New England electricity markets very messy
Dustup in Ct. over this winter’s sky-high rates
OVER THE CHRISTMAS holiday, Gov.-elect Maura Healey’s call for Massachusetts to obtain all of its electricity from fossil-free sources by 2030 looked a lot like a pipe dream.
During a four-day stretch, New England power generators burned an estimated 31.5 million gallons of fuel oil to produce electricity. Normally, oil doesn’t even figure in the fuel mix.
At the moment of peak electricity demand on December 24, oil was generating 34 percent of the region’s electricity, followed by nuclear at 19 percent, natural gas at 16 percent, imports at 11 percent, and renewables (including the burning of lots of wood and trash) at 6 percent.
In Hartford on Tuesday, officials from Massachusetts and Connecticut held a hearing on the sky-high electricity rates in both states this winter. While officials explored strategies that could improve the way utilities buy electricity on behalf of their customers, many of the participants talked about the bigger picture.
Some at the Hartford hearing suggested the answer may be the addition of more fossil fuels, at least temporarily.
“I agree that we need to be very sensitive to not adding fossil fuel capacity, but at this point all things are on the table as far as I’m concerned,” said Sen. Norm Needleman of Essex, a Democrat who co-chairs the Connecticut legislature’s Energy and Technology Committee. “I’m not comfortable putting my residents at risk, and they are definitely at risk. I think we need to understand that and do everything we can to mitigate that.”
Healey wants Massachusetts to achieve 100 percent clean electricity supply within seven years, but utility officials at the hearing said it could be 10 to 20 years before New England is no longer reliant on natural gas to fuel its power plants. The Baker administration, in a recent report, said the region may not be off natural gas even in 2050.
Against this backdrop, there was an interesting dustup in Connecticut recently between two of New England’s key energy players.
First, a little history. Government-regulated utilities used to produce electricity and deliver it to customers, but in the 1990s the companies were required to divest their generation assets. Utilities continued to deliver electricity to customers under government oversight, but competition was introduced to the generation business and homeowners were allowed to buy their power from any number of suppliers. Some consumers buy direct, while others let their local utility purchase the power on their behalf.
In a commentary for CT News Junkie on December 23, Frank Reynolds, the president and CEO of United Illuminating, one of Connecticut’s largest utilities, said the system isn’t working.
“There is considerable misinformation regarding who ultimately bears responsibility for these rising costs, so let me be clear,” Reynolds said. “Electric generator supply costs have risen over 150 percent over the last three years, enriching out-of-state generators at the expense of Connecticut families. The realization of lower electric supply costs for residents has clearly not materialized: the energy market structure in the state and New England is irrevocably broken.”
“In the long term, we at UI would welcome the opportunity to discuss empowering utilities to have further control over the price of generation to help mitigate these cost increases,” he said.
Dan Dolan, the president of the New England Power Generators Association, responded on Tuesday with his own commentary for CT News Junkie, entitled “Beware the Desperate Utility Company.”
Dolan defended the companies he represents, saying competition in the power generation market has increased efficiency, lowered wholesale electricity prices, and reduced carbon emissions.
By contrast, he wrote, wholesale transmission rates, the domain of regulated utilities like UI, have gone up 800 percent.
Dolan also suggested UI is already trying to get back into the generation business through a side door with the help of its parent company, Avangrid.
Avangrid is seeking to build a giant wind farm off the coast of Martha’s Vineyard. Part of the Avangrid wind farm is financed by long-term contracts with three Massachusetts utilities and part is financed by contracts with two Connecticut utilities – UI and Eversource.
Because of rising inflation and interest rates, as well as supply chain disruptions and the war in Ukraine, Avangrid has said its Massachusetts contracts are no longer adequate to finance the wind farm. It asked the Department of Public Utilities to dismiss the contracts so it could start over, but the DPU said no.Avangrid officials have made clear that the contracts with the Connecticut utilities are equally problematic. So far, Avangrid hasn’t made any formal move to cancel the contracts, but Dolan thinks it’s only a matter of time.
“Is the Massachusetts experience the ghost of Christmas future for Connecticut?” he asked.