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Power plants get little-known subsidies

While paper mills close and Cabletron spins off its remnants out of state, power plants from the Seacoast to Whitefield enjoy the perks of a poorly understood, $100-million subsidy program just for energy producers. It has a bureaucratic name: the forward capacity market. ...An unidentified 600-megawatt, gas-fired power plant project somewhere in Rockingham County is blocked behind half a dozen North Country renewable energy projects in the ISO-New England regulatory queue. The waiting list policy is first-come, first-served. A plant like that would typically pay its host community $4 million or more in property taxes, with few smokestack emissions. But those wind- and wood-fired projects at the front of the line are all in limbo. The Public Service power lines in the region are too small. Most of the players can't even bid into the upcoming ISO auction, because yet-to-be-built plants have to ante millions of dollars as a sort of performance bond. And the ISO doesn't make forward capacity payments for transmission line upgrades.

While paper mills close and Cabletron spins off its remnants out of state, power plants from the Seacoast to Whitefield enjoy the perks of a poorly understood, $100-million subsidy program just for energy producers. It has a bureaucratic name: the forward capacity market.

There are two economies, folks. One plays by the strict rules of business. You know about those. In the other, you will find the so-called deregulated merchant power jungle. It turns out to be more protected and regulated than anyone dreamed.

The Federal Energy Regulatory Commission came up with its little-publicized energy incentive to prevent California-style price spikes and rolling brownouts after the feds capped the price of electricity artificially low. That revenue supplements what a power plant earns by selling electricity into the daily New England spot market or by contracting with large customers.

That corporate aid program, funded by customers on their electric bills, strikes some people as especially ironic this month.

Dave Atkinson, the vice president of operations for Wausau paper in Groveton, has some emotional work to do this week - hammer out severance packages for 300 members of the... more [truncated due to possible copyright]  

While paper mills close and Cabletron spins off its remnants out of state, power plants from the Seacoast to Whitefield enjoy the perks of a poorly understood, $100-million subsidy program just for energy producers. It has a bureaucratic name: the forward capacity market.

There are two economies, folks. One plays by the strict rules of business. You know about those. In the other, you will find the so-called deregulated merchant power jungle. It turns out to be more protected and regulated than anyone dreamed.

The Federal Energy Regulatory Commission came up with its little-publicized energy incentive to prevent California-style price spikes and rolling brownouts after the feds capped the price of electricity artificially low. That revenue supplements what a power plant earns by selling electricity into the daily New England spot market or by contracting with large customers.

That corporate aid program, funded by customers on their electric bills, strikes some people as especially ironic this month.

Dave Atkinson, the vice president of operations for Wausau paper in Groveton, has some emotional work to do this week - hammer out severance packages for 300 members of the steelworkers union. The mill will close by Dec. 31, along with its 13-megawatt power plant.

Meanwhile, the 1.2-megawatt Lochmere hydroelectric dam in Tilton, the 20-megawatt wood-fired Pinetree Power facility in Tamworth, and the 1,244-megawatt nuclear reactor in Seabrook all get $30,000 or more per megawatt per year under a complex payment formula to keep them in business. A megawatt can power about a thousand homes.

This kind of bailout propped up the 720-megawatt Granite Ridge plant in Londonderry during its amicable foreclosure three years ago on a $300 million investment. The similar natural gas-fired Con Edison plant in Newington was on the selling block a couple of years ago amid rumors of financial stress.

Nobody held down the cost of natural gas when the feds capped the price of electricity. If Junior Whoppers had to sell for 50 cents, somebody might have to subsidize Burger King, too.

The collective dole for dozens of New Hampshire energy producers, if that is the right word for it, dwarfs the state's $30 million Temporary Aid to Needy Families program to keep single parents and their kids out of homeless shelters. The power plants just have to maintain their boilers and turbines in working order to claim their money.

Those forward capacity payments will change after an auction on Feb. 4-8, conducted by the ISO-New England power grid, based in Holyoke, Mass. The stakeholders will rehearse the event in a pair of daylong, online mock auctions.

The quasi-governmental regulatory agency wants to ensure New England has at least 32,305 megawatts of power by 2010. All the plants will bid for their stay-in-business payments in a marathon competition, round after round, until the subsidy they accept per megawatt falls enough to ensure the target capacity. That's 60 megawatts more than today.

Ellen Foley, a spokeswoman for the grid, said energy-saving projects that reduce demand can enter the auction, too. For the purposes of keeping the lights on, demand reduction is just as good as supply.

"And I wouldn't call the payments subsidies," she said. "For quite some time, we've had limited investment in traditional power plants. Interest has picked up considerably since the forward capacity payments."

Sandi Hennequin, of Constellation Energy, works out of Portsmouth and heads up the company's government relations for New England. Her firm buys electricity and sells 220 megawatts of it to New Hampshire customers. She doesn't see the power plant payments as subsidies either. They emerged, she said, from a settlement agreement that followed litigation over those price caps.

"The natural gas plants were having so much trouble," Hennequin said. "Some of them would have gone out of business under the price caps. The ISO told them, 'We really need you.' Otherwise, there could have been a power reliability crisis."


Rockingham County project
An unidentified 600-megawatt, gas-fired power plant project somewhere in Rockingham County is blocked behind half a dozen North Country renewable energy projects in the ISO-New England regulatory queue. The waiting list policy is first-come, first-served. A plant like that would typically pay its host community $4 million or more in property taxes, with few smokestack emissions.

But those wind- and wood-fired projects at the front of the line are all in limbo. The Public Service power lines in the region are too small. Most of the players can't even bid into the upcoming ISO auction, because yet-to-be-built plants have to ante millions of dollars as a sort of performance bond. And the ISO doesn't make forward capacity payments for transmission line upgrades.

State Sen. Martha Fuller Clark, D-Portsmouth, leads the energy policy in the Senate and has gotten all the stakeholders brainstorming this fall about ways to upgrade those lines. She's looking at the wait list policy. She's watching the big subsidy.

"If you need a solid commitment on your renewable energy project before you can get this (ISO-New England) funding, clearly that's a huge barrier to building it," she said.

She suggested some new criteria for a project's place in the regulatory wait list. It should matter if a future plant will pay significant taxes, create a lot of jobs or use renewable fuels.

"I don't know who is talking about those issues," she said.

Grid spokeswoman Foley said no reporter had ever called her office before trying to learn how the forward capacity market works. A Google search for news stories on the topic drew a blank.


Source: http://www.seacoastonline.c...

OCT 28 2007
https://www.windaction.org/posts/11658-power-plants-get-little-known-subsidies
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