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State appeals to feds to probe natural gas link to electricity price spike

By: Brian Nearing |

State regulators want the federal government to look into recent spikes in natural gas prices during a long, cold winter that have caused electricity prices to skyrocket in the Capital Region and elsewhere upstate.

Both the New York State Independent System Operator, which oversees the state’s electric grid, and the state Public Service Commission, which regulates energy in the state, have appealed to the Federal Energy Regulatory Commission to investigate the market for natural gas, a critical fuel used by power plants in the state to generate electricity.

Earlier this month, National Grid, which provides electricity to the Capital Region and elsewhere upstate, predicted bills for March would rise as much as 25 percent, as power plant owners pay more for natural gas. It would be the third jolt in as many months.

Electricity prices in the Capital Region skyrocketed by more than 30 percent in February, following a 50 percent jump in January due to the prolonged arctic blast that has blanketed the entire Eastern Seaboard, which pushed up demand for natural gas, as well as its price.

In a Feb. 20 letter to FERC Acting Chairwoman Cheryl LaFleur, NYISO President and CEO Stephen Whitley asked for a federal investigation into natural gas markets. Whitley wrote that an investigation would “enhance confidence that markets are performing in an open, competitive manner consistent with robust regulatory oversight.”

On Friday, NYISO spokesman Ken Klapp declined comment about the letter.

Also this week, PSC Chairwoman Audrey Zibelman told CBS6 News that her office also had appealed to FERC for help investigating gas prices and that FERC had agreed to take the case.

Zibelman was quoted saying, “We have some concern that people were taking advantage of the cold weather and that the price of gas was unnecessarily high … If you look at the relationship between the prices and the weather and the duration of how the prices went up and the amount by which they went up, it just begs the questions, let’s look at what happened here and see if there was some inappropriate behavior.”

PSC officials did not return a call for comment Friday.

FERC spokeswoman Mary O’Driscoll declined comment when asked about the requests from the two state agencies.

“We are unaware of any allegations of anything untoward,” said Gavin Donohue, president & CEO of Independent Power Producers of New York, an Albany-based lobbying group that represents about 80 companies involved in generating about three-quarters of the state’s electricity.

“Our members are purchasing natural gas every day, and sometimes minute by minute. We have broken winter demands for electricity. Gas price reflects supply and demand,” he said. “We are proud of the performance of our systems during this cold snap, and we look forward to a FERC review of the gas markets.”

Power plants using natural gas account for more than half of the electricity generated in the state, according to a 2012 annual report from the NYISO. “The price of natural gas and the cost of electricity are closely correlated,” according to the report.

This winter, National Grid and state regulators have been trying to manage volatile electricity prices and fielding complaints from shocked consumers.

In February, regulators gave National Grid permission to absorb at least some of the blow for its upstate New York customers. The company issued a one-time credit of about $30 for Capital Region customers, a move that cost the utility $32 million, and that customers will have to repay over the next six months.