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(Reuters) - New York utility regulators on Thursday approved construction of more than $500 million worth of new power lines in the state to maintain reliability of the grid if the Indian Point nuclear power plant shuts at the end of 2015.
The New York Public Service Commission (PSC) staff said the proposed lines, which will allow more power from elsewhere in the state and region to reach the New York City area, would benefit customers whether or not Indian Point is shut.
The PSC staff estimated the new transmission lines would provide $260 million in benefits to consumers over 15 years and $670 million over 40 years, noting the benefits would be even greater if Indian Point were to shut.
A lot of power plants in upstate New York are underused because transmission lines are too congested to carry the power to the New York City area. New lines would remove some bottlenecks, allowing more power to flow downstate.
Entergy Corp (ETR.N), which owns Indian Point, wants to keep the plant's two reactors running beyond 2015 and has filed with the U.S. Nuclear Regulatory Commission (NRC) to renew the units' operating licenses for another 20 years.
New York Governor Andrew Cuomo has said he wants Indian Point to shut when its licenses expire. Nagging safety concerns about a nuclear power plant less than 50 miles from Manhattan have intensified since the Fukushima nuclear accident in Japan in 2011.
The NRC, which regulates the country's nuclear power plants, has said repeatedly that Indian Point is safe.
The two reactors at the 2,037-megawatt plant provide about a quarter of the power used in the New York City area. The reactors' operating licenses expire in 2013 and 2015.
One megawatt can power about 1,000 New York homes.
The units can continue to operate so long as the NRC relicensing process continues. Entergy has said the relicensing process could last until 2018. Some analysts have guessed Entergy would negotiate with the state to shut the reactors as soon as 2018.
The three lines are part of a proposal filed by New York power provider Consolidated Edison Inc (ED.N) and the state-owned New York Power Authority (NYPA) at the request of the PSC. They have estimated the three lines would cost about $511 million and could enter service by the summer of 2016.
The three lines are located in the Ramapo area just north of New Jersey, on Staten Island and in upstate New York.
In response to the PSC's decision, Entergy has said it believes the best reliability contingency plan would be for New York to support the continued operation of Indian Point and not spread the cost of transmission upgrades to ratepayers.
"According to the PSC, the projects it approved today are in the public interest whether or not Indian Point continues to operate. Therefore, these projects should not be viewed as replacements for Indian Point ... We remain confident that Indian Point will receive its renewed license and continue to benefit New York electric consumers for years to come," Indian Point spokesman Jerry Nappi said Thursday.
In November 2012, the PSC asked Con Edison and NYPA to develop contingency plans in case Indian Point is shut at the end of 2015.
Con Edison and NYPA filed a three-part proposal in February.
The first part, which the PSC approved in March, was for NYPA to seek proposals for about 1,350 MW of generation or transmission that could be online by June 2016.
NYPA issued a request for proposals in March with bids due in May. U.S. power company NRG Energy Inc (NRG.N) and others offered proposals.
The PSC staff on Thursday said it had a short list of generation and transmission projects under consideration but wanted to see what federal regulators decide to do about new power capacity zone in the Lower Hudson Valley that could boost prices in the area and encourage up to 1,500 MW of mothballed generation to return to service.
The second and third parts of the Con Edison/NYPA proposal were for 100 MW of demand response and energy efficiency, and the three transmission lines, which the PSC approved on Thursday.
The PSC on Thursday also approved the companies' demand response and energy efficiency proposal.
Reporting by Scott DiSavino; Editing by David Gregorio and Bob Burgdorfer