Compromise Sought in Power Plan

Oct 21 - Connecticut Post

The Federal Energy Regulatory Commission on Friday said it would promote alternatives to the regional power grid operator's plan to ease congestion by paying plants more to generate power during times of high demand and tight capacity.

FERC said it would provide a forum for settlement talks between opponents to the proposed locational installed capacity program Independent System Operator New England developed in which the two sides could develop alternatives.

"This order gives the region an opportunity to develop a workable alternative to LICAP," FERC Chairman Joseph T. Kelliher said in a news release.

ISO-NE and officials from around New England testified before the FERC last month, and the commission pushed LICAP implementation back from Jan. 1, 2006, to at least October 2006.

FERC did not offer any specific information about when the talks would take place, but Friday's interim order gave ISO-NE 60 days to submit more details on the potential cost impact of LICAP, as well as other issues.

"Our door is always open to settlement discussions, and we will participate in this process," Connecticut Attorney General Richard Blumenthal said in an e-mailed statement.

"My office will continue to fight unfair and unjust federally imposed subsidies for power plant owners that threaten our consumers and economy. As we recently told the FERC, the Connecticut electricity market is broken and needs a drastic overhaul. FERC and ISO-New England should admit failure and start over." New Haven-based United Illuminating Co. supported FERC's move to get the sides talking, but pressed for something to happen soon, noting that the federal agency recognizes that the "status quo is not acceptable." "UI is a supporter of LICAP, however, we are not wed to ISO New England's proposal and are willing to look at variations -- as long as it can correct the broken capacity market in a timely manner," said Anita Steeves, a UI spokeswoman.

Steeves said that UI believes that the fees paid to generators through LICAP will cost consumers less than the reliability-must-run contracts that have been put in place to ensure that there is enough power to feed the needs of the area.

The RMR contracts were negotiated with power plant owners last year, guaranteeing those companies payment for keeping older plants -- which might otherwise shut down because they are inefficient -- up and running, according to the ISO.

Connecticut Light & Power Co., did not immediately return calls for comment Friday.

Ken McDonnell, a spokesman for ISO-NE, said Friday's order, which amounts to a series of hearings overseen by a federal judge, did not come as a surprise.

"This is something that we have been expecting," he said. The two sides would hopefully come to an agreement on how to proceed, he said, but added, "If it's not LICAP, what would it be?" Under one plan backed by officials from Connecticut and other New England states, ISO-NE would, after assessing demand needs for a certain number of years, enter into long-term contracts with power plants.

"It would prove incentives similar to what LICAP would do for capacity to be added as needed," McDonnell said Friday. "It would provide a sense of stability." However, he added, the LICAP plan is further along because ISO-NE has worked on it for two to three years, while the states only put forth the long-term contracts proposal four or five months ago.

Neither side is arguing in support of doing nothing, as demand in New England -- and particularly in southwestern Connecticut -- outpaces supply and transmission ability.

In its 2005 Regional System Plan, which ISO-NE approved Thursday, the grid operator said the region needs 272 transmission infrastructure projects, particularly in southwestern Connecticut and Boston.

That number includes the Bethel-to-Norwalk and Middletown-to-Norwalk 345-kilovolt lines; the former is under construction while the latter has Connecticut Siting Council approval.

The plan calls on power plants to convert some of the natural gas plants so they can also burn oil, to mitigate the effect of shortages and price increases.

"As soon as 2008, the region will need additional electric generation capacity or greater participation in demand reduction programs to ensure reliability during periods of peak demand," ISO-NE wrote.

FERC spokesman Bryan Lee said the chairman is concerned about what tight supplies and heavy demand will mean for the upcoming heating season. "The commission is closely watching the situation in New England," Lee said, while wrestling with the LICAP proposal.

Kelliher worries, Lee said, that southwestern Connecticut will "become the next California," a reference to a situation in 2000 and 2001 when some energy traders took advantage of tight supplies and heavy demand to ratchet up prices.

In a move to stave off any similar moves, FERC on Thursday issued a policy statement for the power industry to explain new authority it has to regulate certain companies.

Under the Energy Policy Act signed into law by President Bush in August and implemented by the FERC on Thursday, the commission now has jurisdiction over publicly owned utilities, such as those belonging to municipalities. Previously, its jurisdiction was limited to companies owned by stockholders. It also now has the authority to impose civil penalties on the utilities it now regulates.

"This really just fills a gap in the commission's authority that was sorely exposed in the wake of the California energy crisis," Lee said.

Staff writer Rob Varnon contributed to this report.

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