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‘Gloomy picture’ for power prices

WORCESTER— Absent interest in lower-priced fuels, New Englanders should brace for continued high electricity prices, the byproduct of a regional system heavily dependent on oil, natural gas and coal, the head of the region’s power grid said yesterday.

WORCESTER— Absent interest in lower-priced fuels, New Englanders should brace for continued high electricity prices, the byproduct of a regional system heavily dependent on oil, natural gas and coal, the head of the region’s power grid said yesterday.

While concern about the supply of electricity has eased in recent months, no reduction in prices is anticipated, said Gordon van Welie, president and chief executive officer of Independent System Operator New England, the Holyoke-based nonprofit that runs the six-state power grid.

Speaking yesterday after meeting with directors of the Worcester Regional Chamber of Commerce, Mr. van Welie said he feels more confident about the system’s reliability than he did six months ago because new generating units have been proposed in recent months. The regional grid needs to add about 600 megawatts of electricity annually to keep up with demand and for the past three years, no one was interested in locating a power plant in New England, he said.

But in recent months, proposals for two 250-megawatts power plants and a 100-megawatt plant have been unveiled in Massachusetts alone, he said.

Some of that interest stems from a... more [truncated due to possible copyright]  

WORCESTER— Absent interest in lower-priced fuels, New Englanders should brace for continued high electricity prices, the byproduct of a regional system heavily dependent on oil, natural gas and coal, the head of the region’s power grid said yesterday.

While concern about the supply of electricity has eased in recent months, no reduction in prices is anticipated, said Gordon van Welie, president and chief executive officer of Independent System Operator New England, the Holyoke-based nonprofit that runs the six-state power grid.

Speaking yesterday after meeting with directors of the Worcester Regional Chamber of Commerce, Mr. van Welie said he feels more confident about the system’s reliability than he did six months ago because new generating units have been proposed in recent months. The regional grid needs to add about 600 megawatts of electricity annually to keep up with demand and for the past three years, no one was interested in locating a power plant in New England, he said.

But in recent months, proposals for two 250-megawatts power plants and a 100-megawatt plant have been unveiled in Massachusetts alone, he said.

Some of that interest stems from a decision by federal regulators last month to approve a new structure for how electricity is procured in New England, a plan endorsed by ISO that should help put more projects in the New England power plant pipeline, he said.

That proposal, which critics claim will boost average customer rates by 12 percent, or an additional $5 per month, was critical in order to attract large investor-owned utilities, hedge funds and other private investors into the power-generation market, Mr. van Welie said.

“From a reliability standpoint, I’m a lot more confident than I was six months ago,” he said. “But it’s a gloomy picture for the future when it comes to a price perspective.”

More than 60 percent of the region’s electric power plants are powered by natural gas and oil, costly commodities that show no signs of abating in price, he said. Less costly power sources, such as nuclear, wind or liquefied natural gas, have encountered various levels of opposition across the region, decisions that have an impact on what a customer pays to keep the lights on, Mr. van Welie said.

“The fuel issue is dictated by politics,” he said. “What we’re trying to do is make the problem visible and tell everyone here is what the current system is costing us. Going forward, we need to get the New England governors to come together and make some of the tough political decisions that have to be made. There’s no such thing as a risk-free decision, and we can’t keep saying ‘no’ forever.”

Cobbling together a long-term regional electricity procurement strategy will take time and effort, and until that initiative shows some results, ISO New England is traveling the region touting an energy conservation plan.

Those conservation efforts can curb wholesale costs, particularly if they occur between 7 a.m. and 10 p.m., Mr. van Welie said. A 5 percent reduction during high-consumption hours can lower wholesale costs by approximately $580 million a year New England-wide, he said. In contrast, a 5 percent increase in electricity boosts wholesale costs by approximately $700 million annually, he said.

The conservation efforts ask residential and business consumers to use electricity more wisely and suggest such measures as keeping thermostats during the summer at 76 degrees Fahrenheit, closing drapes or shades and using window fans.

“Until the region gets its act together, a change in behavior is necessary,” he said. “Anything that can be done to use the system more efficiently should be done.”

State regulators could help the effort by considering regulations that permit electricity to carry differing prices depending on the time of day it’s used, he said.

Most politicians have been reluctant to send such price signals to consumers, even though consumers have adapted to differing price structures when it comes to buying oil for the winter-heating season or making calls on their cell phones, Mr. van Welie said.

“Up until now, we’ve been appealing to a person’s best intentions, but we haven’t been sending them a price signal,” he said. “I believe you let the price signal go through. I think consumers can handle it.”

Contact business reporter Bob Kievra by e-mail at rkievra@telegram.com.


Source: http://www.telegram.com/app...

JUL 27 2006
http://www.windaction.org/posts/3681-gloomy-picture-for-power-prices
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