says 75% of the costs should be paid by those who benefit most, including Long Islanders.
LIPA and Con Ed have filed objections to the order; state will reconsider.

PSC, which oversees state utility companies but has no direct jurisdiction over LIPA, ruled in a March order that "beneficiaries" of the energy projects must pay 75% of the cost of the upgrades, while 25% would be spread out among utilities and their ratepayers statewide. On Long Island, the cost for the first 3,000 megawatts of these upgrades is projected to exceed $1.5 billion.

75% Cost of upgrades ratepayers in "energy-congested" regions like Long Island and New York City pay under state Public Service Commission's plan. (LIPA wants costs to be spread evenly throughout the state.)

More than $1.5 billion The projected cost of the upgrades on Long Island.

The commission didn't say specifically how its plan would impact Long Islanders' electric bills. For comparison, a South Fork grid upgrade that LIPA began five years ago cost just over $513 million — about a third of the price tag for the new upgrades — and will cost ratepayers about $2.48 a month, LIPA has said.

The planned projects include building new large-scale power lines and, in some cases, nearly tripling the capacity of existing ones. The result: Thousands of megawatts of wind power generated by offshore turbines will make landfall on Long Island, travel across the Island, and be transmitted into the state's energy grid for distribution to utilities across the state. The expanded transmission capacity will also make it easier for electricity generated upstate to reach Long Island.

Who will benefit from the upgrades?

PSC says the changes will mean reduced energy costs that will primarily benefit customers on Long Island and in New York City, who now pay inflated prices for electricity because of constraints to delivering power to the downstate region.

"The economic benefits result from reducing system congestion costs and corresponding marginal energy prices due to the elimination and/or the lessening of system bottlenecks," said PSC spokesman James Denn.

That means access to more energy options and cheaper energy sources, he said.

But LIPA is pushing back, saying PSC's plan would burden Long Islanders with an unfair portion of the high cost of converting the state to green energy sources.

LIPA's petition is its last "PSC-related legal mechanism" for challenging the PSC order, the regulator said. Technically, LIPA as its own authority is not regulated by the PSC, but frequently remains in line with state energy directives.

From fossils to renewable energy

The upgrades are "a sea change involving the complete transition from fossil-fueled generation to renewable energy" mandated in Gov. Andrew M. Cuomo’s signature climate-change law, LIPA argued in an April 19 filing obtained by Newsday.

The upgrades, LIPA said, advance wind power by enabling it "to be delivered from Long Island to the rest of the state and reducing the costs of offshore-wind renewable certificates that will be borne by all ratepayers in New York State."

Under the law, utilities still using fossil fuels are required to purchase the certificates to help spread out the cost of building offshore wind farms.

LIPA seeks rehearing of PSC order

In its filing, LIPA requested a rehearing or reconsideration of the PSC's order and blasted the agency's interpretation as "based on errors of fact and law," arguing that the correct reading of the law would spread the costs evenly statewide. LIPA said the PSC "cites no analysis or supporting evidence that would suggest that costs should be allocated to economic beneficiaries of reduced congestion, let alone 75% of the costs."

PSC spokesman Denn said, "Like all petitions for rehearing, the commission will consider and vote on the petition filed by LIPA in the normal course at a subsequent session. No decision has been made regarding whether to grant or deny the requested relief in the petition."

Energy upgrades could top $1.5 billion

New York State's green-energy initiatives call for ending all carbon-emitting power sources by 2040. The state has plans for generating 9,000 megawatts of offshore wind off the South Shore of Long Island and beyond, enough to power 6 million homes. Reducing bottlenecks to transmitting that wind power will help utilities such as LIPA and Con Edison transition away from chiefly fossil-fuel based plants. LIPA has 1.1 million customers and Con Ed 3.4 million in its New York City territory.

As reported in Newsday in February, the state's plans to integrate major wind and solar energy projects onto the power grid could entail $1.5 billion in upgrades on Long Island. The plan also envisions thousands of megawatts of additional solar power, a greater use of batteries to store energy for periods the wind isn’t blowing, and an offshore electric grid network to make the system more resilient.

Projects include a $221 million upgrade to an East Rockaway to Melville transmission line to 345,000 volts, a new $647 million transmission line from Glenwood Landing to Melville, and a new 345,000 volt interconnection between the LIPA and Con Ed grids for which a price was not listed.

LIPA also pointed to a PSC report requesting an upgraded energy grid as a way to make energy from wind farms more economical, noting that transmission costs can constitute 30% of the cost to build a wind farm.