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Federal Agency OK's Power Transfer from New Jersey to New York

Interconnect likely to lead to higher electricity prices and greater congestion on the grid -- along with possible summer blackouts.

New Jersey has lost another battle with federal regulators, a setback likely to lead to higher electricity prices for consumers in the state.

Over the protests of the state Board of Public Utilities (BPU), the Federal Energy Regulatory Commission (FERC) on Monday approved an interconnection request to allow 660 megawatts of power to be transferred from the Public Service Electric & Gas (PSE&G) Ridgefield substation to a Consolidated Edison West 49th Street substation in Manhattan.

Beyond increasing energy and capacity prices for ratepayers here, the state agency argued the interconnection would negatively affect reliability in northern New Jersey, which is already projected to face the possibility of brownouts beginning in summer 2012.

By drawing power from New Jersey, opponents of the project argue it will increase congestion, driving up the cost of power and capacity. Power suppliers receive capacity payments to have power plants in reserve to deliver electricity at times of peak demand.

The power line to the lucrative New York City market is being developed by Hudson Transmission Partners LLC.

New Jersey has found itself in an increasingly combative relationship with the federal agency. Because of high energy costs, the state approved a pilot program to have ratepayers subsidize the development of three natural gas-fired power plants. But as the state’s filing noted, that effort will be impeded by actions taken by the federal agency governing how power plants bid in capacity auctions.

The state had sought either to have the agency reject the interconnection agreement between Hudson, the New York Independent System Operator and Con Ed or to hold a proceeding to debate the issue.

In rejecting the state’s request, the federal agency ruled the sole issue in the matter involved the interconnection agreement, saying reliability and other concerns had been addressed in prior proceedings.

Greg Reinert, a spokesman for the BPU, said the agency is disappointed with the decision. "It imperils further our system, and its reliability." He also said it seems inconsistent with recent rules adopted by FERC. In the past year, state regulatory officials have grown increasingly frustrated with actions taken by FERC and the PJM Interconnection, which operates the regional power grid serving more than 50 million people. They have intervened in a number of cases, including efforts by PSE&G to obtain special incentive rates for transmission projects they are developing, as well as a proposed natural gas pipeline that would run through Jersey City and into New York City.

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