FERC OKs help for Mystic plants

FERC OKs help for Mystic plants

Gas pipeline issue hovers over decision

THE FEDERAL ENERGY REGULATORY COMMISSION has given New England’s power grid operator until the end of August to come up with a plan to prop up a pair of uneconomic natural gas power plants in Everett and until July 2019 to develop a long-term approach to fuel security vulnerability in the region.

The 3-2 decision, handed down July 2, endorsed the power grid operator’s concerns about the need to rescue the Mystic power plants in Everett, but rejected its approach – seeking a waiver from its regional tariff system based on fuel security concerns. Instead of the waiver approach, the federal agency gave the grid operator, ISO New England, an alternative regulatory path to accomplish most of the same goals.

The Mystic plants obtain their fuel from an import terminal for liquefied natural gas that is located next door; the concern was that the terminal could close if the plants shut down, cutting off a key source of natural gas for the region during periods of high demand for electricity.

The complicated debate over the Mystic power plants and the next-door LNG terminal arises from concerns that many of the region’s natural gas power plants may be unable to obtain sufficient fuel for short periods during winter months when demand for natural gas for home heating leaves little left over for power plants. ISO New England and FERC are grappling with how to address the problem through existing rules and procedures, most of which rely on market signals to accomplish their goals.

Building another natural gas pipeline into the region would be one way of addressing the problem, but court rulings and policymakers in Massachusetts have so far decided that approach is unnecessary and would hinder the state’s ability to meet its greenhouse gas emission targets. The FERC ruling said the regional grid operator may be justified in intervening in the market under such circumstances.

“In short, if a state, through policy or permitting authority, prevents investors from adequately responding to the price signals sent by the market, there may be instances where the market alone does not fully address the problem,” the FERC decision said. “As a result, in some circumstances, it may be necessary to consider reliance upon short-term, out-of-market mechanisms to retain certain existing units, while ISO-New England continues to develop longer-term market solutions.”

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Robert Powelson, one of the FERC commissioners, dissented because he thought the agency was embracing out-of-market solutions too quickly. “As I have said on many occasions, the New England region would benefit from additional natural gas infrastructure,” he said. “Such infrastructure would relieve constraints on the region’s electric grid and natural gas distribution systems. I still believe such an outcome would represent the least-cost option. However, in light of the political climate in the New England region and New York, such an outcome is unlikely at this time. Nonetheless, we should not rush to an out-of-market solution. Rather, the region should collectively engage in constructive dialogue to seek market-based mechanisms that address the future reliability concerns.”

Richard Glick, another commissioner who dissented, said he was wary of the approach taken with the Mystic plants. “Ultimately, I suspect that the most likely outcome of today’s order will be a parade of uneconomic generators seeking cost-of-service rate treatment under the guise of fuel security,” he said. “In addition to imposing tremendous costs on ratepayers, by framing the fuel security issue as a series of one-off determinations regarding the need to keep particular resources, this approach will short circuit more serious efforts to fundamentally reform the ISO-New England market to address the drivers of whatever fuel security problem may exist.”