NRG AFFILIATES ASK FERC TO RULE ON DISPUTED STATION POWER ISSUES AFFECTING 
DIVESTED GENERATION ASSETS
  
10/04/2000 
Foster Electric Report 
Page 13 
(c) Copyright 2000, Foster Associates, Inc. 
In a renewal of a controversy that has arisen several times in the past with 
respect to the issue of station power, three NRG affiliates that purchased 
electric generation facilities from Niagara Mohawk Corp. in 1999 -- Dunkirk 
Power LLC, Huntley Power LLC and Oswego Harbor LLC (EL00-113) -- petitioned 
FERC on 9/22/00 to declare that NRG's electric generation facilities have the 
right (and have had this right since their purchase from Niagara Mohawk) to 
treat station power as net/negative generation. The petitioners also asked 
FERC to confirm they have the option of obtaining station power from the grid 
at wholesale, regardless of whether the generation facility is running at 
that specific time, together with the ability to net the station power from 
the facility's sales to the wholesale energy market. Further, the petition 
wants the Commission to declare that Niagara Mohawk cannot require any of 
NRG's generation facilities to obtain station power under a retail tariff, or 
resort to state law self-help procedures to bypass the Commission's 
jurisdiction, disconnect or terminate station power, thereby shutting down 
the facilities. Finally, pending resolution of the instant petition, the NRG 
entities urged FERC to issue an interim order preventing Niagara Mohawk from 
disconnecting or terminating station power for any NRG generation facility. 
If station power service were terminated, the petition noted, the three NRG 
entities would be unable to supply their total capacity of 3,060 MW to the 
New York ISO control area. 
The petition was prompted by Niagara Mohawk's commencement of billing in late 
1999 and early 2000 for station power under its retail tariff for the three 
NRG facilities, NRG questioned the bills since divested generation assets are 
not subject to retail tariff rates under Commission precedent. While Niagara 
Mohawk admitted that its retained generation facilities are still allowed to 
treat station power as negative generation to be netted against output, it 
responded to NRG's questions by sending disconnection notices to the NRG 
facilities. 
Historically, the NRG petition stressed, vertically integrated facilities 
(including Niagara Mohawk) have treated -- and still treat -- station power 
as net/negative generation. Franchise utilities have not charged themselves 
for station power service under their retail tariffs nor have they used such 
tariffs to charge other utilities with generation facilities in their retail 
service territory. "Even today, these same utilities continue to treat 
station power as net/negative generation for their own and other favored 
generation facilities," said the filing. "At the same time, these utilities 
are trying to unilaterally impose retail tariffs and rates on station power 
service for their divested generation. But these divested generation assets 
are the exact same facilities for which the utilities have historically 
treated station power as net/negative generation." 
As evidenced by the historical practice of netting station power, the NRG 
entities first cited a 1972 start-up agreement between Central Hudson, 
Consolidated Edison of New York and Niagara Mohawk (joint owners of the 
Roseton generating facility in Central Hudson's exclusive retail service 
area) providing that start-up power (a component of station power) obtained 
from Central Hudson should be netted against output before net generation was 
allocated among them. Second, the New York Power Pool Agreement (approved by 
FERC in 1991) similarly allowed the netting of station power for members with 
generation facilities in the exclusive retail service territories of other 
members. Third, transition energy sales agreements between Con Edison and NRG 
(concerning NRG's recent purchase of two divested generation facilities from 
Con Edison) explicitly authorized the treatment of station power as 
net/negative generation. These assignments were accepted by the Commission as 
part of the process to obtain approval for the divestiture of jurisdictional 
assets. In the PJM market, the petition noted (1) a recent filing by PJM 
Interconnection L.L.C. (ER00-3513) revising its open-access transmission 
tariff (OATT) and Operating Agreement to make clear that the historical 
practice of netting station power service against gross generation should 
continue even after the utilities divested most of their generation; and (2) 
recent interconnection agreements filed by Conectiv, in conjunction with a 
request seeking FERC approval to divest jurisdictional assets to affiliates 
of NRG, expressly treating station power as negative generation. Finally, the 
NRG petition observed, the Commission has approved market rules of the New 
England ISO recognizing that market participants have the option of netting 
station power. 
Thus, the NRG entities concluded, the Commission-approved arrangements and 
historical practices in New York, PJM and New England all show that station 
power has been and continues to be treated as net/negative generation. "These 
arrangements also demonstrate that utilities such as Niagara Mohawk and Con 
Edison -- the same utilities that are now trying to impose retail tariffs on 
their divested generation --benefitted from prior netting arrangements right 
up until the time these assets were divested. These same utilities are 
currently allowing their own retained and other favored generation to net at 
the same time they are trying to force the divested generation to pay for 
such station power under retail tariffs." Moreover, the petition added, the 
historical practice of netting is consistent with the Commission's repeated 
statement that "load is not served at a generating unit" through transmission 
or interconnection assets. 
The petition requested that FERC confirm its prior rulings and declare that 
NRG's generation facilities have the right and option to treat station power 
as negative generation to be netted against gross generation. This 
declaration would recognize that the historical practice of netting station 
power is still the most efficient means of ensuring that all generators have 
equal access to essential station power in a market-based system. In other 
words, "nothing in a competitive market suddenly transforms station power 
into a retail event." 
By declaring that station power as negative generation is a scheduled service 
available under the Commission's pro forma tariff, the petition contended, 
the Commission will further the public's interest in a competitive energy 
market and, simultaneously, "preempt the type of discriminatory and 
anti-competitive conduct that necessitated this petition in the first place," 
namely, efforts by utilities such as Niagara Mohawk to impose retail tariff 
rates on station power service to divested assets while still allowing their 
own retained generation facilities (and other favored facilities) to net 
station power. Including station power service in pro forma tariffs would not 
only provide generators with a service necessary to operation of their 
interconnected facility but would also ensure availability of the service to 
all generators on fair and nondiscriminatory terms, the petition added. 
Furthermore, the NRG entities said the Commission has and should exercise 
jurisdiction over station power issues. Since generating facilities cannot be 
operated without station power, the petition explained, the provision of 
station power "affects or relates to" the generator's ability to produce and 
sell electric power in wholesale markets. Thus, the provision of station 
power is "an integral and essential part" of the interconnection and 
operation of that generator. "The Commission's jurisdiction therefore easily 
extends to the provision of station power and supports the issuance of a 
declaratory order ensuring that station power is made available to all 
generators on efficient, nondiscriminatory terms as part of a pro forma 
tariff." 
Based on the above discussion, the petition requested FERC to issue an order 
declaring that Niagara Mohawk cannot impose its unbundled retail tariff on 
NRG's generation facilities. However, the petition made clear, the requested 
declaration -- like the OATT revisions proposed recently by PJM -- would not 
prohibit any generator form voluntarily agreeing to take station power under 
a retail tariff. "It is the option to take station power as a scheduled 
service under the pro form tariff that is important. By mandating this 
choice, the Commission will ensure that utilities cannot take advantage of a 
generator's need for station power." 
The Commission should further declare, given its exclusive jurisdiction over 
the wholesale energy market, that Niagara Mohawk cannot use state law 
self-help remedies such as disconnection or termination of station power to 
force payment from a wholesale generator. Any attempt to rely on state law 
procedures is clearly preempted by the Commission's exclusive jurisdiction, 
NRG said. Finally, since both NRG and the public will suffer irreparable harm 
if Niagara Mohawk is allowed to terminate station power service and shut down 
the generation facilities in question, the Commission should issue an interim 
order prohibiting Niagara Mohawk from terminating station power service until 
these proceedings have been completed.