State utility regulators have revealed the financially significant news that the federal government will almost assuredly scuttle a proposal to designate Connecticut as a separate electricity price zone starting in 2010. That would keep it in the price zone shared by the other New England states.
Otherwise, Connecticut ratepayers could have expected a potential doubling of the monthly federal charges — now averaging $6 a month — that all New Englanders started paying in January to power plant owners. That fee goes to help finance expansion, construction, and maintenance of the plants needed to satisfy region-wide demand.
In a preliminary ballot, the results of which are almost always repeated in a final tally, New England power industry players voted to keep the state in the New England price zone, because recent state efforts have succeeded in substantially cutting demand in Connecticut and increasing generating capacity.
The result is that Connecticut does not now need more in-state power plants and can satisfy almost all its estimated annual demand for 2010 of about 7,200 megawatts. If it could not, the other New England states would never have agreed to share the huge cost of building Connecticut plants solely for Connecticut needs. Now Connecticut’s generating capacity is about 6,600 megawatts (with one megawatt powering 750 to 1,000 homes).
“We have avoided becoming a separate price zone, because we’ve been very aggressive about cutting demand and making sure we are conserving as much electricity as we can,” state Public Utility Control Commission Chairman Donald Downes said, citing a cut in demand of up to 500 megawatts.
A year and a half of state efforts have primarily consisted of ensuring that power plants on the state border transmit as much electricity as possible to in-state customers rather than out-of-staters and that ratepayer-financed contracts, mandated last year by the state legislature, pay hundreds of entities statewide to reduce demand or run operations at off-peak hours during the hottest summer periods.
Gained Efficiency
Indeed, demand-reduction contracts and energy efficiency projects yielded “something north of 180 megawatts saved,” Downes said, “and conservation and load management programs added up another 250 megawatts. We’ve cut enough demand so we no longer have to build an entire power plant.”
However, because the state is still about 600 megawatts of capacity short of the 7,200 megawatts of estimated need in 2010, ratepayers may have to pay a small monthly federal fee to aid power plant expansion or construction somewhere in New England to provide those 600 megawatts. Of course, the fee would disappear if demand is further cut and/or there is more in-state generation.
In addition, when all of the 224 ratepayer-funded grant contracts awarded to date are finally signed, they will provide about 45 percent of the cost of buying every-day-use “baseload” generators — which are not large, permanent power plants — for businesses, municipalities, and schools; medium-size adjustable generators for producing different amounts of electricity loads; and small emergency generators exclusively used to satisfy high demand on peak summer days.
To date, those ratepayer-funded grants totaled about $90 million.
Grants Suspended
Last week, the DPUC agreed to suspend action on grant applications and to appoint a study group to report back in mid-August.
However, one scenario supports continuing grants for emergency generators: Connecticut needs about 2,500 megawatts to satisfy demand on the summer’s hottest days, an average 60 hours in any given year. Without emergency generators, the state would need to build five 500-megawatt power plants that would sit idle until activated for those 60 hours.
“A 500-megawatt plant will cost close to $400 million to build, so we’d need $2 billion to cover that 60-hour peak,” Downes calculated. “So if I can get a whole bunch of people to set up emergency power plants, I’ve saved ratepayers billions of dollars. This is a remarkable bargain.”
What’s more, the grantees pay about 55 percent of the cost of the small emergency kits; consume the power themselves, thus avoiding paying suppliers what they would charge at peak; and recover their 55 percent of the investment in two to three years on average.
“The public is getting a great deal,” Downes said, estimating that the total cost of buying 2,500 megawatts of emergency generators is $320 million, “drastically cheaper than having the public go out and pay for five new power plants or having Connecticut Light & Power and United Illuminating build them.”
And, Downes added, “Ratepayers would pay for every last dime for construction of those plants before you even turn them on.”
However the consumer counsel’s principal attorney, Joseph Rosenthal, questions the value of the emergency generators.
“They’re small units and they’re portable, and you can’t rely on them the same way you can rely on iron and steel permanently affixed and run by someone in the power business,” Rosenthal said. A decision on whether to continue the grants is tentatively scheduled for September.
