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Frontlines

Merchant plants snub the market, using native load to create their own private rate base.
Fortnightly Magazine - April 15 2003

In a report to clients issued March 19, Lehman Brothers noted the ISO's March 1 shift to a PJM-style market, with LMP:

"In a nutshell, this transforms the New England wholesale market. … The new rules provide better price signals and eliminate subsidies."

Also, NRG's calculation of its own fixed costs includes a return on equity of 14 percent (much higher than regulated Connecticut utilities), plus an outrageous depreciation rate (remaining life of 6.6 years), with an allowance for net negative salvage, which implies that brownfields have no value.

"This is clearly wrong," say Connecticut state regulators, who oppose the NRG deal. Connecticut is now considering a proposal by Northeast Utilities to build a 345-kilovolt transmission line that would relieve congestion and make this kind of subsidy unnecessary. .

National Grid argues that transmission upgrades offer a better answer than these RMR subsidies: "Their existence can serve to entrench the very transmission constraints giving rise to the need for the locational requirements in the first place."

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