OREANDA-NEWS. Entergy Corp's nuclear unit has filed a lawsuit to block a state deal it says will interfere with New York's wholesale power market by subsidizing a coal-plant conversion to natural gas.

Entergy sued the New York Public Service Commission (PSC) last week in federal court over its backing of a \$140mn deal to convert three coal-fired units with 360MW of capacity to burn natural gas at NRG Energy's Dunkirk generating station near Buffalo, New York. Entergy worries the deal will suppress power prices, hurting one of two nuclear plants it operates in the state.

New York regulators approved the repowering plan in 2014, two years after NRG sought to mothball units at the facility for economic reasons, citing grid reliability concern. Under the deal, National Grid ratepayers will pay to keep the plant running for 10 years so NRG can install gas capacity to generate 435MW.

Entergy described the plan as "unlawful interference" by the PSC in an area under exclusive authority of the Federal Energy Regulatory Commission (FERC).

"This interference with FERC-approved market processes, by keeping uneconomic supply in the market, will artificially suppress prices," Entergy said in the lawsuit filed in the US District Court for the Northern District of New York.

Entergy said beyond suppressing wholesale power prices in the short term, the deal will also deter new generation from entering the market over the long term, eventually raising power prices for consumers.

"Supply will be reduced and prices will increase for local utilities, and ultimately for the homeowners and businesses that they serve," Entergy said.

The PSC has defended its agreement as the result of a competitive process under which the repowering plan was determined to be superior to new transmission. The PSC said keeping the plant running will improve reliability and provide local economic benefits.

The lawsuit follows other action from the Sierra Club and the Independent Power Producers of New York, who have opposed the Dunkirk plan at the PSC and in state court.

"This lawsuit is not about trying to prevent repowering of Dunkirk — it is about protecting federally regulated markets from unilateral interference by [the PSC] that props up one power plant with special subsidies," Entergy said.

Entergy and other independent power producers also oppose a plan under which Exelon's 581MW Ginna nuclear plant will be paid by utility customers of Rochester Gas & Electric to remain in operation.