Firm Suspends 190-Mile New York Power Line Project

Apr 3, 2009 - Dow Jones & Company, Inc.

NEW YORK - The New York Regional Interconnect said Friday it is suspending plans to build a 190-mile power line in the state, saying a recent decision by federal regulators makes the $2.1 billion project too risky.

The company had asked the Federal Energy Regulatory Commission to reverse a rule established by the region's power grid operator, saying it gave utilities too much power over the project. But the commission denied the request this week, prompting NYRI to suspend operations nearly five years and more than $20 million into the line's development. NYRI is a partnership between privately held American Consumer Industries Inc. and Borealis Infrastructure, which manages the infrastructure investments of Canadian pension plan OMERS.

The FERC decision chills investment by an independent transmission developer at a time when federal officials are trying to expand the nation's electric grid in part to incorporate renewable generation, said Chris Thompson, the company's president.

"It seems like FERC, the Department of Energy, and the Obama administration are not on the same page," Thompson said in an interview Friday.

Transmission projects traditionally have been developed by local utilities, but NYRI saw an opportunity in new policies FERC put in place to get lines built in regions with capacity constraints. The NYRI project would connect upstate New York with Orange County to the south and runs through a federal corridor designated for transmission upgrades. The project would lower generation costs by bringing cheaper power to the New York City region, while helping to move electricity from rural wind farms to populated areas, Thompson said.

NYRI executives, however, didn't agree with rules set by the New York Independent System Operator, which runs the state's electric grid and power market. Under the rules, line developers would need approval from a " supermajority" of the electric utilities whose customers would benefit from the project to collect back capital costs, plus a return on the investment.

NYRI challenged this rule before the FERC, saying utilities, which also develop transmission lines, shouldn't have veto power over a project. FERC on Tuesday declined to rehear the issue.

"The commission does not believe that the New York ISO's processes are biased. NYISO's supermajority voting proposal is reasonable because it provides a useful check to ensure a project has net benefits," a FERC spokeswoman said in a prepared statement.

NYRI would have faced opposition from Consolidated Edison Inc. (ED) on the project. The utility said in a statement Friday it "supports the addition of infrastructure, including transmission lines, needed to provide service to New York's electric consumers [reliably] and economically. The proposed NYRI project, however, would not meet these objectives."

-By Mark Peters, Dow Jones Newswires; 202-938-4604; mark.peters@dowjones.com