Citing a growing trend toward competition in the electric and gas industries, the Massachusetts Department of Public Utilities (DPU) has issued guidelines for the development of incentive...
Commission Shelters Utility QF Capacity Payments
The Massachusetts Department of Public Utilities (DPU) has again turned down a request by a cogeneration developer (QF) to collect capacity payments for the entire 20-year term of a purchased-power contract with Commonwealth Electric (CE), despite conflicting advice from the state supreme court.
Last year, in remanding a similar DPU ruling, the Massachusetts Supreme Court had suggested that a contract price violates the Public Utility Regulatory Policies Act (PURPA) if it does not include any capacity payments for most of its term. See, Plymouth Rock Energy Associates v. DPU, 648 N.E. 2d 752, 161 PUR4th 440 (Mass. 1995).
The latest case involved Plymouth Rock En-ergy Associates, L.P., a QF formed to construct a
5-megawatt, gas-fired cogeneration facility in Kingston, MA, and to provide steam to the Independence Mall, which is heated and cooled by electricity. However, the DPU said it had previously found that CE's need for capacity during the term of the contract proposed by the QF was uncertain. It concluded that PURPA should not force electric ratepayers to accept risk for paying for unneeded capacity. Instead, it explained that electric utilities may pay short-run rates to QFs, without a contract, and then adjust the short-run energy rate quarterly to include capacity payments if and when the utility finds it needs more capacity.
The DPU reiterated policy adopted in a prior order (em that it would not allow utilities to recover from ratepayers "the stranded cost associated with above-market investments that may result from power-purchase agreements signed after August 15, 1995." Re Plymouth Rock Energy Associates, L.P., D.P.U. 92-122-A, Aug. 21, 1996 (Mass.D.P.U.).
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