Connecticut’s current energy market is at an important inflection point.
Driving this market transition are announcements that some local power plants are retiring, new replacement plant and merchant transmission investments are being proposed, and increased development of renewable and low-carbon energy continues.
On the fuel side, abundant supplies of nearby, domestic natural gas now exist with pending proposals to bring increased supplies into New England. As these projects move forward, however, Connecticut businesses and residents remain understandably focused going into 2015 on the rising cost of electricity.
With some recent power plant retirements and replacement capacity currently under development, the electricity supply across New England has tightened, which will lead to higher winter energy prices. This tightened electricity supply, as well as the 2014 winter Polar Vortex that had widespread impacts across the country, resulted in short-term winter energy price increases. Importantly, however, even with higher winter energy costs, the New England grid is anticipated to provide reliable service demonstrating its continued diversity and resiliency. That means there will be enough supply to meet the demands of businesses and consumers.
For several years Connecticut and other New England states have benefitted from historically low wholesale electricity prices generated out of the region’s power plants. As tightening power generation and fuel supply/demand dynamics have led to higher energy prices during the winter, a significant market response is occurring; 2015 looks to be a pivotal year as the market responds to today’s investment signals.
Right now, more than 50 generation projects have applications pending to connect to the New England grid. Among these, two major new plant proposals have been announced here in Connecticut representing more than 1,200 megawatts (enough to power more than 1 million homes) of potential electric supply coming from Bridgeport and Oxford. Merchant transmission line developers have proposals pending, with in-service dates ranging from late 2016 to 2019. Pipelines have announced proposals to bring large-scale new natural gas infrastructure into New England between 2016 and 2018.
Once these proposals become finished projects, the supply side of the economic equation will increase and prices will likely return to the levels enjoyed in the region during previous winters and throughout the rest of the year. The proposals being developed now, however, cannot be completed for this winter as building this type of infrastructure takes years.
As a result, 2015 will be a transition period. Fortunately, options exist for businesses to manage their energy costs. Through the competitive retail electricity market, consumers have access to multiple suppliers in addition to default utility standard offer service. As always, businesses and consumers should make informed decisions, carefully considering all options and appropriate terms and conditions.
Customers remaining on standard offer supply may also inquire about bill smoothing programs to help address winter volatility and prices as well as federal assistance for low-income consumers. Notably, Connecticut has policies that prohibit utilities from disconnecting consumers’ electricity during winter months to ensure no one is left out in the cold.
As the regional energy market transitions, energy companies are responding. The proposed market-based infrastructure developments offer the best path to meet the current challenges for Connecticut’s businesses and consumers.
As these investments move forward in 2015, it is the hope of the New England Power Generators Association that government policymakers ensure important market-based infrastructure projects can be sited and appropriately developed where they are needed. After all, it is the infrastructure developments being proposed now that will provide the basis to drive Connecticut’s economy for decades to come.
Dan Dolan is the president of the New England Power Generators Association.
