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State Regulators: Driven By Reliability

Can natural gas supply keep up with demand for power?
Fortnightly Magazine - November 2004

costs, when projected under- or over-collections exceed five percent of the total gas costs to be recovered in the period. The department has encouraged gas companies to request these adjustments.

In order to continue to protect customers from volatility in gas prices, the department has encouraged ratepayers to enroll in 12-month levelized billing plans.

Last, Massachusetts is progressive in developing cost-effective demand-side management programs. These energy-efficiency programs include energy audits, weatherization, and rebates for thermostats and energy-efficient appliances. All Massachusetts LDCs are required to offer such programs to all classes of ratepayers.

Q: What is next on the RTO agenda in Massachusetts?

A: On March 24, 2004, [FERC] approved, subject to conditions, the joint proposal of ISO New England (ISO-NE) and the New England transmission owners to establish an RTO for New England. Following settlement discussions with stakeholders to address issues that were not resolved by the FERC order, on Sept. 13, 2004, ISO-NE and New England transmission owners filed a settlement with the FERC that received broad support from NEPOOL members. This is a significant step forward in the formation of an RTO in New England, and although there are issues outstanding, I believe they can be resolved.

Specifically, resource adequacy and the completion of transmission projects in Northeast Massachusetts and Southwest Connecticut are current priorities. In June, the FERC issued an order addressing ISO-NE's locational installed capacity proposal, accepting some provisions and setting others for hearing. In late August, the ISO-NE filed testimony with FERC, which included revisions to its LICAP proposal. Hearings are scheduled to begin in February 2005.

In September 2004, the ISO-NE published its draft Regional Transmission Expansion Plan report for 2004, which identified transmission projects believed to be key to the reliability and efficiency of the New England system and Massachusetts in particular. As the blackout of 2003 pointed out, New England operates as part of an interconnected transmission grid. Resource planning within New England, coordinated on an inter-regional basis, is absolutely critical.

Q: Does Massachusetts have enough gas and electric infrastructure to ensure service reliability, and are adequate incentives in place to encourage building new facilities?

A: One issue that was highlighted during this past January was the region's dependency upon natural gas for electricity generation. Most of the new electric generation capacity added since 1990 is fueled by natural gas, and currently over 30 percent of New England's winter capacity consists of gas-only units. The January 2004 severe low temperatures, coupled with high electric and gas demands, was a stress-test for the bulk power system in New England-a test that was met successfully in that instance.

On the electric side, New England currently has adequate electric capacity in place. The question of adequate resources, however, is timely. Analysis of the markets is necessary to ensure that there is continued adequate generating capacity, and new rules may need to be established to ensure that new generation receives the appropriate signals for siting and market entry.

Q: What is the future of retail competition in Massachusetts for gas and electric consumers?

A: To date, the department