Posted on 02/24/2003 8:49:41 PM PST by zx2dragon
The New York Public Service Commission on Wednesday ordered the state's major natural gas utilities to file special delivery rates for nonresidential customers who operate their own gas-fired distributed generation (DG) units, a move that should result in lower costs for DG operators and provide incentives for more widespread use.
The utilities were given 90 days to tailor new rates to customer usage profiles, with the idea that the new cost structure would be in place for three years. The chairman of the PSC, William Flynn, said the order will help lower electricity costs, reduce emissions and improve reliability by giving small-scale generation a leg up.
"As we encourage more development of efficient small power production facilities through fairer rates, we not only open up a valuable option for customers, but we also enhance our state's economy," Flynn said.
Unlike large gas-fired power plants, DG units -- often driven by fuel cells and microturbines -- can be located off the overburdened grid and distributed throughout a utility's service territory, thus easing congestion. But because the technology is so new and traditional utilities are so entrenched behind restrictive interconnection standards, existing gas delivery rates for DG operators are higher then they should be, the PSC explained, justifying action to make delivery more economical.
The commission also voted Wednesday to implement a similar system for residential DG units by Jan. 1, 2004. Industry and environmental proponents applauded both decisions, saying New York continues to outpace other states in its efforts to advance alternative power sources and renewable portfolio standards (RPS). Just last month, New York Gov. George Pataki (R) announced plans for a statewide, 25 percent RPS to be in place within the next 10 years, and the PSC is working towards drafting the new standards (Greenwire, Jan. 9).
The American Gas Association's director of media relations, Peggy Laramie, said it's hard to find fault with the new orders as long as the old problem of adapting interconnection rules to help nontraditional power sources connect back into the grid can be overcome. "Everybody wins," she said. "This is a very effective tool."
Laramie explained that with the incentives, supermarkets, schools and small businesses might be more willing to consider installing cogeneration technologies, like a combined heat and power microturbine system that burns gas to produce power and recycles steam for other uses. "This could be a tremendous boon to facilities in terms of energy savings," she said.
An example of where the technology is thriving is the 48-story Time-Life Building in Manhattan's Rockefeller Center, where the building's owners have reduced energy costs by one-third since switching last spring to a new central hybrid chiller plant that uses natural gas, electricity and steam. Having all three fuel sources gives the building's energy manager the option of picking the least expensive fuel at any given time.
DG pilot program approved In a separate decision, the New York PSC voted to install a three-year pilot program meant to defray the cost of installing DG equipment at facilities served by the National Fuel Gas Distribution Co. (NFG), a utility with 18 DG units in its service territory in western New York and Pennsylvania.
The first of its kind in the state, the pilot program will allow interested parties to secure loans for DG projects through National Fuel Gas, with up to $3 million provided by the state to back the loans over the next three years.
The decision is supported by the Erie County Department of Environment and Planning and should help promote installation of DG equipment in rural areas in the Buffalo-Niagara region, the PSC said. Loans to interested customers would have to come initially from NFG shareholder funds, meaning shareholders would assume the risk of nonpayment. As a result, National Fuel Gas says it is reviewing the decision and has not yet taken a position.
"We think this is a positive step in the right direction, but we haven't seen the order yet," said National Fuel Gas spokeswoman Julie Coppola Cox.
Cox said DG units are already operating throughout her company's service territory, but the pilot program should help expand use of fuel cells and microturbine units. National Fuel Gas's DG customers operate units that produce as little as 60 kilowatts of power (a residential participant) to as much as 53,000 kilowatts (an industrial customer).
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