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.
“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.”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.”