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Approval of Electricity Grid Plan Put on Hold

Posted on: Wednesday, 10 August 2005, 21:00 CDT

Aug. 11--The Federal Energy Regulatory Commission announced Wednesday it will delay the New England electricity grid operator's plan to levy billions of dollars in premiums for electricity generation, and reconsider its initial approval.

Independent System Operator New England, the region's electricity market manager, won an initial approval from FERC in June for its locational installed capacity plan, or LICAP. According to ISO's definition, LICAP would "pay [power plants] more when power supplies are tight and much less when there is excess supply available."

LICAP was to go into effect on Jan. 1, 2006, but FERC said that "implementation of the LICAP mechanism, if it proceeds, will not be earlier than Oct. 1, 2006."

All six New England governors, their public utility regulators and the entire Connecticut Congressional delegation opposed LICAP, demanding that ISO pull and reformulate its proposal. Opponents claim that LICAP will add $13.5 billion to the cost of electricity during the next five years.

Gov. M. Jodi Rell said in a prepared statement Wednesday that the cost to Connecticut would be $3.7 billion during that period.

Attorney General Richard Blumenthal, hailed FERC's decisioin as a sign that LICAP will finally get the kind of scrutiny it merits. He's been fighting LICAP since 2004 and said the delay may provide the opportunity to stop this "ill advised energy policy."

In its delay order, FERC said that it would hear oral arguments from supporters and opponents on Sept. 20.

In a prepared statement, ISO New England said that it is disappointed with the decision, but will work with the states and their representatives on the issues surrounding LICAP. It also warned that, by 2008, increased demand for electricity could create the need for costly emergency procedures to prevent black outs.

Ellen Foley, an ISO spokesperson, said demand is increasing by 1.5 percent per year and "investment in generating supply has dried up."

The fear is that there will come a day when demand will outstrip supply.

Foley said her organization believes LICAP creates the necessary market incentives to encourage power plant development in areas where it is most needed.

At least one Connecticut utility company agrees with ISO New England.

Anita Steeves, a United Illuminating Co. spokesperson, said UI supports LICAP because it would eventually cost less than not doing anything. Currently, Connecticut residents are paying approximately $250 million in fees to keep old power plants up and running, she said, in order to stave off a blackout. Under LICAP, new generation would be encouraged, according to UI.

But in a letter to FERC and ISO New England made public Tuesday, Connecticut's congressional delegation challenged those assertions.

The letter asked ISO New England to explain how reducing payments when more power plants go on line would foster development.

Specifically, the lawmakers noted that existing power plants would be earning a premium for generating electricity without having to perform any upgrades at all.

While the six states will get a chance to make their case in September, FERC said that it is not delaying the creation of two electric pricing zones in Connecticut.

As of Jan. 1, 2006, Fairfield and New Haven counties will become one pricing zone, an ISO plan -- approved by FERC -- whose intention is to have the counties that use more energy bear more of the cost.

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Copyright (c) 2005, Connecticut Post, Bridgeport

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UIL,

Source: Connecticut Post

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