New York Weighs More Power Market Reforms to Curb Emissions

(Bloomberg) -- New York, the state that pioneered subsidies to prop up money-losing nuclear reactors, is weighing more steps to cut carbon emissions by changing the way that electricity is traded.

Adding a carbon charge to the price of power generated by fossil-fuel plants could advance the state’s goal of cutting greenhouse gas emissions by 40 percent from 1990 levels, at little or no extra cost to customers, according to a study carried out by the Brattle Group. The premium paid could be refunded to customers.

Brattle was hired by New York’s grid operator to study ways in which the state could advance its fight against global warming while preserving competitive power markets. Last year, New York created subsidies for nuclear reactors that generate zero-emissions power and drew fire from fossil-fuel plant owners who say such policies undermine free markets.

“A carbon charge would be a straightforward and economically efficient way to harmonize New York’s environmental goals and the wholesale market design,” the report found. “Customer costs would not rise materially.”

Imposing a $40 a ton carbon charge has a “relatively small” impact on customer costs, the report found, amounting to a minus 1% to plus 2% change in total electric bills. Although energy prices would rise, part of the extra cost could be offset by returning carbon revenues to customers, as well as lower prices for other types of credits, among other factors.

A conference on the idea is scheduled for Sept. 6 by the grid operator, which monitors the reliability of the state’s power system and coordinates supply.

Average spot on-peak electricity for New York City plunged to a record low of $35.19 a megawatt-hour last year, according to grid data compiled by Bloomberg.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net, Naureen S. Malik in New York at nmalik28@bloomberg.net.

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Stephen Cunningham, Susan Warren