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`Hybrid' Power System Sought

The president of Connecticut Light & Power Co. urged lawmakers Tuesday to partially reverse the state's deregulation of the power industry, saying consumers will get better rates if his company is again allowed to run some of its own generating plants.

Raymond Necci, president of CL&P, the state's largest electric utility, said continued steep rate increases would be less likely under a system letting CL&P build or purchase a limited number of power plants while maintaining a competitive market for the remainder of the electricity needed here. Such a "hybrid" system would be similar to one used in New Hampshire, he said.

Necci said CL&P is ready to build or purchase badly needed small plants, each capable of generating 50 megawatts of power in parts of the state where it is most needed, such as Fairfield County. He did not propose having Northeast Utilities, CL&P's parent company, buy back plants sold in recent years.

Such smaller plants can be switched on to offer "peaking" power during torrid summer days or subzero winter days, when the power demand is highest. Necci said that adding five such plants would provide about half of the 550 megawatts in additional power supply needed to ensure reliable power for the state.

"It provides some checks and balances on the price of energy," he said before testifying at a hearing of the General Assembly's energy and technology committee.

Driven by the... more [truncated due to possible copyright]  
Raymond Necci, president of CL&P, the state's largest electric utility, said continued steep rate increases would be less likely under a system letting CL&P build or purchase a limited number of power plants while maintaining a competitive market for the remainder of the electricity needed here. Such a "hybrid" system would be similar to one used in New Hampshire, he said.

Necci said CL&P is ready to build or purchase badly needed small plants, each capable of generating 50 megawatts of power in parts of the state where it is most needed, such as Fairfield County. He did not propose having Northeast Utilities, CL&P's parent company, buy back plants sold in recent years.

Such smaller plants can be switched on to offer "peaking" power during torrid summer days or subzero winter days, when the power demand is highest. Necci said that adding five such plants would provide about half of the 550 megawatts in additional power supply needed to ensure reliable power for the state.

"It provides some checks and balances on the price of energy," he said before testifying at a hearing of the General Assembly's energy and technology committee.

Driven by the high price of natural gas, CL&P's rates jumped 17 percent Jan. 1. On April 1, they will rise to a total increase of 22.4 percent, compared with last year. Necci said that without a change in the system, he anticipates another increase of at least 10 percent in 2007, although the exact figure is impossible to predict.

The idea of putting CL&P back in the generating business encountered resistance from some lawmakers, but drew a vote of approval from state Attorney General Richard Blumenthal, who was present to urge support for his plan to create a state power-purchasing authority.

"We think their proposal is better than what we have now, but simply not as good as what we're proposing," Blumenthal said.

Blumenthal urged the committee to support his idea for a state power authority, which would fund the construction or purchase of power stations through the sale of state bonds and through a "windfall profits" tax on generators in Connecticut whose profits exceed 20 percent return on equity.

He said he has discussed CL&P's idea at length with Necci. Blumenthal said their similar views "show a very powerful consensus that the present [deregulated] system is flawed and failed, and needs to be changed."

As in the days before Jan. 1, 2000, when the legislature began deregulation of electricity generation, the state Department of Public Utility Control would regulate how much CL&P could charge for any power it generates.

The company was required to sell its generation plants as part of deregulation. Currently, CL&P buys power from other companies and earns a profit on distributing it to 1.5 million users.

Necci said the "hybrid" model is used by CL&P's sister company, Public Service of New Hampshire, which owns 70 percent of its generating capacity. Necci said he does not envision CL&P owning so great a share of its power capacity.

However, Richard Soderman, the utility's director of regulatory policy and planning, said CL&P's analysis shows that a new, 1,000-megawatt coal-fired plant would save consumers $1.5 billion over 10 years if operated by the utility under state regulation. He said a project of such a large scale is not currently proposed.

"What you'll find is building new plants [to be run by CL&P] will gain value over time" in stabilizing electric rates, Soderman said. "There is no silver bullet, so [savings] will not take effect immediately."

Rep. Terry Backer, D-Stratford, a former chairman of the energy committee, said he did not blame the CL&P executives for striving to reclaim some of the generating capacity stripped away by state-ordered deregulation.

But he said approving such a plan would be a bad deal for consumers - and would impede the benefits expected from a free market for energy.

Because state law assures regulated utilities a "reasonable rate of return" - usually 10 percent or 11 percent - "all the risk of these new plants is assumed by the ratepayer," Backer said. "If something goes wrong - say a massive cost overrun on a construction project - the risk is borne by ratepayers."

Over the years, Backer said, CL&P and other electric companies have resisted opening the power market to alternative generating sources, such as wind power or biomass, that will let the nation escape its dependence on foreign oil.

He noted that Northeast Utilities is selling its Select Energy Inc. subsidiary, which was supposed to compete in the deregulated power market by being a middleman, as well as other competitive businesses.

"I think it's inescapable that NU did not do a good job when they had all the generation capacity," he added.

A spokesman for NRG Energy Inc., Raymond Long, urged the lawmakers to stand by their 1998 commitment to open the power market to competition.

He noted that his company is taking steps to reopen a peak-power generator in Greenwich and a deactivated plant in Milford. It also is seeking to build a $1 billion clean-burning coal power plant in Connecticut or elsewhere in the Northeast.

"Development of competitive generation will fix current issues" and ensure that the state has reliable, affordable power, Long said.

Seeing that New England is over-reliant on natural gas for fueling power plants - the fuel generates more than 40 percent of the region's electricity - "competitive generators ... have responded, and many are seeking to utilize new technologies, like clean coal, ethanol and fuel cells," he said.

Drawing on diverse sources for generation "will provide Connecticut with a hedge against escalating [fossil] fuel prices," he said.

The committee also heard from Robert Genuario, secretary of the state Office of Policy and Management, who called for approval of Gov. M. Jodi Rell's call for a state Department of Energy.

He said energy planning now is "done in a disjointed fashion" so the state needs a cabinet-level "coordinated planning agency to make logical decisions that will cover us through the next century."

The energy panel has until March 14 to approve bills to be submitted to the House and Senate for action.


Source: http://www.courant.com/busi...

MAR 1 2006
https://www.windaction.org/posts/1590-hybrid-power-system-sought
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