Energy officials: Supply looks good Flurry of power plant plans may ease crunch

A recent agreement to help spur new electricity-generating plants in New England has left the region better prepared to meet rising demand and avoid rolling blackouts in the next few years, energy officials said last week.

The head of New England's power grid manager and the chairman of the Federal Energy Regulatory Commission credited the agreement for yielding a flurry of new power plant proposals in New England, reversing a sharp drop-off in recent years.

The officials, Gordon van Welie of ISO New England and Joseph Kelliher of FERC, cautioned that many obstacles remain before the plants can go online. But they told a regional energy conference that New England now appears capable of meeting electricity demand over the next few years because of the pact allowing power generators to bid at auctions for the right to build plants.

The pact was reached last fall and approved in June by FERC, despite opposition from officials including the attorneys general in Massachusetts and Connecticut, who objected to the expected rate increases the plan would yield.

The agreement "speaks volumes about the region because those were hard calls. And there are costs associated with ensuring adequate electricity supply in the region," Kelliher, who was named FERC's chairman by President Bush last year, told reporters before delivering a speech at the conference organized by ISO New England in Boston.
 
Van Welie, president and CEO of ISO New England, said his Holyoke-based nonprofit corporation has received applications for more than 35 new generation projects since the middle of last year, when it was clear a settlement would be reached to adopt the so-called "Forward Capacity Market."

"Obviously, the market signals are working," van Welie said.

The majority of the proposed plants are in Massachusetts and Connecticut - the most populous of New England's six states, with the greatest need for new resources.

However, van Welie cautioned the proposals must meet permitting requirements and overcome likely political resistance.

He cited long delays that have held up Massachusetts's Cape Wind wind-energy project off Nantucket and proposals for new transmission lines in Connecticut.

"Although there is good news in the fact that investment in new supply appears to be on the rebound, these proposed plants have not yet been built," van Welie said.

"And until they are, the growth in peak demand will jeopardize the reliable operation of the system."

The 1990s boom in new energy plant construction turned to bust in New England starting in 2002, with little additional capacity built since then despite steady increases in energy demand.

"Last year, New England's total electricity supply increased 11 megawatts, and demand rose 2,700 megawatts," Kelliher said.

Kelliher called such numbers "disturbing."

He compared New England's lack of new capacity amid increasing demand to the situation in California and some other western states before they were plagued by rolling blackouts and skyrocketing power prices in 2000 and 2001.

"They're the kind of things that, if left standing, might visit upon New England what happened in the West six years ago," he said.

ISO New England has warned that rolling blackouts could be necessary starting as soon as 2008 absent a significant increase in electrical capacity. Rolling blackouts have never before been imposed in New England to prevent longer and more widespread power outages.

The need for more incentives to spur new electricity production led to last year's Forward Capacity market agreement, which replaced an earlier proposal that was heavily criticized because it would have imposed higher electric rates in areas where demand is greatest.

Under the agreement, ISO New England will project regional power needs three years in advance and hold annual auctions to buy power resources, including new and existing power plants. Incentives would encourage private operators to respond to power system emergencies, and operators that don't make extra capacity available would face penalties.

The agreement is designed to ensure revenue and rate certainty for power generators and consumers before the auction system begins in early 2008.