5 N.E. governors criticize grid operator

THE GOVERNORS of five of the six New England states, including Gov. Charlie Baker of Massachusetts, issued a statement that appeared to criticize the operator of the region’s power grid for failing to partner with them in combatting climate change by bringing renewable energy to market.

“Going forward, we require a regional electricity system operator and planner that is a committed partner in our decarbonization efforts,” the governors said in their statement. “As our states accelerate efforts to expand clean energy resources and combat the global challenge of climate change, we now seek to better align our regional competitive markets with the achievement of our decarbonization goals.”

The statement, full of lofty goals, was short on specifics, but the governors promised a vision statement soon. The head of the organization that coordinates electricity policy efforts of the New England states declined to answer questions, deferring to Massachusetts officials, who declined to comment on the record. None of the officials would comment on why New Hampshire Gov. Chris Sununu did not sign on to the statement.

A spokeswoman for the region’s grid operator, ISO New England, said it was premature to say anything until more specifics are provided.

ISO New England operates competitive wholesale electricity markets for the region that attempt to match demand and supply at the lowest possible price. The markets operated well for many years, but have had difficulty of late, largely because clean energy suppliers could not compete easily in that marketplace.

States, trying to comply with their own greenhouse gas emission targets, have stepped into the breach, ordering utilities to negotiate power purchase contracts directly with renewable energy suppliers. Massachusetts utilities, for example, have negotiated contracts for offshore wind and hydro-electricity from Quebec. Those contracts were competitively bid, but their 20-year duration means electric ratepayers will be on the hook for a long time.

Two markets – one operated by the power grid operator and one by individual states — have emerged, and reconciling the two has not been easy.

“The gap between our current system and the system we need to achieve deep decarbonization is marked,” said the governors in their statement. “Today’s wholesale electricity market and organizational structures: (1) are based on a market design that is misaligned with our states’ clean energy mandates and thereby fails to recognize the full value of our states’ ratepayer-funded investments in clean energy resources; (2) lack a proactive transmission planning approach and tools that facilitate the development of a future system with more clean, dynamic, and distributed resources; and (3) are based on a governance structure that is not transparent to the states and customers it serves, with a mission that is not responsive to states’ legal mandates and policy priorities.  Recognizing these shortfalls, it is time to make the necessary changes to meet the challenges of our 21^st century energy transition.”

Gordon Van Welie, the head of ISO New England, recently called for states to implement net carbon pricing to send a price signal to power generators and allow one market to serve all types of suppliers.

“The net concept is really trying to deal with one of the political impediments to carbon pricing, which is the fear that carbon pricing is going to create this big price shock in the wholesale market and drive electricity prices up,” Van Welie said at a recent meeting of the New England Council.

Van Welie said net carbon pricing would assess a fee on all electricity being produced that emits carbon and, given the way wholesale electricity markets work, would raise the price of electricity. A portion of the carbon fee would then be recovered from the generators, with more being recovered from the most carbon-intensive resources, and that money would be rebated to wholesale purchasers of electricity based on the size of their purchases. The rebate process would have the effect of blunting the impact of the price rise caused by the carbon assessment.

The statement released by the governors did not address whether carbon taxes would be an acceptable solution and a Baker administration spokesman declined to comment on the issue.