ate last week the New York Independent System Operator (NYISO) recognized a new capacity pricing zone called the Lower Hudson Valley capacity zone (LHV). The Federal Regulatory Commission (FERC) approved this new capacity pricing zone which includes the NYISO Load Zones G, H, I, and J. Capacity is a cost component included in the overall supply price; it is based partially on a rate determined by the market and the natural influences of supply and demand, but also on a business’ individual peak consumption from the prior year. The purpose of this new LHV capacity zone is to serve the long-term interest of consumers in New York State by promoting investment in more efficient resources in the Hudson Valley, and to enhance system reliability.
The NYISO hopes that the creation of this new zone will encourage power generators to add new capacity to the region, which will alleviate some of the bottleneck that comes from the upstate generators trying to meet the high demand of the downstate regions. Utilities delivering power in this new zone will have to buy a significant portion of their energy from producers within the zone during peak times. Effective May 1, 2014, consumers in this new zone should prepare for an increase in their electricity bill. Some expect an increase in capacity charges well above 5 percent for homeowners and 10 percent for businesses.
\We have heard from multiple suppliers in this region, that they will be enforcing the “change in law” provision in their existing contracts in order to absorb these higher prices. Suppliers have this clause included in their contracts for situations such as this one, where they could not foresee the effect this change would have on their price. Even now, the price that the power producers can charge is a moving target. Most times these new capacity charges will be listed as a separate line item and should be clearly labeled. If you have any questions please give Power Management a call and we can take a look at your invoices to ensure accuracy.