New Jersey Power Generator Loses Bid to Supply Electricity to New York Utility

Hackensack, N.J. - -- The power-generating division of New Jersey's largest utility lost out Tuesday in its bid for a 10-year, $1 billion contract to supply electricity to New York's Consolidated Edison Inc.

Con Ed awarded the contract to Astoria Energy LLC, a subsidiary of SCS Energy LLC, which will supply 500 megawatts of capacity power from a new, natural gas-fired power plant to be built in Astoria, N.Y., starting in 2006. SCS Energy is a privately owned energy development company based in Concord, Mass.

The decision was a major setback for PSEG Power, which has spent the past two years developing the capacity to generate and deliver power to a Con Ed substation on Manhattan's West Side from its plant in Ridgefield.

"It is a disappointment," said Neil Brown, a spokesman for PSEG Power, an unregulated division of Newark-based Public Service Enterprise Group. "We thought we made a very competitive offer to Con Ed, but they made a different decision. We don't have details, but that's business."

In its announcement, Con Ed said Astoria Energy was selected "from a number of competing developers because of the project's efficient design, its beneficial impact on our electric system reliability, and for its ability to deliver power at a price that will benefit our customers." Despite the loss, PSEG will continue with the project, at least for now, Brown said. "We think it still has potential to offer needed benefits to the market in New York City, but at some point down the line, we have to make the decision whether to commit the capital to complete it. There's no question the city needs additional capacity, energy to meet current and future demand." PSEG will now explore "other avenues to supply that energy," Brown said. That could mean selling it through the New York power pool or to other suppliers.

For now, the electricity will continue being sold through the PJM Interconnection LLC, a regional power poll serving New Jersey and other Middle Atlantic states.

Con Ed's decision comes just two weeks after PSEG cleared a major hurdle, approval from the New York Public Service Commission of the company's application to construct the transmission line under the Hudson River. "We have all the permits we need on this side of the river," Brown said. "All we need is [approval from] the Army Corps of Engineers." The 345-kilovolt line, which would cost $100 million to build, was designed to start at PSEG Power's Bergen generating station in Ridgefield, follow an existing railroad right of way and the New York Susquehanna & Western Railroad tunnel, and enter the Hudson at Edgewater. Unit 2 at the station, which began operations last summer, was constructed specifically to supply power to New York.